Company Law/Corporate Law

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2010 Could any of the expert explain and clarify in simple the below case:

Salomon Vs Salomon Case for me Please.

Rakesh Khanna

Rakesh Khanna (Expert)
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16 June 2010 Salomon Vs Salomon & Co Ltd.
Meaning
A company in the eyes of law is separate from its
members. The company at law is a different person
altogether from the subscribers to the memorandum. The
company is an independent legal entity.
Facts
Aron Salomon, carrying on business as leather and shoe
manufacturer sold his solvent business to a company. The
consideration was 38,782 pounds of which Aron Salomon took
20,000 shares of 1 pound each, secured debentures worth
10,000 pounds and balance in cash. His wife, daughter and
four sons took 1 share each. A year later the company wound
up on which date the assets were worth 6000 pounds and
liabilities were 17,000 pounds. Payment was made to
Salomon first as he was a secured creditor.
Contention
The contention of the unsecured creditors was that, the vast
possession of shares made him absolute master of the
company which was conducted solely for him. They claimed
that Salomon was liable to indemnify the company against
claim of ordinary creditors.
Decision
The court held, the company was not an agent or a trustee for
Salomon. The company is entirely different from the individual.
The creditors contention could not be upheld.

Rakesh Khanna

Rakesh Khanna (Expert)
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16 June 2010
source:

http://www.primeacademy.com/pdfs/bclsmallchapter1.pdf

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Querist : Anonymous

Querist : Anonymous (Querist)

17 June 2010 Thank you sir :-)