This is the most important of the fundamental principles of company law. it simply means that upon incorporation, the company becomes a legal entity distinct from its members.
Corporate personality is essentially a device to protect the creditors and other persons dealing with the company by predetermining who to hold responsible for the company’s obligation. Its implications were fully grasped by the court in the case of Salomon v Aaron Salomon & Co Ltd. 1897 AC PG 22 which is the Locus Clasicus on the principle.
It must be noted that the judgment of the court in Salomon’s Case isn’t a license to an unscrupulous promoter to defraud a company promoted by him. Had Salomon made a profit from the sale which he concealed from his fellow shareholders, the position would have been different. The decision was justifiable on the ground that there wasn’t any fraud and the creditors dealing with the company had the freedom to make enquiries as to the company’s financial position.
In Lee v Lee‟s Air Farming Ltd, Lee and his wife and children formed a company. The company provided air services. Lee was a pilot and a shareholder in the company. One of the airstrips caught fire and was destroyed. The wife brought an action to recover money from the company. The court stated that the company was a different person from its shareholders.
In the case of Alhaji A Olalekan v Wema Bank PLC, the Supreme Court held that the Chairman or Managing D director of the Company who was also the sole signatory to the Companies account was a separate or distinct person from the company. NB, S. 37 CAMA 1990 has now incorporated the concept of corporate legal personality in our law.