Business Law Essay

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Business Law “The doctrine laid down in Salomon v Salomon & Co Ltd [1897] AC 22 has to be watched very carefully. It has often been supposed to cast a veil on the personality of a limited company through which the courts cannot see. But that is not true. The courts can, and often do, draw aside the veil. They can, and often do, pull off the mark. They look to see what really lies behind” - Lord Denning in Littlewoods Mail Order Stores v Inland revenue Commissioners [1969] 3 All ER 422. Introduction “Law is order, and good law is good order” - Aristotle 343 BC Incorporation is the act of a business achieving a separate corporate personality from that of its owners. When a company is a separate legal identity to its owners it is…show more content…
(Marsh, Soulsby, 2002, P.232) The principles found in the Salomon v Salomon & Co Ltd [1897] AC 22 are similar to the Lee v Lee’s Air Farming Ltd [1961] AC 12 case. This shows the effects that the doctrine has had on future cases since 1897. Lee formed a company for the purpose of aerial crop spraying of which he was both the controlling shareholder and governing director. After Lee died in 1956 during work, his widow was entitled to compensation. This was due to the fact that the company had been incorporated, therefore Lee was a separate legal entity to that of his company. The company’s corporate personality meant that Lee was classed as an employee, as well as his other roles. (Rush, Otley, 2006, P.199) The case of Salomon v Salomon & Co Ltd [1897] AC 22 has had an effect on a large number of cases since 1897, helping owners avoid costs by gaining a corporate personality for their business, thus distancing themselves from any debts and problems that may arise. Littlewoods Mail Order Stores v Inland revenue Commissioners [1969] 3 All ER 422 Lord Denning states, “The courts can, and often do, draw aside the veil.” The ‘corporate veil’ refers to the separation of legal identity between parent firms and their subsidiaries. Fearing that such liability protection would facilitate illicit activity, early twentieth century courts would sometimes ‘pierce’ the corporate veil. (Tweedale,

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