Business Law

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Salomon v A Salomon & Co Ltd

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Salomon v A Salomon & Co Ltd |

Whitechapel High Street |

Court | House of Lords |

Citation(s) | [1897] AC 22 |

Case history |

Prior action(s) | Broderip v Salomon [1895] 2 Ch. 323 |

Case opinions |

Lord Macnaghten, Lord Halsbury and Lord Herschell |

Keywords |

Corporation, separate legal personality, agency |

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay up outstanding debts.

Contents

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* 1 Facts

* 2 Judgment

* 2.1 High Court

* 2.2 Court of Appeal

* 2.3 House of Lords

* 3 Significance

* 4 See also

* 5 Notes

* 6 References

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Facts[edit]

Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. His sons wanted to become business partners, so he turned the business into a limited company. His wife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took 20,000 of the company's 20,006 shares. Transfer of the business took place on June 1, 1892. The company also gave Mr Salomon £10,000 in debentures (i.e., Salomon gave the company a £10,000 loan, secured by a charge over the assets of the company).

Soon after Mr Salomon incorporated his business a decline in boot sales, exacerbated by a series of strikes which led the Government, Salomon's main customer, to split its contracts among more firms to avoid the risk of its few suppliers being crippled by strikes. Mr Salomon assigned Edmund Broderip his debenture, the loan with 10% interest and secured by a floating charge. But Salomon's...