What was salomon v saloman case?

Answer 1

Court held that salomon was liable to pay the unsecured creditors because the business had been started up by him. salomon appeared in the house of lords and it was held that salomon was merely an agent of the company and not the company being salomon's agent and that after incorporation the company becames a separate person set apart from salomon who had created it and that artifical person was absolutely liable for all the his debts and liabilities.

Answer 2

Hi there!

It is an old English case regarding the separation of a company from its shareholders. ( also refers to the lifting of corporate veil )

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http://www.enotes.com/topic/Salomon_v_A_Salomon_%26_Co_Ltd

Take Care!

-Wish

Answer 3

in this case the court held that the company has a distinct legal personality which is different from its members its irrelevant that the members are related or not but once the company is incorporated it is a legal person in the eyes of law

Answer 4

Is by Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. He ran his business for 30 years and "he might fairly have counted upon retiring with at least £10,000 in his pocket.

Answer 5

Salomon conducted his business as a sole trader. He sold it to a company incorporated for the purpose called A Salomon and Co Ltd. The only members were Mr Salomon, his wife, and their five children. Each member took one £1 share each. The company bought the business for £39,000. Mr Salomon subscribed for 20,000 further shares. However, £10,000 was not paid by the company, which instead issued Salomon with series of debentures and gave him a floating charge on its assets. When the company failed the company's liquidator contended that the floating charge should not be honoured, and Salomon should be made responsible for the company's debts.

Answer 6

Facts

Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. He ran his business for 30 years and "he might fairly have counted upon retiring with at least £10,000 in his pocket." 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 20,001 of the company's 20,007 shares. The price fixed by the contract for the sale of the business to the company was £39,000.

According to the court, this was "extravagant" and not "anything that can be called a business like or reasonable estimate of value." Transfer of the business took place on June 1, 1892. The purchase money the company paid to Mr Salomon for the business was £20,000. 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). The balance paid went to extinguish the business's debts (£1,000 of which was cash to Salomon).

Soon after Mr Salomon incorporated his business a series of strikes in the shoe industry led the government, Salomon's main customer, to split its contracts among more firms (the government wanted to diversify its supply base to avoid the risk of its few suppliers being crippled by strikes). His warehouse was full of unsold stock. He and his wife lent the company money. He cancelled his debentures. But the company needed more money, and they sought £5,000 from a Mr Edmund Broderip. He assigned Broderip his debenture, the loan with 10% interest and secured by a floating charge. But Salomon's business still failed, and he could not keep up with the interest payments. In October 1893, Mr Broderip sued to enforce his security. The company was put into liquidation. Broderip was repaid his £5,000, and then the debenture was reassigned to Salomon, who retained the floating charge over the company.

The company's liquidator met Broderip's claim with a counter claim, joining Salomon as a defendant, that the debentures were invalid for being issued as fraud. The liquidator claimed all the money back that was transferred when the company was started: rescission of the agreement for the business transfer itself, cancellation of the debentures and repayment of the balance of the purchase money.