Legal aid oyo journal of legal issues vol. 1, Issue 1, 2017


LEGAL AID OYO JOURNAL OF LEGAL ISSUES VOL. 1, ISSUE 1, 2017



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THE SALOMON PRINCIPLE OF WHAT RELEVANCE
Company Law Notbeook
LEGAL AID OYO JOURNAL OF LEGAL ISSUES VOL. 1, ISSUE 1, 2017.
110 books of account and on the evidence it was treated like one of Smith, Stone & Knight's departments. Accordingly a claim for compensation for loss of business was made by Smith, Stone & Knight Ltd. Birmingham Corporation argued that Smith, Stone & Knight Ltd. could not succeed because the loss had been sustained by the waste company - a separate legal entity. The Court held that compensation was payable as the Waste Company was carrying on no business of its own but was in fact carrying on the Smith, Stone & Knight business as agent for them.
Atkinson J held that the following six factors must be proven in order to show the requisite agency relationship and thus be able to lift the corporate veil
 Profits of the subsidiary must be treated as profits of the holding company
 Those conducting the subsidiary's business must be appointed by the holding company
 The holding company must be the head and brain of the trading venture
 The holding company must be in control of the venture and must decide what capital should be spent and what should be done
 The profits made by the subsidiary's business must be made by the holding company's skill and direction and
 The holding company must be inconstant and effective control. Arguments to however lift the veil were rejected in
Adams v Cape Industries Plc (1990) Ch 433where the Court of Appeal ruled that, as a matter of first legal principle, it was not justified in piercing the corporate veil of a defendant company, which was a member of a large corporate group, merely on the grounds that the corporate structure had been engineered so as to ensure that legal liabilities in respect to particular future activities of the group would be imposed on another member of the group rather than on the defendant company itself. In simple terms, the Court of Appeal dismissed the argument that the corporate veil should be pierced purely because a group of companies functioned as a single economic entity.

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