Salomon v A Salomon and Co Ltd
1897 · [1897] AC 22
Posted By lanbuk.com
- Facts
- Salomon sold his boot business to a company he formed. He and six family members held the shares, Salomon holding almost all. Part of the price was paid by secured . The company became insolvent.
- Issue
- Was the company a mere agent or alias of Salomon, so that he was liable for its debts and could not rank as a secured creditor?
- Held
- No. The House of Lords held that the company was validly formed and was a legal person distinct from Salomon. He was entitled to be paid as a secured debenture holder before the unsecured creditors.
- Principle
- A registered company is a separate legal person from its members, even where one person holds nearly all the shares.
- Why it matters
- It is the foundation of company law and of limited liability.
Words and Latin in this note
- Debenture
- A document that creates or acknowledges a debt owed by a company, often secured by a charge. A debenture holder is a creditor, not a member. Open the note.
For study only. By lanbuk.com. Always check current sources and consult a qualified professional.