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The most famous case illustrating the operation of the concept of the separate legal personality of a company is Salomon v A Salomon & Co Ltd [1897] AC 22 (HL). The case was hard fought, all the way to the House of Lords, by the liquidator on behalf of the unsecured creditors of a company that had become insolvent very soon after being registered under the Companies Act 1862. The case is important because it confirmed the ability of a sole trader to transfer his business into a registered company and thereby insulate himself from the liabilities of the business.
Before this case, the full significance of the ability to incorporate a limited liability company by registration was not appreciated. As the judgments at first instance and in the Court of Appeal indicate, as the nineteenth century was drawing to a close, it was not widely understood that sole trader owners of small businesses could use the Act to secure limited liability and insulate their personal property from business risks.