Corporations Law: Legal Basis, Solomon Case, and Future Amendments

Running head: Corporations Law
Corporations Law

Corporations Law
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Contents
Introduction................................................................................................................................2
Soloman v. A Soloman And Co. Ltd..........................................................................................2
Legal Basis of a Corporate Entity..............................................................................................3
Future of Corporation Law.........................................................................................................4
Conclusion..................................................................................................................................4
References..................................................................................................................................6

Corporations Law
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Introduction
A corporation is a separate legal entity by law. It has a separate identity from its owners who
are called stockholders. It does not mean the corporation has the voting right but he is liable
to pay taxes. The partnership firm differentiated with the company. The company provides a
“veil” that protects its shareholders from personal liability whereas partnership firm does not
provide a “veil” (Bottomley, Hall and Spender, 2018). The corporation is very different to
deal in legal terms. In partnership firm, it will only affect the capital of him and his partner. If
the Sole proprietor is making any decision, he is only risking his capital. Whereas in
corporation, the managers of the corporation making any decision they are risking the capital
of others, the shareholders capital they are risking. In a case of Solomon V A Solomon and
Co. Ltd. [1897] AC 22, it is had been described that the company role and the role of the
owner in the company. The future of separate legal entity necessary that it requires that
whether any amendment in current law. It will require by taking more cases of Corporation
law that why it is necessary to amend these changes.
Solomon v. A Solomon And Co. Ltd.
Aaron Solomon case has been considered the major case for the rule of Separate legal entity.
Judge, Vaughan Williams J. in the ruling said that Mr Solomon created the company with the
only purpose to transfer the company. The judge considered that Company was agent and the
Solomon was principle. Mr Solomon also appealed against this order but that appeal is also
ruled against him. It was ruled by the court that Mr Solomon had misused the privileges of
incorporation that was conferred for bona fide shareholders. He incorporated the company
was just a scheme and described the company is just a fiction and a myth. However, the
House of Lords overturned this decision said that Mr Solomon had made the company with
all requirement and rejected the arguments of the agent-principal and the fraud. He held that
only seven members are required to hold at least one shares according to the Companies Act,
1862. The company is a separate person created by law and considered as a legal person that
had a different identity from its shareholders. The company was principal and Solomon was
his agent, hence the business does not belong to the Solomon but it belongs to the Company.
Even though the business will remain same after the incorporation and his managers and they
only receiving the profits but after the incorporation the “veil” had provided to its