Aaron Salomon Case Study

Aaron Salomon was successful leather merchant that specializes in the manufacture of leather shoes, for many years ran his job as a trader and sole.
At the time, it was a legal requirement for inclusion at least seven people participate as members, partners of the company. Mr. Salomon, CEO himself. Mr. Solomon owned 20,001 of the 20,007 shares of the company - with the participation of the remaining six individually among six shareholders (wife, daughter and four sons). Mr. Salomon work to the new company sold nearly £ 39,000, of which £ 10,000 was religion. It was thus at a time when the main shareholder of the company and main creditor.
When the company was in liquidation, the liquidator argued that the bonds used by Mr. Salomon as a guarantee

However, as time went on, courts began to ignore the separate entity doctrine, in other words to show that the members, controllers or subsidiary is one and the same with company.
The first significant challenge came during the First World War and with huge political significance. The separate entity doctrine was ignored in Daimler Co. Ltd v. Continental Tyre and Rubber Co. (Great Britain) Ltd. (1916)38 to show that the shareholders were from an enemy country (Germany). However, the existence of an enemy character involves a question of public security rather than abuse of corporate personality. Yet again, politics was playing a key role in shaping company law.
The courts began an independent assault on the separate entity doctrine in the 1930s. For example, in Gilford Motor Co. Ltd v. Horne (1933),39 a former employee was bound by a covenant not to solicit customers from the employer upon leaving the company. He set up a company for that purpose and the court lifted the corporate veil to show that it was a sham company set up by Horne to evade legal

Unless a subsidiary is found to be independent of the parent company, it would be classified as one and the same with the parent company under the rules of contractual agency for the purposes of determining liability or impropriety. In Littlewoods Mail Order Stores Ltd v. IRC (1969), Lord Denning pointed out a new emphasis on parent and subsidiary companies: I think that we should look at the Fork Manufacturing Co. Ltd. and see it as it really is the wholly owned subsidiary of Littlewoods. It is the creature, the puppet, of Littlewoods, in point of fact: and it should be so regarded in point of law.
Lord Denning’s emphasis that ‘law’ and ‘facts’ should operate together is reminiscent of the Court of Appeal’s approach in Salomon. His Lordship was going back to the basic principles employed by the Court of Appeal in Salomon.
The factual approach was employed in DHN Food Distributors Ltd v. Tower Hamlets LBC where Lord Denning observed that a group of companies was in fact a ‘single economic entity’. Somewhat expectedly, two years later, Lord Denning’s approach to group companies in DHN was particularly disapproved by the House of Lords in Woolfson v. Stratchclyde Regional Council