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Activity 1: Saloman v A Saloman & Co Ltd (1897) AC 22 ( HL)

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Activity 1: Saloman v A Saloman & Co Ltd (1897) AC 22 ( HL)

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1. In England, Mr. Salomon worked as a shoemaker. He changed his company to a limited corporation because he wanted his sons to join him in business (A Salomon & Co Ltd). Mr. Salomon's company was bought by A Salomon & Co Ltd for more than its fair market value. His wife joined, followed by his five kids. The corporation appointed the two eldest sons as directors. Of the 20,007 shares of the corporation, 20,001 were assigned to Mr. Salomon. Edmund Broderip advanced the company £5,000 on the condition that the debentures would serve as security, and the company gave Mr. Salomon £10,000 in debentures. Eventually, Salomon's firm faltered, and it stopped paying the interest on the debentures (half held by Broderip). To enforce his security, Broderip sued. The business was liquidated. The $5,000 was returned to Broderip. The remaining firm assets were £1,055. In accordance with his retained debentures, Salomon asserted this sum. Nothing would be left for unsecured creditors as a result. Salomon should be held accountable for the company's debts, according to the company's liquidator. Salomon filed a claim for £1,055.

2. The Court of Appeal ruled that the company was a myth, reasoning that Salomon had formed it in violation of the original object of the Companies Act of 1862 and that it had operated as Salomon's agent, making Salomon liable for any debt created as a result of that agency.

On appeal, the House of Lords overturned the previous decision and unanimously held that the company, having been duly incorporated, is an independent person with rights and obligations that are appropriate to itself, and that "the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and obligations are." Thus, the legal fiction of “corporate veil” between the company and its owners/controllers was firmly created by the Salomon case.

3. The case established that a Limited liability company has a legal identity separate from its shareholders.

The concept of limited liability was not crystallized as a fundamental core in cooperate law until the landmark case of Salomon v A Salomon. As a sole proprietor, Salomon ran a boot manufacturing business.

In this case it was an important principle that was established that the cooperate veil should not be pierced in order to protect the interest of shareholders and uphold the true spirit of the Companies Act.

Group Members

1. Isika Gunaratne- cb008998
2. Janathie Fernando- cb009124
3. Jenari Sulanjana- cb008951
4. Minna Ali- cb008996
5. Anjalee Navodya-cb008956
6. Sandani Swetha- cb008663

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1) Companies Act 2006(CA 2006),s.761- Trading Certificate
CA 2006, s.405 - Group Account
CA 2006, s.82 - Company name on paper work
CA 2006, s. 993 - Fraudulent Trading
Insolvency Act 1986, s.213/214 - Fraudulent and wrongful      trading

2) The principle of corporate personality refers to the legal concept that a company is a separate legal entity from its shareholders and directors. This means that the company is responsible for its own debts and liabilities, and its shareholders and directors are generally not personally liable for the company's obligations. However, in certain circumstances, statutes provide for the ability to "pierce the corporate veil" and impose liability on the individuals behind the company.

One of the most common circumstances in which the corporate veil may be pierced is when there is evidence of fraud or improper conduct. For example, if a company is used as a vehicle for fraud or other illegal activities, a court may find that the individuals behind the company should be held personally liable for the company's actions.

Another circumstance in which the corporate veil may be pierced is when there is evidence of inadequate capitalization. If a company is undercapitalized, meaning that it does not have sufficient funds to meet its obligations, a court may find that the individuals behind the company should be held personally liable for the company's debts.

There are a number of relevant statutes that provide for the ability to pierce the corporate veil in specific circumstances. For example, Section 213 of the UK Insolvency Act 1986 allows for the veil to be pierced when a company has been used to carry out fraudulent or wrongful trading.

Companies Act 2006 (UK): This statute sets out the framework for the formation, management, and operation of companies in the UK. It defines the legal concept of a "limited liability company," which is the most common form of corporation in the UK. It also sets out the rules for the distribution of profits, the appointment and duties of directors, and the liability of shareholders.

Overall, the ability to pierce the corporate veil is an important legal tool that allows courts to hold individuals accountable for the actions of a company in certain circumstances. However, courts are generally reluctant to do so and will only pierce the veil when there is clear evidence of impropriety or wrongdoing.

Group Members -
Shanuki [CB009174]
Anuki [CB009176]
Sewmini [CB009224]
Rakitha [CB008914]
Thushii [CB009148]

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Activity 1: Saloman v A Saloman & Co Ltd (1897) AC 22 (HL)

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Activity 1: Saloman v A Saloman & Co Ltd (1897) AC 22 (HL)

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The doctrine of the undisclosed principal in the contract was not considered in Prest v Prestodel Resources Limited, VTB Capital Plc v Nutritek International Corp, and Salomon v A Salomon and Co Ltd.

This article upholds the fact of incorporation but would lift the corporate veil where the independence of a company is suspected.

Salomon is authority only for the sanctity of the fact of incorporation, and so upholds the separate identity of companies properly incorporated under the Act.

Trusts and disclosed agency law are both rejected as devices for visiting Salomon with liability.

The presumption of independence is not an iron curtain, but a rebuttable presumption that can be lifted to allow evidence of dependence, and undisclosed agency in particular.

Team members: Zahra Mohamed (CB007840), Shaakya Fernando (CB009183), Nayanjalie Marini (CB009170), Arsiya Mahir (CB009210)

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isiumi

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CB009295

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Workshop 4-Corporate Personality  Lifting the Veil