The rule in Salomon v Salomon & Co

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Write a 10 page essay on The rule in Salomon v Salomon & Co [1897] AC 22 has been described as one of the corner stones of English Company Law. Discuss the rationale and impact of the decision on company law.Furthermore, through the extension of the advantages of incorporation to small companies, this case of Salomon manages to promote fraud, and the evasion of certain legal obligations. This article explains the impact that Salomon vs. Salomon has had on companies and corporations.

On a general perspective, the judgment by the House of Lords was a good decision. This case is recognized all over the world as a good authority, regarding the principle of a corporation being a separate legal entity. Under this case, the House of Lords firmly established that after incorporation, a new and a separate artificial organization comes into existence. Under the law, a company is a distinct person, and it has its own personality, which is separate and independent from the people who created it, invested in it, and those who direct and manage the operations of the company.

2.From the principles established in this case, the duties and rights of a corporation are different from the duties and rights of the directors, members, or the stakeholders of the corporation. These people are always obscured by the concept of the corporate veil, which normally surrounds the company. A corporate veil refers to a legal concept which is responsible for separating the personality of that of a corporation, from the personality of the shareholders of a corporation. Furthermore, this personality protects the managers and shareholders of a corporation from personal liability of the company’s debts, and any other obligation that the company may face3. However, this protection is not impenetrable or iron clad, and this is mainly because the court can rule that the activities of a company are not conducted as per the provisions of the legislation that guides the operations of a company, or the managers or shareholders of a company were engaged in carrying out illegal activities.Based on these facts, the courts may hold the……..

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