It is a better form of existence for the reason it takes its responsibilities itself, owners are free from their personal liabilities and owners enjoy limited personal liability (risk) only up to their investments in stocks, though there may be certain situations where their personal responsibilities can exceed from limited liability concept.
This honesty and good faith on the part of Salomon prevented him from indemnifying the company creditors. The House of Lords found there is a legal entity properly formed and there was no use of lifting the veil between Salomon and his company. the business belonged to it and not to Mr Salomon.”
As a result of the Court of Appeal refusal to recognize the existence of the legal entity.
And regarding the company instead as a myth and fiction, they thought that the business belonged to Aron Salomon.
2/24/2010 10 Ghanshyam IILM Gurgaon
Conclusion The House of Lords found that honesty and good faith on Salomon’s part prevented him from assuring the company creditors as they knew they were dealing with a legal person totally different from his incorporators. Limited liability at that time was also available to sole traders and large investors who wanted some form of limit on their undertakings. 2/24/2010 11 Ghanshyam IILM Gurgaon