Salomon vs Salomon & Co. Ltd.
Citation: Salomon vs Salomon & Co. Ltd. 1897 AC 22
Court: House of Lords, United Kingdom
Bench: Lord Halsbury LC, Lord Watson, Lord Herschell, Lord Macnaghten, Lord Morris, Lord Davey
Facts of the Case:
Aron Salomon, a leather merchant, incorporated a company named Salomon & Co. Ltd. He transferred his business to the company in exchange for shares and debentures. When the company went into liquidation, the creditors argued that Salomon should be personally liable for the company’s debts, claiming that the company was merely an agent of Salomon and not a separate legal entity.
Issues:
1. Was Salomon & Co. Ltd. A separate legal entity distinct from its shareholders?
2. Was Aron Salomon personally liable for the company’s debts?
Relevant Articles:
Companies Act, 1862 (UK)
Judgement:
The House of Lords held that Salomon & Co. Ltd. Was a separate legal entity, and Aron Salomon was not personally liable for the company’s debts. The judgement established the principle of corporate personality, which means that a company has its own legal identity separate from its shareholders. This principle protects shareholders from personal liability for the company’s debts.
Conclusion:
The Salomon case is a cornerstone of company law, establishing the doctrine of corporate personality. This principle is fundamental to modern corporate governance, providing a clear distinction between the company and its owners and protecting shareholders from personal liability.
-THENDRAL VALVAN
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