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Assignment
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Corpations Law Summer School
Michelle Pollacco s3842889

Abstract
Salomon v Salomon & Co Ltd [1897] AC 22 is significant because it was not until the House of Lords handed down its decision that the de facto one person company was fully recognized as being a separate entity. The Corporations Act allows the formation of public or proprietary companies with a singe shareholder s114. The principal in Salomon’s case has been applied in many cases so that’s it’s operations has expanded to include many situations which the House of Lords judges would not have anticipated. This is particularly so in the case of Corporate Groups…

Over time, the Law has changed in order to keep up with the challenges and advances in the business world. Therefore, the terms and references used in Corporations Law have been reviewed and altered to fit these clauses and situations that arise in present time.
One major change has occurred in the case of Salomon v Salomon & Co Ltd [1897], which brought into light the idea of a one-person company. From this motion carried down, other cases in Law wore brought into light, to deal with other factories that follow from the set precedent of Salomon’s case. Furthermore expanded with the idea of a company lifting of the Corporate Veil. This enables a company to chase payments that they owe and what is owed to them in a nutshell. Further implemented is the courts decision based on the outcomes of each case, once the Corporate Veil has been pierced and therefore placed into action into businesses. Lastly, a company also has an interest in balancing shareholders investment and confidence versus creditors and liquidators chasing a company for payment when it’s going downhill. All in all, a company has many different measures put into place in order to protect individuals in a company, and the company itself in order to stay strong and viable.

In the late nineteenth century, the term a Separate Legal Entity was established from the case of Salomon v Salomon & Co Ltd [1897]. This case occurred from Mr. Salomon and his decision “to give his sons some finical rewards other than as employees and to extend the business” (Wishart, p.64, 2009). The case involved the fact that Mr. Salomon, ”knew that the business was failing and wanted to take advantage of limited liability ” (Wishart, p.64, 2009).
Thus meaning, the business was a once a small venture, which Salomon had sold and which included shares and a lump sum payment. The business had therefore turned into a company, but did not succeeded because it was created during a non- economically viable time. As a result, the unsustainable and non-financial company went into liquidation, but was saved from Mr. Brodiep as a debenture (Wishart, p.65, 2009). From this Aaron Salomon had deceived Mr. Brodiep by not telling the truth of the financial position of the business and thus affected the shareholders worth. Therefore the House of Lords decision, based on the facts of this case, had changed from its original decision that the debenture should not be considered as first priority but instead the Company was considered a Mere Sham (Wishart, p.65, 2009). This meant the company had acted with the interest of the agent (Mr. Brodiep). Instead the decision was changed to define the company as separate legal entity, because it had still continued to run as a business. Also in the case it was presented that it did not matter that the shareholders wore related to Mr. Salomon or that he was in fact the majority shareholder of the company. Aaron Salomon stated that he owed “no liability to indemnify for any losses, the company carried out the business in it’s own right, and the debenture had to be paid first in priority” meaning Salomon was not held responsible for his actions because he was considered separate from the company and the