Salomon v A Salomon And Co Ltd: Corporate Law Case Study

Corporate Law
Running Head: CORPORATE LAW 0
Student’s Name

CORPORATE LAW 1
Contents
Introduction ...........................................................................................................................2
Salomon v A Salomon And Co Ltd [1897] AC 22..........................................................................2
Legal basis of the statement.............................................................................................................4
Future of the legal principle detailed in Salomon’s case and changes required under Corporations
Act 2001 ...........................................................................................................................5
Conclusion ...........................................................................................................................6
References ...........................................................................................................................7

CORPORATE LAW 2
Introduction
Being an identified business structure, a company has several characteristics. The separate Legal
entity is one of the significant features of a company. According to this feature, a company has it
is different identification from it is members as well as directors. Directors or members of a
company can not be considered a company. A company can run business and also can enter into
various business transactions by it is own name. This is the reason that directors and members of
the company started taking unfair advantage of this feature. In the history of corporate law, many
of the cases have been reported where the separate entity rule did not hold legal and decision of
such cases developed into law further. These are the decisions which became the basis of modern
law.
Salomon v A Salomon And Co Ltd [1897] AC 22
In general, every company is a separate legal personality in the eyes of law. The lead reason
behind this rule is that a company can do all the acts like a natural person in the course of
business. As a company is an artificial person, therefore the same cannot conduct and behave.
Director in the company is the person who acts on behalf of the company but cannot be held
liable for such acts. The company only will be held responsible for all the conducts that directors
do on behalf of the company and in the name of the company. However, this is necessary to
mention that court respect this separate entity rule until directors will not take unethical
advantage of the same. In the history of corporate law, many of the cases have reported in which
court denies to consider this rule and pierced the virtual corporate veil. Salomon v A Salomon
And Co Ltd [1897] AC 22 is a very significant case in this area.