The principle of corporate personality is confirmed by the case of Salomon and reaffirmed by later cases. The company is recognised as a separate legal person from its members. This case initially was regarded as the corner stone of which company law was formed. The principle of corporate personality was then incorporated in the Company Act 1985 under section 13(3); company would be seen as a separate legal entity as long as the requirements under the act were fulfilled. The case therefore established the complete separation between the company and those involved in its operations. The decision made in this case is the main principle in showing the distinction between companies and partnerships.
The limited liability rule shielded investors against incurring full liability for the wrongs of the company. This has been a major advantage to companies as it is likely to promote more investors to the company .Many larger parent companies are able to structure their companies in such a way that liability would not fall upon themselves but to their smaller subsidiaries instead. As stated in the case of Adams v Cape it is not illegal for companies to structure themselves with the calculated aim of avoiding liability. The separate entity was designed to protect the shareholders and managers and those with interests in the company against the company itself. Therefore, the idea of a ‘veil’ was designed to protect shareholders from liabilities incurred as a result of the company’s actions.
The Research paper on Company Case Study of Technics SL Ltd
BackgroundThe company that I have chosen to look at is Technics SL Ltd, a subsidiary company of Technics Ltd, which is now owned by Panasonic. Technics main purpose of business is home entertainment systems but Technics SL Ltd concentrate their efforts toward turntable production. They currently produce 2 products, the SL1200MK2, SL1210MK2. (Appendix 1)•Technics announced the world's first direct ...
The law in the United Kingdom is seen to favour the Salomon principle and rarely wishes to ‘pierce the corporate veil,’ in order to enforce liability on the members. Corporate personality and limited liability offers double protection to corporate shareholders that hold more control and influence than the individual shareholders. This could be highlighted in subsequent cases following the landmark decision. Salomon v Salomon is followed in subsequent cases, notably Macaura v Northern Assurance Co. and Lee v Lee’s Air Farming Ltd. These cases highlight the reality of the separate corporate identity and take it a step further in stressing the distinction between a company’s identity and that of its shareholders.
However, the law of separate legal personality has caused some major issues as the years have gone by since the Salomon case. There have been criticisms regarding the real nature of corporate personality which has been attached to something that cannot really ‘be treated like any other person with its rights and liabilities appropriate to itself’ this is surely impossible. Due to these reasons a number of exceptions to the separate entity arise. It is this potential for injustice and abuse of the corporate form that has led to the mitigation of the Salomon principle by what has become known as ‘lifting the corporate veil.’
Many critics argue that the lifting of the corporate veil lacks any systematic approach, even though it has been regarded that there are broad policy reasons for refusing to recognise some companies as separate entities there is no one unifying principle underlying all of this. in the case of DHN Foods the courts wanted to disregard the separate legal identity of all companies involved and to recognise them as one main company, based mainly on economic arguments has not been followed enthusiastically by the Courts
However, in the case of Adams v Cape Industries where it was decided that each company in a group is a separate legal entity unless there was some justification for the single economic unit argument in the wording of a particular statute or contract. This ‘conservative’ restatement of the separate entity principle shows the courts willingness to stick by Salomon’s principle. Thus recent case law points to the importance of the Salomon principle in that companies will be regarded as separate legal entities with their own liabilities and obligations unless there seem obvious reasons to disregard the corporate veil
The Term Paper on Vicky Case Corporate People
Ethics Theory/ Vicky Green Case Right to be Informed: Since key personnel of other companies are certainly going to face the risk of losing their jobs if they decide to accept the K. I. , Koke International, 50 percent raise, then Vicky must consider the key personnel's right to be informed about the aftermath of such a decision. Wendy McGee, Vicky's boss, has made it clear to her senior staff ...
Judges and practitioners to date have reinforced the principles asserted in the Salomon case and highly regard it as one of the main cases in company law.
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[ 1 ]. [1925] AC 619
[ 2 ]. [1961] AC 12
[ 3 ]. Salomon v Salomon
[ 4 ]. [1991] 1 All ER 929
[ 5 ]. Farrar
