He had not transferred the insurance policy to the company. After the sale, Macaura continued to insure the plantation in his own name. When Macaura attempted to claim on the policy, the company refused to pay.
This separation of a company from its members was established in the House of Lords in the famous case. Salomon had a boot manufacturing business which he decided to incorporate into a private limited company.
He sold his business to the newly formed company, A Salomon & Co Ltd, and took his payment by shares and a debenture or debt of £10,000.
The plaintiff, who was the major shareholder and managing director of the company, sought to conduct the company’s defence.
The court held that while a human person can represent him or herself in court, a legal person such as a company can only be represented by a solicitor or barrister.
The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.