[roseskylace]

Hi- I have already looked at previous posts on the Salomon case, but can’t really find anything to help me!

I have to answer this question:

The Salomon decision [Salomon v Salomon and Co Ltd [1897] AC 22 HL.] is a fundamental and enduring decision in company law, yet has been famously described as ‘calamitous’ by one academic commentator.

Discuss the case in relation to the development of limited liability and the importance of separate corporate personality.

I have explained the case of Salomon and the concept of separate corporate personality, including HOL judgments. I have then explained subsequent cases such as Lee v Lee’s Air Farming Ltd, Malyon v Plummer, Macuara v Northern assurance, Re A company.

But I cannot really find anything about it being ‘calamitous’, apart from Freund’s journal… So I don’t know what to write about that!

If anyone could help me about anything else they think I should include?

It is meant to be 1000 words, and I have already done 783.. so I am not on this to get someone to do this for me.. I just need some basic guidelines, and to see if I am going on the correct track or not.

Any help would be greatly appreciated!

Thanks!

[Curlyben]

Yes and excellent case that we have seen a lot of on this site.

This will help: Let me google that for you
As this has been repeated to death this question is now closed

[LisaB4657]

This thread was re-opened because even though the question has been asked to death, at least you tried to do your homework. :)

Here's a pointer for you: When doing your searching, don't look for the word "calamitous". Think about why someone would think that this decision spells bad news. You've already read about why this decision is considered a stride forward. Now think for the other side. What arguments can you make for the belief that this decision is not a good thing? What are the disadvantages?

[Fr_Chuck]

I will agree with Lisa you have at least tried to look at it.

Remember when there is a law suit, there are two sides to the case, one side wins and the other loses, The people who loss, what was their case, if others were in that same position would they not be against the decission.

In every case there is a winner and loser, the loser always thinks it is bad case.

[gomze21]

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to firmly uphold the doctrine of corporate personality, as set out in the Companies Act 1862. Mr Aron Salomon was a leather boot and shoe manufacturer of his firm in Whitechapel High Street, with warehouses and a large establishment. He had it for 30 years and 'he might fairly have counted upon retiring with at least £10,000 in his pocket.' he had a wife, a daughter and five sons, four of whom worked with him. The sons wanted to be partners, so he turned into a limited company. The wife and five eldest children became subscribers and two eldest sons also directors.
In Salomon Vs. Salomon & Co. Ltd. [1897] A.C. 22, the House of Lords laid down that a company is distinct and separate from its members. In this case one Salomon incorporated a company named, 'Salomon & Co. Ltd.', with seven subscribers consisting of himself, his wife, his daughter and four sons. This company took over the personal business assets of Salomon for 38,782 pounds and in turn, Salomon took 20001 shares of the 20007 shares of 1 pound each, debentures worth 10000 pounds of the company with a charge on the assets of the company and the balance was discharged in cash. His wife, daughter and four sons took up 1 share each. Subsequently the company went into liquidation due to general trade depression. The unsecured creditors contended that Salomon could not be treated as a secured creditor of the company, in respect of the debentures held by him, as he was the managing director of the one-man company, which was not different from Salomon and the cloak of the company was a mere sham and fraud.
It was held be Lord Macnaghten: 'The company is at law a different person altogether from the subscribers to the Memorandum, and though it may be that after incorporation of the business is precisely the same as it was before and the same persons and managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustees for them. Nor are the subscribers or members liable in any shape or form except to the extent and in the manner provided by the act.'
Thus this case clearly established that the company has its own existence and as a result a shareholder cannot be held liable for the acts of the company even though he holds the entire share capital of the company. The whole law of corporation is in fact based on this theory of corporation entity.

[AK lawyer]

... The unsecured creditors contended that Salomon could not be treated as a secured creditor of the company, in respect of the debentures held by him, as he was the managing director of the one-man company, ...

In the U.S. this aspect of the situation is looked at differently. See, for example, the Deep Rock case (a US Supreme Court case). As I recall, it held that, without necessarily "piercing the corporate veil", outside creditors were to be nevetheless preferred to owners.