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Corpotate Law

Corpotate Law
n 1897, something fundamental occurred in the business world. The British House of Lords ruled, for the first time in modernity, that a legal corporation (a limited liability company) is, in the eyes of the law, a legal "personality" separate from its shareholders (Salomon v. Salomon & Co Ltd [1897] AC 22)

Aron Salomon was a Jewish leather trader in Victorian England.  He established a limited liability company with seven shareholders (as required by law at the time), being himself, his wife and his children. He lent money to Salomon Ltd as a secured creditor. The company later borrowed more money for its activities, but suffered serious difficulties and legal actions. Aron Salomon also filed a claim against the company in his capacity as a secured creditor, demanding that the company return the loan he had provided it. The Victorian Court was required to decide the question of who the company liquidator should pay first; unsecured creditors such as suppliers and employees, or the secured creditor, Mr Aron Salomon himself, director and founder of the company which had, as mentioned, encountered difficulties.

The British Court of Appeal "didn't like" Salomon's claim against the company and decided that it was not interested in "semantics", finding the whole idea of setting up the company a "sham". Mr Salomon didn't waiver and he appealed to the House of Lords (the highest legal instance in England and the British Commonwealth). The House of Lords ruled against the decision of the Court of Appeals, stating that Mr. Salomon's legal argument should be accepted and that the company is in fact a legal personality that is separate from him; as such, he is entitled to enjoy the status of a secured creditor of the company.

To this day, the average person is not aware that a limited liability company has the status of a separate legal personality. From his point of view, the company and its shareholders are one and the same. "He is the company".  Even in our day, creditors find it hard to accept a determination that a company shareholder is not liable for the company's debts and that in fact, "he is not the company". One can only imagine the shockwaves that resulted from the decision of the House of Lords in the case of Salamon v Salomon, when it was passed in the 19th century!

From that time and to this very day, the decision of the House of Lords in the case of Salomon v Salomon is a leading aspect of modern company law worldwide, including company law in Israel.  Indeed, much water has flown under the legal bridge since that ruling, amongst others a reduction in the "separation" between the corporation and its shareholders, in circumstances providing grounds for "raising the corporate veil", circumstances giving rise to cause pursuant to the laws of agency, or circumstances involving bad faith under contract law. Nonetheless, the principle of a "separate legal personality" is alive and well, and was born, as mentioned, in the decision of Salomon v Salomon.

On the face of it, business arrangements entered into under the mantle of a limited liability company (a private company limited by shares) provides the party entering the arrangement with a relative measure of security (subject, as mentioned, to the provisions of the above law), on the business level (according to the rationale which says that the company's debts are not his personal debts) and on the criminal level (according to the rationale which states that, subject to any relevant law, criminal offences committed by the company are not attributed to him personally).  As we have seen, the security is relative and not absolute, because company law has undergone substantial "evolution" since the days of Salomon v Salomon. However, such relative security, which is not insignificant, is preferable to being totally exposed and defenseless when conducting business "personally" outside of the framework of a limited liability company. (In certain circumstances, the alternative of a limited partnership could also be considered).

The firm of Adv. Ron Major specializes in business in general and company law in particular.  The firm provides ongoing legal support for businesses, from the setting up stage through to ongoing business activities or specific transactions where required, and the filing of legal actions or statements of claim, as the case may be, to the competent court.

Adv. Major came to the practice of law from the business world, with which he has intimate familiarity and personal experience. Adv. Major's orientation is commercial, and he is from the school that sees the legal process as a means to achieving the client's ends and defending his various (mostly commercial and/or business and/or financial) interests and not as an end in itself.

Adv. Ron Major completed his studies in commercial law at an elite University in England and also holds an MBA in marketing and economics from the prestigious Edinburgh Business School. This is a real advantage for the firm's business clients, whether their business is on the rise or on the verge of collapse.

The synergy between Adv. Major's legal and academic qualifications in the field of business and commerce, and his personal experience in the business sector, are also an advantage for the firm's private clients in the various areas in which they need advice or assistance. Because ultimately, the vast majority of disputes requiring legal intervention revolve around money and finances. His understanding of the business context that has led to the dispute, together with his legal abilities, are a winning formula which is successfully applied for the firm's clients.

The firm operates with professionalism, creativity, assertiveness and personal attention, selecting the most suitable framework for the (business or private) client's real needs, in each individual case.

Adv. Major is involved in every case handled by the firm, including cases which are routinely dealt with by other lawyers.


 

 
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ron@forcemajorlaw.co.il
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