Corporate Law A Business Organization Is Governed,...

Corporate law can be described as the legislation under which the formation, registration or incorporation of a business organization is governed, dissolved, controlled and administered . The laws relating to corporations are highly important to the judicial system to control companies and their shareholders in a lawful manner. Mr. Aron Salomon manufactured leather boots as a sole trader, by the early 1880’s his sons became interested in taking part in the business. As a result, Mr. Salomon decided to incorporate his business as a Limited company, known as Salomon Co. Ltd. The company bought Mr. Salomon’s business for  £39,000;  £10,000 of which was a debt to him. Mr. Salomon took 20,001 of the 20,007 issued shares for himself and†¦show more content†¦The Act contemplated the incorporation of seven independent bonà ¢ fide members, who had a mind and a will of their own, and were not the mere puppets of an individual who . It was believed by the lord justices of appeal that the company was fiction and that the company’s shareholders were puppets of Mr Salomon’s and that he had abused the privileges of incorporation and limited liability as a result of his previous actions . The House of Lords later quashed the Court of Appeals ruling, after critically interpreting the Companies Act 1862 . The court ruled that there was nothing in the Act specifically detailing whether the shareholders should be independent of the majority shareholder . As well as this, it was equally as irrelevant that the bulk of shares were issued to Mr. Salomon as the legislation did not mention that each shareholder was to own a minimum maximum amount of shares. The company was constituted in law as the Companies Act 1862 views limited liability companies as legal ‘individuals’, separate and distinct from the company’s shareholders leaving Mr. Salomon not liable for the debts of Salomon Co. Ltd.’s creditors. The Salomon case has been seen as significant to corporate law after its original ruling was quashed and supported by the House of Lords in 1897. The reason for this is that it has paved the way for companies to be seen as complete individuals like any human and are seen as separate from its