Company Law Assignment Sample

Introduction

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Salomon v/s Salomon is the chief cause that contains the principle regarding the corporate veil. It is used as a landmark ruling in corporation law cases which is having the doctrine of corporate character that means the company or corporate entity is separate from its shareholders and shareholders can’t be accountable at the time of insolvency of the company. this case has some facts and issues after that judgment has been passed. This report refers to the case named Salomon v/s Salomon that is UK’s company and all relevant facts about this case are also mentioned in this report. After it issue regarding this case is discussed in the report and passed judgment is also detailed out. After this, some examples are also mentioned in the report that refers to the implementation of this landmark judgment for many other similar cases by judges.

Sperate legal entity

A separate legal entity is a creature recognized by law as a legal person. According to this concept, the entity has its lawful rights and duties, separate from those running and owing to the entity. A company has a different unit and is independent of its members or people who control it. This doctrine detached the accountability. Any company can be incorporated separate from its individual or owner and it is a limited company or incorporation. Under this, all transactions of a company or business are recorded separately from its members, owners, promoters, or shareholders. At the time of liquidation, the only company can have unlimited liabilities or debts to pay and shareholders or members need not pay for the company's debt, they remain liable for some limited liability. (Abdullah, L., et al, 2020)

Facts of the case

The plaintiff named was Aron Salomon who was a extensive supplier of the exportation quality skin boot and it was 30 years back in 1892. On 1st June 1892, he moved his business to a business in which the subscriber of the memorandum was the plaintiff himself, his companion, offspring, and four sons. The business of the appellant was vended to the business for the amount of $38,873 in which $16000, was obvious to be salaried in the procedure of cash or debentures. It was considered that this price was higher than the actual valuation price of the commercial. some debentures of value $ 10,000 were issued to Aron Salomon after some time he gave these debentures to another one named Mr. Edmund Broderip as a safety of the mortgage worth $5,000.

The plaintiff himself took 20,001 out of the total 20,006 stocks as a sum for his old commercial. in October 1893, the corporation's commercial botched and an instruction was issued to wind up the commercial of the corporation. on the date of the winding up the corporation was in a debt to $ 7,776 to the indiscreet creditors of the company. then liquidator stated that the business was just fiction and he alleged that an act should be brought in contradiction of the plaintiff to insure the arrears of the business. so, these are some facts of this case.

Issue of the case

There were some issues in this case that were necessary to consider and resolve. the receiver jagged out Aron Salomon was shamefaced of non-fulfilling his financial liabilities for the business by captivating extreme cash to sell his commercial to the corporation. receiver contended that Aron Salomon was the chief stockholder, he could not accomplish his liability in contradiction of the business and unsecured creditors. He sought that the plaintiff is for myself accountable for the debts of the business. so, the query was raised that whether the stockholder of a business could be compulsory with the limitless obligations of the business and can be generally liable for it.

Judgment

The appellate court was propounded his judgment in favor of the liquidator over the appellant. Judge also found Aron Salomon accountable for the payment of the arrears of the indiscreet creditors of the corporation. The court seemed that the business's was Salomon's own commercial and the subscribers of the memo were only as figures and the business was working as Salomon's boss. The plaintiff was the prime member and made extreme money from this commercial so, he owed to insure the business’s debt. The court has decided that company’s debts as a personal liability of Salomon and does not consider that company is a distinct legal entity.

But the house of Lord contraries the ruling of the plaintiff court. It examined the contentions made by the judge of the appellate court that the business was employed just as an manager of the Salomon to carry out the commercial activities. The house of lord discussed in his hearing about the reality of the company. According to him at a time only one point can be possible such as the company is in existence or not in existence. If the company is in existence, then it clears that it is having its legal entity and business and can not belong to the Salomon. But if the company is not existing in real then it is considered just as a myth or fiction because there is no actual existence of the company so, no point can be raised for the company to work as an agent for Salomon. One noticeable thing is that Salomon sells his business in an excessive amount at that time business was in sound condition. After considering all the points the House of Lord stated that “incorporation of the company can not be disputed.” So, it was the landmark judgment that contains the creation and waged of the business, concept of the corporate veil.

The judgment of this case was additional incorporated in another case named Lee v/s Lee's Air Farming Ltd, 1925. In this case, some duties, responsibilities of the company and its legal entity were discussed in depth. Lee was a pilot who formed a company and he worked as managing director of the company, selected himself as the preliminary of the business. He lost his life during employed for the corporation and his dowager required recompence under the workmen's compensation act. On this, the court contended that according to the corporate personality concept he is the principal and retainer at the same time that permits his dowager for reimbursement due to the death of her husband while working as a pilot in the company.

This belief of separate legal entity was implemented in another case as Macaura v Northern Assurance Co. Ltd. This court stated that memberships have no attention in the company’s possessions. The proprietor of the wooden state was a creditor of a business that was majorly possessed by him. He ensured all the possessions in his name in contradiction of any fire accidents. After some time, the fire broke and he marched the claim for the damages from the insurance company. In this case, the court categorical the case in the favour of cover company because no associate of the business cannot own the assets in his name.

It can also be stated that the belief of self-governing business being gained its global receipt after the Salomon case. This principle was recognized by Calcutta high court in a similar case named Kondoli Tea Co. Ltd. In 1886. In this case, few people transmitted the business or tea domain to a corporation and attempted to escape from ad vole rum duty as they were themselves the members or stockholders of the corporation. So, it was just a transfer between them using another name. according to the court, the corporation was a separate legal entity, a separate body overall from the stockholders and the transmission of it was as much transportation and this can be a transfer of property if the stockholders of the company had been distinct persons. Along with this, there are many cases in which the case of Salomon was referred to as its landmark judgment.

The main rule of Salomon refers to once a company is incorporated it would be considered as a separate legal entity. According to the doctrine of separate legal entity the company and its members are not cojoined but disjoined. The liability of the members of the company is limited at the time of liquidation. In the case of Salomon v Salomon, it found that a company is formed or incorporated according to the regulations and rules of the companies act. The company is considered as a separate person not the agent of the owner or any controller. The judgment of this case was propounded by the House of Lords and this decision was made as to the basic principle of corporate personality and described a limited liability concept. The corporate veil is considered as a support for the wrongdoers of the company and some persons who conduct fraudulent activities in the business. But after some doctrine and company law, some awareness of the doctrine of the corporate veil was introduced according to that this veil can be lifted in the case when a corporate entity is used in the defense proceedings or as a covering of wrongdoings for tax evasion or some other matters.

Salomon vs Salomon case has some significance for the other case as this is the leading case and it laid down the principle of the corporate veil. It is a landmark judgment case of the UK company law case which holds the doctrine of separate legal entity for all the corporations. According to this shareholder cannot be personally liable at the time of insolvency of the company because the company has its own identity and liability to pay. 

Conclusion

This abovementioned report stated about the very popular case law named as Salomon V Salomon and facts, issue related to this case was discussed above in detail. After that judgment declared by the House of Lord was also detailed out in this report and implementation of this landmark judgment is described here. Some examples regarding the implementation or use of the judgment of this popular case are mentioned in the report. It is also mentioned that in what manners this case is helpful for the other similar cases and their judgment can be passed based on doctrines, principles of separate legal entity.

Along with this, the doctrine of separate legal entity and the corporate veil is detailed out in the report. The report is having some description of the separate legal entity. The main purpose of this report was to define and describe the doctrine of separate legal entities and their impacts on other similar cases. Some significance of Salomon v Salomon was also mentioned in this report. It is clearly stated that the landmark judgment case is used for many other similar cases.