2) What are the two (2) principles that
emerge from the UK House of Lords decision in Salomon v Salomon?
The two principles that emerge
are that corporations are distinct legal persons and that corporations should
have limited liability. In actuality, these already existed in statute; the
ruling merely upheld them in case law.
When we talk about "legal
persons", we do not mean living, breathing human beings. These are
sometimes referred to as "natural persons". The more general term,
"persons", is attributed to anything, living or not, that is
"capable" of having rights and duties. The legal fiction of a
"legal person" arises from the state artificially assigning
"personality" to an entity that is not a "natural person"
for the purpose of assigning in "rights and duties" under the law. From
a legal standpoint, then, a "legal person" is an entity of some sort
that is not a "natural person" but that the law (tentatively) treats
as a "person" anyways.
Limited liability is a
principle that states that those who invest within a company are not liable for
any losses that the company incurs, excluding loss of dividends. This is meant
to protect investors from lawsuits, debts and bankruptcy. It is often claimed
that it was deemed desirable by some to protect investors from losses in order
to encourage them to take risks in their investments, rather than to give them
immunity from questionable business practices. However, the second motive logically
follows from the first. There exists some jurisprudence that limits limited
liability in certain extreme cases.
I would like to interject
something I've picked up from between the lines of the course material. To
truly understand the legal separation between shareholders and corporations, we
need not to seek answers in the world of classical economics and classical
liberalism but in the world of corporatism, or right-wing collectivism, and if we
are entering this world then we must analyze it through a Marxist filter. It is
only by recognizing the class dominance inherent in lawmaking that such an
arrangement can truly begin to make sense.
The greater question here ought
not to be related to investment but to the rule of law. By providing limited
liability to investors and shareholders, and by limiting or eliminating
personal accountability for crimes to individuals working within corporations,
we are placing an entire class of individuals above the law. Limited liability
was initially brought into law by a Liberal government, which in nineteenth
century England represented the interests of business, in opposition to
aristocratic Toryism and a still slowly developing workers movement. It is consequently
a rather blatant enforcement of bourgeois class privilege. How could it come to
be that the investor class came to legislate itself above the rule of law? How
could it be that the courts could not only ignore the question altogether, but
uphold the legislation under a 'supremacy of parliament' argument? Is
parliament itself above the rule of law? These answers seem to have their
resolutions in an understanding of the state as the protector of the interests
of capital, rather than in seemingly contradictory propositions about reducing
the role of government in the economy.
LAWS 2201
feb, 2013
http://dghjdfsghkrdghdgja.appspot.com/thoughts/essays/salomon.html