The rule in Salomon v Salomon & Co [1897] AC 22 has been described as Essay - 1

The rule in Salomon v Salomon & Co 1897 AC 22 has been described as one of the corner stones of English Company Law. Discuss the precept and impact of the decision on company law - Essay ExampleThis paper will discuss the rationale and the impact of the decision made by the House of Lords regarding Salomon v Salomon & Co Ltd on company law.Aaron Salomon was a short letterman who for many years worked in manufacturing leather boots. Increasingly, his sons grew and demanded to be part of the business. Consequently, Salomon capitulated and incorporated his manufacturing business as Limited Liability Company. During those times, one needed to have at least seven members in order to incorporate their business. Salomon registered all his family members as shareholders of the business. Salomon, however, have a majority of the companys shares while the rest of the family members shared the minority shares equally. Consequently, Salomon became not only the companys principal shareholder h ardly also the companys principal creditor (Duhaime, 2010).Upon incorporation of the business, the company saw a decline in the sales of the boots. Part of the resolve for the waning was as a consequence of a sequence of internal strikes. The strikes made the government, Salomons main customer, divide its contracts to other firms in order to avoid the risk of depending heavily on one supplier. The governments decision to divide its contract among other firms affected Salomons business greatly and was one of the reasons it failed. The consequence of failure was the inability of the company to pay interest on its debentures (half-held by Broderip). Broderip took action and litigated to apply his safety in the year 1983. It is after the company failed that it was put into excreting (Duhaime, 2010).While in liquidation, the liquidator became suspicious of Salomons debentures used for security for the debt. He termed them as invalid and argued that Salomon obtained them fraudulently. As such, the liquidator demanded a refund of the coin that had been dished out to Salomon by the company and a cancellation of the debentures. The