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

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