Salomon v. Salomon: A Landmark Judgement on Corporate Veil

LAW201 Corporate
Law Semester 2 2021
Assessment Task 2
Report Individual

Table of content
INTRODUCTION...............................................................................................................................3
MAIN BODY.......................................................................................................................................3
Facts..................................................................................................................................................3
Prior law...........................................................................................................................................4
Decision............................................................................................................................................4
Effect.................................................................................................................................................5
CONCLUSION....................................................................................................................................5
REFERENCES....................................................................................................................................6

INTRODUCTION
In today’s life it is important to manage all the functionality and the general working
scenarios in a systematic manner. In order to create a positive environment by protecting the
rights of individuals with their safeguarding measures Law is an important source. Law is a
command given by irrespective higher authorities and government in order to create safe
environment for individuals and also to protect their rights and responsibilities. This is not
only helps in the daily lifestyle but also helps to manage the organisational work in a proper
manner. As Companies act sets out to protect the rights of the shareholders, employees and
all the working members in order to manage the business efficiently (Hasif, (2018)). This
report will cover a case scenario of Salomon v. Salomon Which was a leading case which
laid out the principle of corporate veil and has raised a landmark judgement in UK regarding
to the facts with the critical analysis of the decision and the effect that has been led out after
the decision has been influenced.
MAIN BODY
Facts
Aron Salomon was a well-known show maker in England He used to make leather
boots as a sole proprietor. As that was his family earning his sons were willing to be business
partner with him in order of which he turned his business into a limited liability company
through which the business changed in a Salomon & Co Ltd. The business was being
purchased by the company at an excessive price. His five elder children and wife became be
subscribers along with that the two elder sons of Aron Salomon became the directors. Mr.
Salomon was already being allocated for about 20, 001 of their companies 20, 007 shares. For
all this the company thereby has given him £10,000 as debentures in order to make the
security of debentures and has also received an advance of £5000 through Edmund Broderip.
Later on, there is been seen that Salomon Business failed there was also observed the
defaulted-on interest payments through the debentures for which Broderip sued for enforcing
his security. Because of all this the company went in liquidation for which Broderip was there
by being repaid their £5000 and through which the company’s assets remain was about £1055
(Tayyarli, (2021)). Salomon Claimed in order to retain the debentures as there was left
nothing for unsecured creditors in the company’s liquidator argued that Salamone will be
responsible for all the company’s steps and was sued for £1055. The major issue turned over
there was that the formation of the company into a limited liability company a fraud intention
in order to defeat the creditors.