The Relevance of the Salomon v. Salomon Case

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The Relevance of the Salomon v. Salomon Case

'Salomon v Salomon is an outdated case with little relevance to modern

company law.'

Discuss.

Salomon v Salomon[1] served to establish the principle of corporate

personality that 'forms the cornerstone of company law.'[2] It is my

contention that despite various attempts by both the legislature and

the judiciary to circumvent the principle, this 'cornerstone' has not

been eroded, rather, it forms the very foundations of modern company

law.

Salomon v Salomon was and still is a landmark case. By confirming the

legitimacy of Mr Salomon's company the House of Lords put forward the

concept of separate corporate personality and limited liability.

Inextricably linked with this ratio is an acknowledgement of the

importance of certainty within the law, thus separate corporate

personality becomes a concrete principle to which the law must adhere.

Salomon v Salomon is followed in subsequent cases, notably Macaura v

Northern Assurance Co.[3] and Lee v Lee's Air Farming Ltd[4]. 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. In effect Salomon's

principle as confirmed by Macaura v Northern Assurance Co. and Lee v

Lee's Air Farming Ltd. helps form an image of a corporation as a

'depersonalised conception'[5], an object that is 'cleansed and

emptied of its shareholders.'[6]

Yet the concept of an incorporated company as a separate legal person

causes some difficulties, for surely all 'legal personality is in a

sense fiction'.[7] Questions soon arise ...

... middle of paper ...

... [7] Farrar (1998) chap. 7

[8] Salomon v Salomon

[9] Lennards Carrying Co Ltd v Asiatic Petroleum Co.[1915] AC 153

[10] As occurred in Daimler v Continental Tyres [1915] 1 KB 893.

[11] As quoted by F. Moghadam in QMWLJ 1 p36.

[12] e.g. Gilford Motor Co. v Horne [1933] Ch.935

[13] S.213

[14] S.214

[15] D.H.N Food Distributors v Tower Hamlets L.B.C ([1976] 3 All ER

462)

[16] [1983] 3 WLR 492.

[17] cf. Gallagher and Zeigler 1990

[18] [1991] 1 All ER 929

[19] Farrar

[20] [1996] 2 All ER 433

[21] [1998] 1 All ER 929

[22] [1998] BCLC 447

[23] [1985] BCLC 333 at p337.

[24] p536.

[25] [1993] BCLC 480

[26] [1998] 1 WLR 830

[27] Cf Ord v Belhaven.

[28] [1998] AC 854

[29] Cf S.24 Companies Act 1985

[30] cf. S213, 214 Insolvency Act 1986.

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