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Separate Legal Entity
Company is distinct from its shareholders under the Companies Act, 2013 principle established in Salomon v Salomon
What is Separate Legal Entity?
📌 Overview
The company is a separate legal entity distinct from its members. It can own property, enter contracts, and sue/be sued in its own name. This principle was established in the landmark case Salomon v Salomon & Co Ltd (1897).
✅ Key Benefits
Company can hold assets in its own name. Shareholders not personally liable for company debts. Company can enter into contracts with its own members. Perpetual succession and independent legal identity.
⚖️ Legal Framework
Salomon v Salomon & Co Ltd (1897) established this principle. Section 9 of Companies Act, 2013 provides for corporate personality. The corporate veil protects shareholders from personal liability.
Important FAQs
❓ What is piercing the corporate veil?
Courts may ignore separate entity status in cases of fraud, illegal activities, or sham companies under Section 7 of Companies Act, 2013.
❓ Can a director be an employee of the company?
Yes, a director can also be an employee and receive salary. The director has a dual role - as an officer and as an employee.
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