On incorporation a company becomes a separate legal person. Shareholders own the company but do not own its assets, and their liability for the company's debts is generally limited to what they paid for their shares.
Courts will disregard the separate personality — “pierce the corporate veil” — only in narrow circumstances, such as where the company is used as a mere instrument to commit a fraud or improper act. Directors, meanwhile, owe their fiduciary duty to the corporation itself.
The House of Lords held that a properly incorporated company is a legal person separate from its shareholders, so the company's debts are its own. The foundation of separate corporate personality and limited liability.
The Court clarified that directors' fiduciary duty runs to the corporation itself, not to any single group of stakeholders. In acting in the best interests of the corporation, directors may weigh the interests of shareholders, creditors, employees and others.