Company Law - Types of Companies Cases Flashcards
Salomon v Salomon
Mr S was a merchant running a wholesale leather boot manufacturing business as a sole trader. he decided to convert his business into a limited liability company. He took 20,001 shares of £1 and, his wife and five children each took one £1 share. He also receive £100 in cash and £10000 of debentures. The company was a “one man” company although there where seven shareholders. The company got into financial difficulties and Mr S cancelled his debentures and reissued them to Mr Broderip who thus became a creditor of the company. Eventually a liquidator was appointed. When the assets were realised there was only sufficient to part repay Mr B who challenged the distribution seeking repayment from Mr S. He was initially successful but Mr S appealed ultimately to the House of Lords.
It was held that Mr S did not require to indemnify the company or its creditors in respect of debts of the company. The requirements of the Company Act 1862 had been complied with fully with the effect that the company had its own legal persona and its members had limited liability for the debts of the company. Mr B could not recover from Mr S.
Lee v Lee Air Farming Ltd
This case concerned an aerial cap spraying business. Mr L owned the majority of the shares and was the sole working director of the company. He was killed when piloting the aircraft.
It was held that as he and the company were distinct persona, he could be an employee for the purpose of the relevant statute with a right against it while killed in the course of his employment
Foss v Harbottle
Two minority shareholders initiated proceedings against, amongst others, directors of the company. They claimed that the directors had misapplied company assets.
It was held that the court dismissed the action saying that where a company is wronged by the directors, it is only the company that has a standing to sue
Gilford Motor Company Ltd v Horne
Mr Horne had been an employee of GMC and as such was subject to a restrictive covenant in his contract. He left the employment of GMC and set up a company through which he approached customers of his former employee.
It was held that the company could be restrained from competition as the former employee has set up the company to evade his own legal obligations. An injunction was granted against him and the company
Daimler Co Ltd v Continental Tyre and Rubber Co (GB) Ltd
C sued D for debts owing. C was a UK company but all the shareholders were German and D successfully argued that to pay the debt amounted to trading with the enemy which would go towards the German war effort
DHN Food Distributors v London Borough of Tower Hamlets
DHN carried on a business from premises owned by a subsidiary. The subsidiary itself had no business actives. Both companies had the same directors. The local authority acquired the premises compulsorily but refused to pay compensation for disturbance of the business since the subsidiary who owned the business did not trade from there.
It was held that the companies were in economic terms, mutually interdependent therefore could be regarded as a single group. Thus there was a valid claim for disturbance since the ownership of the premises and the business activities were in the hands of a single group
Adams v Cape industries
Cape was an English registered company. One of its subsidiaries CPC, a com many incorporated and carrying on business in the US, had a court judgement against it.
It was held that it was unsuccessfully argued that the veil should be lifted to enable the judgement to be enforced against Cape. The Court of Appeal said there were no special circumstances indicating that CPC was a mere facade of Cape
