Answer to Question #308049 in Accounting for Faith

Question

The decision in Salomon Vs Salomon & Co Ltd gave rise to the Salomon Principle.

a. Explain FIVE exceptions to this principle under statutory provisions (10 Marks)

b. Explain FIVE exceptions to this principle under case law (10 Marks

Answer 1

a.b.

• for example, the court wants to determine the true nature of the transaction.
• if the subsidiary is in the process of liquidation
• in case of threat of fraud
• in case of tax evasion or unauthorized tax evasion
• a company can act as an agent if its members, i.e. directors/shareholders authorize the company to do so
• an improper trading has taken place if the director knew, or should reasonably have known, that the company was insolvent or heading for insolvency, and did not take all reasonable steps to minimize the creditor's loss.