Salomon v Salomon & Co Ltd [1896] UKHL 1 (16 November 1896)
Salomon v Salomon & Co Ltd [1896] UKHL 1 is a judgment from United Kingdom on 16 November 1896. Cite it as [1896] UKHL 1. Search it by the party names, the citation [1896] UKHL 1, or United Kingdom judgment.
united-kingdom
November 16, 1896
UNITED KINGDOM
Salomon
v.
Salomon & Co Ltd [1896] UKHL 1
[1896] UKHL 1
Proceeding. Judgment. United Kingdom.
Held. A company is a separate legal person from its members. Once validly incorporated, the company is not the agent of its shareholders, and the shareholders are not liable for the company's debts beyond their unpaid share capital.
SALOMON v A SALOMON AND CO LTD [1896] UKHL 1; [1897] AC 22 House of Lords 16 November 1896
Judges: Lord Halsbury LC, Lord Watson, Lord Herschell, Lord Macnaghten, Lord Morris, Lord Davey
Facts
Aron Salomon carried on a boot-making business. He formed a company and sold the business to it. He took 20,001 of the 20,007 shares; the other six were held by his wife and children to meet the statutory minimum. He also took debentures secured on the company's assets. The company failed. The liquidator argued that the company was a mere agent or nominee for Salomon, and that Salomon should be liable for the company's debts.
Held
The House of Lords held that the company was a separate legal person. Once the formal requirements of the Companies Act were met, the company was validly constituted. It was not the agent of Salomon, and Salomon was not liable for its debts. The debentures were valid.
Key Principles
1. A company has a separate legal personality from its members.
2. The motives of the promoters are irrelevant if the statutory formalities are observed.
3. Shareholders are not liable for the company's debts beyond the amount unpaid on their shares.
4. The case is the foundation of company law in every common-law .
Why It Matters in Sierra Leone
Sierra Leone company law is based on the English Companies Acts. Salomon is persuasive authority on separate legal personality, limited liability and the validity of security given to a controlling shareholder. It is the starting point for any argument about lifting the corporate veil.