Company Law: Salomon v Salomon & Co Ltd, Vicarious Liability, Contract Law, and Director's Legal Obligations

This article delves into the concepts of separate legal entity, piercing of the corporate veil, vicarious liability, and director's legal obligations in Company Law through case analysis of Salomon v Salomon & Co Ltd, Catty Nips Pty Ltd, VitC Ltd, and Cold Choco Ltd. It covers the reasoning and significance of the findings of Salomon v Salomon & Co Ltd, the assessment of employee compensation and vicarious liability in Catty Nips Pty Ltd, the process of taking a company public and shareholder duties in Catty Nips Pty Ltd, the responsibility of a company in contract law through VitC Ltd, and the legal obligations of a director in Cold Choco Ltd. Course code and college/university not mentioned.

COMPANY LAWS

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
QUESTION 1...................................................................................................................................3
Discuss the reasoning of the Court and significance of the findings of Salomon v Salomon &
Co Ltd with regard to separate legal entity and piercing of the corporate veil. .........................3
QUSETION 2(a)..............................................................................................................................4
Please advise Harry as to whether he or Ms Patty are right in their assessment.........................4
QUSETION 2(b)..............................................................................................................................5
Please advise Ms. Patty on the process of taking the company public. Will she be able to do so
without Ms Posy’s consent?........................................................................................................5
QUESTION 3...................................................................................................................................6
QUSETION 4...................................................................................................................................7
Merrick has come to you for advice and wants to know whether this would breach his legal
obligations as a director of Cold Choco Ltd. ............................................................................7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9

MAIN BODY
QUESTION 1
Discuss the reasoning of the Court and significance of the findings of Salomon v Salomon & Co
Ltd with regard to separate legal entity and piercing of the corporate veil.
Facts of the case
In this case appellant Aron Salmon was wholesale supplier of export quality leather boot
and transferred business to a company within which his wife, daughter and four sons were the
subscriber to the memorandum of association. Further, the company was sold for sum of £
38,782. £ 16,000 was to be paid in the form of cash or debentures which was issued in the name
of Aron Salomon. This was later given to Mr. Edmund Broderip as a security for mortgage for £
5,000. In this £ 20,001 has shared payment of his old business in the year 1893 which caused
failure of business and wind up the company as it failed to show progress. At this date, a
company was indebted to £ 7,773 to the unsecured creditors. The liquidator alleged that the
company was merely a shame and brought an action against the appellant to indemnify the debts
of the company (Jackson, 2018).
Issue of the case
Whether the Salmon &Co. Ltd was a company at all?
Then artificial creation of legislation of company is valid in any manner within the case?
Is Salmon liable over the debts of the company or not?
Rule applied in the case
In this case, the rule that is applied is of Lifting of corporate Vile which is based upon
making shareholders consider as separate legal entity form its owners. This is applied only when
corporate vile has been lifted(Flaatten, 2019).
Application of the case
In order to justify the principle, relevant case law is Jones v Lipman in this case court
lifted corporate veil over protection of fraudulent business activities. The judgement passed by
the court said that company is just an agent working on behalf of Salmon thus Salmon cannot be
held liable for paying debts.
Conclusion

It can be observed from the case that separate legal entity is one of the most important
concept which is present with the company and commercial laws making constructive foundation
over concept of limited liability of shareholders. The limited liability of shareholders protects
them from any kind of personal liability over debts unless court find that fraud has been done.
QUSETION 2(a)
Please advise Harry as to whether he or Ms Patty are right in their assessment.
Issue raised in the case
 Whether Harry can be considered as an employee after Catty Nips Pty Ltd is bought by
Ms Patty.
 Whether Harry can claim compensation for his injuries.
Rule Applied within the case
As per this case the general rule of vicarious liability is applied which makes employer
liable over the act done by employee. This rule also has exception as per it an employer is not
liable upon act committed by employee only when employer does not know about an act
committed by employee. Further Fair Work Act 2009 is applied that make employer bound to
pay employees. This means that wages cannot be cut in accidental cases where employee is not
at default(Ferrarini and Vote, 2021).
Application in the case
The facts of the case makes it clear that Harry is an sole employee of the company that
belongs to Ms Patty. Also it has been observed that injuries has been faced by Harry which has
caused him trouble in coming to college. As per the facts analyses cat named Herbert has
scratched Harry a lot and become violent in such a manner that it become unbearable. This
makes Fair Work Act 2009 applied as in this the fault if not of employee. Then vicarious liability
is applied in a way that employer can be held liable for not giving wages in illegal manner. Then
it can be observe that Harry is employee of the organization as he was working till the time and
cannot be barred from giving salaries as he has continued to work.
Conclusion of the case
The case has developed understanding about employee's compensation which is one of
that most important part which makes salaries of employee's not deducted at any cost. Further

