Swot Analysis Of Salomon Company

This essay will explain the concepts of separate personality and limited liability and their significance in company law. The principle of separate personality is defined in the Companies Act 2006(CA) ; “subscribers to the memorandum, together with such other persons as may from time to time become members of the company are a body corporate by the name contained in memorandum.” This essentially means that a company is a separate legal personality to its members and therefore can itself be sued and enter into contracts. This theory was birthed into company law through the case of Salomon v Salomon and Co LTD 1872. This case involved a company entering liquidation and the unsecured creditors not being able to claim assets to compensate them. The issue in this case was whether Mr Salomon owed the money or the company did. In the end, the House of Lords held that the company was not an agent of Mr Salomon and so the debts were that of the company thus creating the “corporate Veil” .

There is also the concept of secondary liability. This means that if, for example, an employment agency

• Liability: The owner has unlimited liability. When the business fails it is up to the owner to pay all the creditors off.

Sole Proprietorship: A type of business that is owned by and run by one person with no legal difference between the business and the owner. It is easy to form with no cost or time to initiate. It gives the owner the ability to self-govern the business. There are drawbacks; only one owner can be established not allowing a partner. Also, unlimited liability puts the owner’s personal assets in jeopardy with the creditors.

* Limited Liability - Unlike partnerships and sole proprietorships, corporate shareholders are not liable for any of the corporation's debts.

Limited liability: the liability of investors is limited to their personal investments in the corporation.

Frank has the right to form any type of business which he desires so far as its in line with the laws of the state. Now Frank chooses the limited liability company with a lot of advantages. There is nothing wrong with choosing sometimes that works for us so far as its in line with the law or with the bible if we are Christians. The problem comes when there us an abuse of the system. Limited Limited Company has a lot of advantages to the owners. What happens when there is an abuse of those advantages. One of the protections of limited liability company is asset protection. It will be ethical wrong to abuse this protection. One way that this protection can be abused is by intentional securing credit to buy personal assets knowing very well that should the company go under their personal asset cannot be

Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).

Choosing a Corporation/Company Structure - the business structure of a company/ corporation is highly recommended, it has the flexibility to gain more capital, or credit capability and assets used as security. Based on the Corporation Act 2001 (Cth) AC 22, a corporation is another legal entity with their own legal rights, duties and responsibilities separate to the individual or owner of the company (Harris, Hargovan & Adams, 2013, pp 229). The risk and consequences are one of the principal considerations of choosing a company structure (Harris, Hargovan & Adams, pp 50). Based on the “Corporate Veil” Liability is owned by a separate legal entity and not to the extent of the owner, for instance, the debt of the company is not a personal liability, but the company. This is further explained in the case below.

Salamon v. Salamon & Co. Ltd has a significance principle that has been recognised universally. Refer to s16(5) in The Act, once company is registered, the new company is a juristic person that separate from its members. Likewise, company has the full responsible on its own debts and contractual

The concept of a company being a separate legal entity is the most striking illustration in separating the company from its owners. A paramount principle of corporate law is that no shareholder or member of a company is made liable for the obligations incurred by such incorporations A company is different from its members in the eyes of law. In continuations to this the opposite also holds true in the sense that neither can the company be held liable for the acts of its members. It is a fundamental distinction that a company is distinct from its members.

Salomon transferred the debentures to Broderip in exchange for a loan. Salomon defaulted on payment of interest on the loan and Broderip sought to enforce the security against the company. Unsecured creditors tried to put

This doctrine has been seen as a “two- edged sword,” reason being that at a general level while it was seen as a good decision in that by establishing that corporations are separate legal entities, Salomon 's case endowed the company with the entire requisite attributes with which to become the powerhouse of capitalism. At a particular level, however, it was a bad decision. By extending the benefits of incorporation to small private enterprises, Salomon 's case has promoted fraud and the evasion of legal obligations.

The government wanted to diversify its supply base to avoid the risk of its few suppliers being crippled by strikes. His warehouse, as a consequence, was full of unsold stock. He and his wife lent the company money, and he cancelled his debentures, but the company needed more money, so they sought £5,000 from a Mr. Edmund Broderip. Mr. Salomon assigned Broderip his debenture, the loan with ten per cent interest and secured by a floating charge. But Salomon 's business still failed, and he could not keep up with the interest payments. In October 1893, Broderip sued to enforce his security. The company was put into liquidation. Broderip was repaid his £5,000, and the debenture was reassigned to Salomon, who retained the floating charge over the company

Corporation origin from the Latin word Corpus which means body. It is formed by a group of people and has separate rights and liability from those individual. In any means, corporation exists independently from its owner and this principle is called the doctrine of separate personality. Doctrine of separate personality is the basic and fundamental principle in a Company Law. This principle outline the legal relationship between company and its members. Company’s assets belong to the company not the shareholders as assets are the equity for creditors. Company must use up all its assets to pay off the creditors if it became insolvent. The same applies to the corporation’s debts. For limited liabilities company, the shareholder liability is limited which means that the shareholder is restricted to the number of shares they paid and not personally liable for the corporation’s debts. If the company does not have enough equity to pay off debts, the creditors cannot come after the shareholders. However, limited liability company can be very powerful when in hands who do fraud and on defeating creditors’ claims. Courts then can ignore the doctrine for exception cases and lifting the corporate veil. Lifting the corporate veil is a situation where courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s debts.