Legal Issues in Media History

Legal Issues in Media History



Legal Issues in Media History

Corporate personality

Corporate personality refers to the fact that as far as the law is concerned a company personality really exists apart and different from its owners. As a result of this, a company can sue and be sued in its own name, hold its own property and crucially - be liable for its own debts. It is this concept that enables limited liability for shareholders to occur as the debts belong to the legal entity of the company and not to the shareholders in that company.

The history of corporate personality

Corporate legal personality arose from the activities of organisations such as religious orders and local authorities which were granted rights by the government to hold property and sue and be sued in their own right and not to have to rely on the rights of the members behind the organisation. Over time the concept began to be applied to commercial ventures with a public interest element such as rail building ventures and colonial trading businesses. However, modern company law only began in the midnineteenth century when a series of Companies Acts were passed which allowed ordinary individuals to form registered companies with limited liability. The way in which corporate personality and limited liability link together is best expressed by examining the key

cases.

Salomon v Salomon & Co.

Salomon v Salomon & Co. [1897] AC 22, this assumption proved to be mistaken.

Mr Salomon carried on a business as a leather merchant. In 1892 he formed the company Salomon & Co. Ltd. Mr Salomon, his wife and five of his children held one share each in the company. The members of the family held the shares for Mr Salomon because the Companies Acts required at that time that there be seven shareholders. Mr Salomon was also the Managing Director of the company. The newly incorporated company purchased the soletrading leather business. The leather business was valued by MrSalomon at £39,000. This was not an attempt at a fair valuation; rather it represented Mr Salomon's confidence in the continued success of the business. The price was paid in £10,000 worth of debentures (a debenture is a written acknowledgement of debt like a mortgage - see Chapter 7) giving a charge over all the company's assets (this means the debt is secured over the company's assets and Mr Salomon could, if he is not repaid his debt, take the company's assets and sell them to get his money back), plus £20,000 in £1 shares and £9,000 cash. Mr Salomon also at this point paid off all the sole trading business creditors in full. Mr Salomon thus held 20,001 shares in the company, with his family holding the six remaining shares. He was also, because of the debenture, a secured creditor.

However, things did not go well for the leather business and within a year Mr Salomon had to sell his debenture to save the business. This did not have the desired effect and the company ...