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In this case, a separate corporate entity was brought into existence outside the taxable territory with the ulterior motive of evading the tax obligation by the assessee mills.

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Separate personality means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things.

The ‘veil of incorporation’ is the rather poetic term given to this separation of the company from its shareholders or members.

Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.

Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.

For all intents and purposes, all acts taken by these two company types are taken by the owners themselves.

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