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Limited Liability in UK: The Landmark Decision of Salomon V. Salomon and its Implications on Limited Liability

Posted: 15 Feb 2013  

Mehwish Baloch

Georgetown University Law Center

Date Written: February 14, 2013

Abstract

The decision of the House of Lords in the Salomon v. Salomon & Co. Ltd. case firmly established the separate legal entity doctrine, also known as corporate personality. The decision meant that legal entities be treated separately from the shareholders and in turn providing them with all the benefits needed to promote economic liberalism. However, the decision in Salomon’s case also enticed criticism from various groups. By treating small private corporations as separate legal entities, the doctrine is said to have encouraged fraud and transfer of legal obligations from the individual shareholders to the corporations. It will be argued, however, that the general effect of the Salomon case is a positive one. The following points will be discussed in this paper: 1. The decision by the House of Lords in the Salomon v. Salmon & Co. Ltd. case; and 2. An analysis of the relationship between limited liability and corporate personality; and 3. Denial of corporate personality and holding the shareholders responsibly for the liability.

Suggested Citation

Baloch, Mehwish, Limited Liability in UK: The Landmark Decision of Salomon V. Salomon and its Implications on Limited Liability (February 14, 2013). Available at SSRN: https://ssrn.com/abstract=2217284

Mehwish Baloch (Contact Author)

Georgetown University Law Center ( email )

600 New Jersey Avenue, NW
Washington, DC 20001
United States

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