The Legal Principles Of The Case Of Salomon V. Salmon And Co Ltd.

This essay will explain the concepts of separate personality and limited liability and their significance in company law. The principle of separate personality is defined in the Companies Act 2006(CA) ; “subscribers to the memorandum, together with such other persons as may from time to time become members of the company are a body corporate by the name contained in memorandum.” This essentially means that a company is a separate legal personality to its members and therefore can itself be sued and enter into contracts. This theory was birthed into company law through the case of Salomon v Salomon and Co LTD 1872. This case involved a company entering liquidation and the unsecured creditors not being able to claim assets to compensate them. The issue in this case was whether Mr Salomon owed the money or the company did. In the end, the House of Lords held that the company was not an agent of Mr Salomon and so the debts were that of the company thus creating the “corporate Veil” .

Salomon case brought an idea to the whole world that the company is separate from it member and completely independent with rights and duties distinct from those possessed by its shareholders. S15 (1) make it clear that the company is incorporated, therefore, is treated as a legal person. Thus, a company could own property, to be party to a contract and is protected under some of human rights as an artificial person.

According to this section every member or creditor, including debenture holder, of each of transfer or companies before amalgamation shall have, as nearly as may be the same interest in or rights against the transferee company as he/she had in the company of which he/she originally was a member or creditor and in case the interest rights of such member or creditor in or against the transferee are less than his/her interest rights in or against the original company, he shall be entitled to compensation to that

Because it is a separate person, it has its own legal identity or personality, which means that it can, for example, hold property in its own name and enter into contracts in its own name. It can also commence or defend legal proceedings in its own name. Importantly, its liabilities are its own and not those of its members or officers.

There are exceptions to the principle in Salomon’s case, where the veil is lifted, or pierced, and the law disregards the corporate entity and pays regard instead to the economic realities behind the disguise. Exceptions can be classified into those expressly provided by statute (such as in section 214 of the Insolvency Act 1986 which makes directors liable for wrongful trading10) and those under judicial interpretation11. To ‘lift the veil of incorporation’ simply means to ignore or set aside the separate legal personality of a company.

Rule of Law: As provided in the corporate law, corporations are legal entities that are liable for their own liabilities, and hence shareholders cannot be personally held liable for any liability in the corporation. Whether a corporation de jure or corporation de facto, individual shareholders may not take the identity of an organization per se; and hence this limits the liabilities of individual shareholders against creditors of the

Choosing a Corporation/Company Structure - the business structure of a company/ corporation is highly recommended, it has the flexibility to gain more capital, or credit capability and assets used as security. Based on the Corporation Act 2001 (Cth) AC 22, a corporation is another legal entity with their own legal rights, duties and responsibilities separate to the individual or owner of the company (Harris, Hargovan & Adams, 2013, pp 229). The risk and consequences are one of the principal considerations of choosing a company structure (Harris, Hargovan & Adams, pp 50). Based on the “Corporate Veil” Liability is owned by a separate legal entity and not to the extent of the owner, for instance, the debt of the company is not a personal liability, but the company. This is further explained in the case below.

Salamon v. Salamon & Co. Ltd has a significance principle that has been recognised universally. Refer to s16(5) in The Act, once company is registered, the new company is a juristic person that separate from its members. Likewise, company has the full responsible on its own debts and contractual

From the beginning of the judicial history, the lawyers and judges have emphasized about how a corporation is an intangible legal entity alone without body or soul (Arthur and Machen, 1911). The doctrine of separate legal personality basically is about how a corporation and the owners were two different entity (Kelly, Hammer and Hendy, 2014). The Limited Liability Act which replaced by the Joint Stock Companies Act 1856, is where the members are only liable up to the amount that

In order to establish the liability of each party involved, it must first be determined whether the liable party will be KAL itself as a corporate personality or its directors. The case of Salomon v Salomon & Co Ltd has established the legal principle of a company as a separate legal entity with its own rights and responsibilities. This legal doctrine was reaffirmed in Andar Transport Pty Ltd v Brambles Ltd when Justice Kirby held that “the mere fact that the company may be owned or controlled

The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.

There is no clear framework of the rules that would cover the contingencies of a ruling to pierce the corporate veil Idoport Pty Ltd v National Australia Bank Ltd. The corporate Veil usually protects owners and shareholders from being held liable for corporate duties. Yet again a decision made by the court to lift that veil and would place the liability on shareholders, owners, administrators, executives and officers of the company without ownership interest. The purpose of this essay is to conduct an analysis on the concept of lifting the corporate veil and to review the different views on its fairness and equitability to present a better understanding of the notion, the methods used was throughout researching the numerous scholars views on the subject, case law and statutes examples, and the evidence provided by the empirical study of Ramsay & Noakes. When we discuss the lifting the corporate veil the first case that pops out is the case of Salomon V A. Salomon & Co Ltd, since the decisions of applying the corporate veil were first formed as a consequence of this case. The idea covers all of company law and distinguishes that a company is a separate legal entity from its members and directors. Furthermore, spencer (2012); have indicated that one of the core principles that followed the decision in Salomon v Salomon was the wide acceptance one man company’s. However In order to form a

This doctrine has been seen as a “two- edged sword,” reason being that at a general level while it was seen as a good decision in that by establishing that corporations are separate legal entities, Salomon 's case endowed the company with the entire requisite attributes with which to become the powerhouse of capitalism. At a particular level, however, it was a bad decision. By extending the benefits of incorporation to small private enterprises, Salomon 's case has promoted fraud and the evasion of legal obligations.

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.

the company is the owner of a pool of assets that are distinct from other