the case has explained about vicarious liability which is an important principle and has helped in
providing justification that why Harry is liable to attain compensation. Then in this case it can be
marked out that Harry is considered as employee as he has worked in important manner which
makes claim to be made in more effective manner. In this Fair Work Act 2009 applied which
helps in providing proper justification in relation to wages given to employee and also it makes
an employee part of organization also. The case has been able to develop understanding about
gaining compensation on time.
QUSETION 2(b)
Please advise Ms. Patty on the process of taking the company public. Will she be able to do so
without Ms Posy’s consent?
Issue marked out within the case
Whether Ms Patty can go forward over the idea of making Catty Nips Pty Ltd a public
company without any consent of Ms Posy?
Rule applied within the case In this protection of shareholders is deal and the rule that is
applied is shareholders duty. In this various aspect is covered which makes decision taken by
organization applied more effectively. In order to make justification over it relevant case law is
Foss v Harbottle. In this case court has said that decision taken by shareholders is required to be
followed by an organization in more effective manner this makes organization work in
appropriate manner. In this case the act that is applied is Corporation Act 2001. In the act
majority of shareholders require over taking decisions that makes activities of an organization
done in more effective way and helps shareholders taking important decision. (Dahal, 2018).
Application of the case
As per the facts of the case, it can be marked out that Posy has no consent over decision
of Ms Patty for making Catty Nips Pty Ltd a public company. In this, Catty Nips Pty Ltd requires
to have majority of shareholders and with the help of the Corporation Act 2001, decision can be
taken of making organization public or not.
Conclusion of case
From the above discussion, it can be marked out that Ms patty cannot make the
organization public without considering Ms Posy.

QUESTION 3
Issue raise out of the question
Whether VitC Ltd holds responsibility over action of Leila and can be held liable to pay
over the order of fruits that has been ordered.
Rule applicable within the case
In this case, law agency makes company responsible over entering into contract on behalf
of itsagent. As per the facts of cases, section 126(1) of the corporation act 2001 is applied within
it which says that the agent of company have power over entering into contract on behalf of
company . Also section 125(1) is applied which says that power of an owners and shareholders
makes an organization makes contract formed in valid manner. Further in this section 125(2)
says that even if restrictions have been imposed through the legislation they can be invalid if they
are making an organization face various consequences in relation to its trade. Also both the
section holds validity in relation over making an organization achieved fairness within its
working . These are covered within Corporation act 2001 which is an valid legislation used
within contract.
Application
In this case principles applied is based upon the facts within which Leila has worked as
an agent within VitC Ltd and has authority to enter into contract with third party which makes
all process to be completed with third parties. Lelia is entitled for acting on behalf of VitC Ltd.
In order to provide relevancy upon the legislation case law that is applied is Hely-Hutchinson v
Brayhead Ltd in this court observe that an contract making an company liable upon forming an
contract. Further discussions and applicability of the case law with section shows that contract
form can only be valid when they satisfy the conditions mentioned above. (Bernard Esq, 2021).
Conclusion of the case
From the dioscussion it can be concluded that if Merrick goes forward with the contract
and discloses information that is important for an organization makes legal obligation raised by
the director of Cold Choco Ltd. In this discussion discussion has proved that the sections of the
cat is proven to be valid within the eyes of law. This makes validity provided upon making
contract formed in more effective way. Further in this discussion clearance is developed in
relation to formation of contract with third parties. Then in this cases is explained showing about

proving more relevancy in relation to these section. Various aspects in relation to contract law is
covered making formation of contract done in effective way.
QUSETION 4
Facts of the case
Merrick has come to you for advice and wants to know whether this would breach his legal
obligations as a director of Cold Choco Ltd.
Issue arise within the case
The main issue that has rise within the case is based upon breach of legal obligation hold
by directors of the company.
Rule in relation to case
In this case the rule which is applied within the case is based upon section 183 of
Corporation Act 2001. This section is based upon disclosing of information which is
important for an organization. It has been coverd within section 19(1) of the Act.(Ackers,
2017).
Application of the case
After analysing the facts it can be observed that breach has taken place making obligation
raised in relation to directors. This is covered the section that is applied in relation to benefits
obtained over personla intrest making directors duties justified,
Conclusion of the case
According to this discussion it can be find out that if Merrick peruses with the deal then
in such situation information is also disclosed to Steel makes violation of legal obligation upon
director of Cold Choco Ltd.
CONCLUSION

REFERENCES
Books and Journals
Ackers, B., 2017. Independent corporate social responsibility assurance: a response to soft laws,
or influenced by company size and industry sector?. International Journal of Disclosure
and Governance, 14(4), pp.278-298.
Bernard Adaafu Oba Esq, O., 2021. Company's Securities: An Overview of Nigeria's Relevant
Laws. Available at SSRN 3886386.
Dahal, R., 2018. Salomon v Salomon: Its Impact on Modern Laws on Corporations. Available at
SSRN 3169431.
Ferrarini, G. and Vote, O.S.O., 2021. 1.6 Approximation of Company Laws. European Company
Law, p.17.
Flaatten, S., 2019. The laws of the economy: decriminalizing business transgressions in the late
19th century. Management & Organizational History, 14(4), pp.337-349.
Jackson, O., 2018. US, UK cryptocurrency laws deterring blockchain companies. International
Financial Law Review.
Naghizadeh, M., 2020. A Comprehensive Approach to Reviewing the Role of Laws on
Technology Transfer in Foreign Collaboration Contracts (The Case Study: Omia Pars
Company). Journal of Technology Development Management, 8(2), pp.45-76.
Scampuddu, B. and Nieddu, G.L., 2019. Italy: Tax authorities clarify laws on customer list
transfers from a company to a permanent establishment. International Tax Review.
SMITH, D.C., 2020. The Mid-Victorian Reform of Britain’s Company Laws and the Moral
Economy of Fair Competition. Enterprise & Society, pp.1-37.
Wachuka, N., 2018. Effect of the Enhanced Maternity Leave in the Kenyan Labour Laws
(Employment Act, 2007) to the Employability of Women at Britam Life Assurance
Company Ltd (Doctoral dissertation, University of Nairobi).