Salomon Principle: The Case Of Commercial Vs. Sallomon & Co)
Introduction
In 1897 the case of Salomon v A. Salomon & Co. Ltd was concluded, a highly regarded case within company law due to the Separate Entity Principle outlined, the principal which became widely known as the Salomon Principle. This piece will summarise the case in order to identify the importance it has in company law, along with identifying under what circumstance the Salomon Principle might be ignored by the courts. The final section will conclude with a subjective view of the Salomon Principle.
The case of Salomon v Salomon
The story begins with Aron Salomon, a Sole Trader who runs a boot making business. Following years of business, Salomon decides to incorporate a Limited Liability Company, A. Salomon & Company Ltd. The limited company was formed, and one £1 share was allocated to Salomon, his wife and each of their five children. Salomon's business was sold to the new company …show more content…
The brief facts of this case are that Gilford employed Horne as a managing director for a six year term . Horne's employment contract contained a restraint of trade clause where he agreed if he terminated his employment he would not solicit customers away from Gilford. Horne did leave Gilford and set up a rival business in which enticed customers away from Gilford. Gilford sued Horne to enforce the restraint of trade clause, however Horne argued on the grounds of separate legal entity that it was the company that enticed the customers away not Horne personally. The Court of Appeal allowed the enforcement of the clause in contract against the company. They did this because Horne had used the company as a "mere cloak or sham", the court lifted the corporate veil and allowed liability to be imposed on the reasons of fraud, Horne used a separate legal personality to carry out an action that was personally prohibited for him to
In 1897 the case of Salomon v A. Salomon & Co. Ltd was concluded, a highly regarded case within company law due to the Separate Entity Principle outlined, the principal which became widely known as the Salomon Principle. This piece will summarise the case in order to identify the importance it has in company law, along with identifying under what circumstance the Salomon Principle might be ignored by the courts. The final section will conclude with a subjective view of the Salomon Principle.
The case of Salomon v Salomon
The story begins with Aron Salomon, a Sole Trader who runs a boot making business. Following years of business, Salomon decides to incorporate a Limited Liability Company, A. Salomon & Company Ltd. The limited company was formed, and one £1 share was allocated to Salomon, his wife and each of their five children. Salomon's business was sold to the new company …show more content…
The brief facts of this case are that Gilford employed Horne as a managing director for a six year term . Horne's employment contract contained a restraint of trade clause where he agreed if he terminated his employment he would not solicit customers away from Gilford. Horne did leave Gilford and set up a rival business in which enticed customers away from Gilford. Gilford sued Horne to enforce the restraint of trade clause, however Horne argued on the grounds of separate legal entity that it was the company that enticed the customers away not Horne personally. The Court of Appeal allowed the enforcement of the clause in contract against the company. They did this because Horne had used the company as a "mere cloak or sham", the court lifted the corporate veil and allowed liability to be imposed on the reasons of fraud, Horne used a separate legal personality to carry out an action that was personally prohibited for him to