“As a separate legal entity, the courts to a very large degree will allow companies to operate as they see fit within the boundaries of the law…The courts are very protective of the Salomon decision and the corporate form. Without it, company law would virtually collapse as limited liability would no longer act as an incentive for investors to be able to restrict the risks associated with their ‘passive’ investment; the consequence being the grinding to a halt of the corporate-capitalist machine.”
Wild, C & Weinstein, S Smith and Keenan’s Company Law (17th Edition), page 20.
In light of the above statement, undertake a critical evaluation of whether the decision in Salomon should continue to be welcomed or whether it is time to recognise the negative consequences of the decision and introduce reforms to this corporate model.
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