Company Law - English law

Case Study
Pages 10 (2510 words)
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'The company is at law a different person altogether from the subscribers. Nor are subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the [Companies] Act.'2
It is a general principle of English law that it is not possible in the absence of agency, a trust relationship or wrongful trading to hold one person liable for the debts of another.3 However, like most common law principles and judicial interpretations it is a rebuttable presumption which must give way to a statement to the contrary 'in clear and unequivocal language'4 by Parliament.


Commentators have attempted to categorise those decisions under various headings, such as agency, fraud, group enterprise, tort and so forth6. What is clear on a close reading of the cases which have distinguished Salomon is that the courts will only interfere - by lifting the veil of incorporation - where there is clear evidence of wrongdoing or where they are required to interfere by Statute. There is therefore a presumption that members of a limited company are only liable to the extent of any unpaid amount on nominal value of their shares unless 'wrongdoing' can be established.
LJM Limited seems to have been incorporated for the sole intention of providing a vehicle for the directors Jean, Lynette and Lauren to unlawfully deprive W&H Limited, its shareholders and its members of its corporate assets and any retained profits from the international contract.
There is authority to suggest that the courts will lift the veil to prevent evasion of an existing obligation7 and the court will grant an injunction/specific performance in that instance. ...
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