Salomon vs Salomon & CO LTD (1897)


Separate legal entety 1st low.

Salomon vs Salomon & CO LTD (1897)

Aaron salomon was a successful leather merchant. First he ran the business as a sole proprietorship.
He decided to incorporate his business as a Limited liability company.
He gave one shares each to his wife & his five children and he himself took 20,001 shares of 20,007 shares, in consideration there of debentures were issued to salomon.
The business floundered, Salomon unable to salvage the company and the company was put into liquidation.
The assets were enough to pay off secured creditor including himself who was a debenture holder.
Unsecured creditor were left stranded,
The liquidator sued Salomon.
The court of Appeal held that he was liable to indemnity the company against the losses.
The house of lords reversing the court of Appeal's decision, incorporation of a company created a separated person.
The member were not liable in respect of the company obligation.
Even though the business of the company was the same as before and the same person managed the business & with the same hands received the profits, yet the company was not an agent or trustee for the member.

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