Salomon v A Salomon & Co Ltd. (1897) Case Summary | Salomon v Salomon case summary | salomon v salomon short summary

Salomon v A Salomon & Co Ltd. (1897) Case Summary

  Mr. Salomon has a business of manufacturing boot then he decided to change his business into a company. As we all know we can’t convert it directly so he established a private limited company under the name A Salomon & Co Ltd. and sold his business to the company and he took his payment in shares and debentures or debt. He gave 1 share each to his wife and 5 kids. Later after some years at the time of winding up of the company and Mr. Salomon claimed to be entitled to be paid first as secured debenture holder. Creditors objected to this saying this will be unlawful because the company and Salomon are the same person because Salomon and his family holds every share of the company and as well as he formed and ran the company so he should not be paid first. However, the House of Lords said that the company is a separate legal entity other than his owner in the eyes of Law. As a result Mr. Salomon was entitled to be paid first. 

In this case, Mr Salomon was the major shareholder, a director, an employee and a creditor of the company he created. It is quite common in Ireland for one person to have such a variety of roles and still be a separate legal entity from the company.



Comment

This case is one of the most famous cases that students have to study when it comes to Company Law because of separate corporate personality. This case is also known as Salomon v A Salomon & Co Ltd. (1897) Case Summary | Salomon v Salomon case summary | salomon v s salomon case summary | salomon v salomon short summary