Review the Rule Laid Down in the Case of Salomon V Salomon (1897)

“Review the rule laid down in the case of Salomon v Salomon (1897). Identify the issues that have arisen after that decision and outline how the rule has been applied in recent cases. ” Once registered and the ‘certificate of incorporation’ issued a company has a legal existence that is separate and distinct from its members. As a separate legal entity the company is conferred with rights and is subject to duties and obligations, the company can sue to have these rights enforced and similarly it can be sued.

The implications of the company’s separate legal status were demonstrated in the case Salomon V Salomon & Co Ltd. Salomon V Salomon & Co Ltd (1897) is a landmark Company Law case. The effect of the House of Lords unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the companies’ act 1862 so that creditors of an insolvent company could not sure the company’s shareholders to pay outstanding debts.

The separate legal entity applied The decision in the Solomon case established beyond doubt that once the statutory formalities have been complied with a ‘ Veil of incorporation’ placed over the company this veil distinguishes the company from its members and in doing so separates their respective obligations. The effect of the decision of the case Salomon v Salomon can be seen in lee V. lee’s farming ltd.

Lee who held the beneficial interest in the shares of the defendant company was also its governing director and employed by the company as their pilot, while being on the course of carrying out the company’s business he was killed. The deceased’s wife then claimed compensation under the workers compensation act. The Court of Appeal of New Zealand held that the victim’s wife was not entitled to compensation Since Mr Lee was as owner and governing director of the company could not be an employee of the business as well. The Privy council then rejected