Legal aid oyo journal of legal issues vol. 1, Issue 1, 2017
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Company Law Notbeook
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- Lopes LJ and Kay LJ
- LEGAL AID OYO JOURNAL OF LEGAL ISSUES VOL. 1, ISSUE 1, 2017. 105 House of Lords
| Court of Appeal The Court of Appealconfirmed Vaughan Williams J's decision against Mr. Salomon, though on the grounds that Mr. Salomon had abused the privileges of incorporation and limited liability, which Parliament had intended only to confer on "independent bona fide shareholders, who had a mind and will of their own and were not mere puppets". He was not alone in this reasoning as Lopes LJ and Kay LJ variously described the company as a myth and a fiction and said that the incorporation of the business by Mr. Salomon had been a mere scheme to enable him to carry on as before but with limited liability. 444 Thus it was held by the court that Salomon was a trustee for the company which was his mere shadow. 443 The case at first instance was known as Broderip V Salomon [1895] 2 Ch. 323 ibid LEGAL AID OYO JOURNAL OF LEGAL ISSUES VOL. 1, ISSUE 1, 2017. 105 House of Lords Salomon appealed to the House of Lords which rejected the lower courts' rulings The House of Lords in unanimously overturning this decision, rejected the arguments from agency and fraud. They held that there was nothing in the Act about whether the subscribers (i.e., the shareholders) should be independent of the majority shareholder. The company was duly constituted in law and it was not the function of judges to read into the statute limitations they themselves considered expedient. From this judgment of the House of Lords, the concept of "a company" was seen as a legal entity in its own right. The very heart of separation and independence from those involved in the company's management and structure was established as a result of Salomon's case. If creditors dealt with the company it was to the latter to which recourse had to be made, not to those who were behind the entity. Over the years that followed Salomon, this became known as the veil of incorporation” 445 time however, would severely erode this traditional perception as would be seen later in the course of this paper. Download 384.7 Kb. Share with your friends:
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