Saloman v. Saloman & Co. Ltd. (1897)
Facts:
Saloman carried a business as leather merchant. He formed a limited company named Saloman and company with 6 of his family members in 20000 in fully paid up 1 Pound shares , 10000 in debentures and rest in cash to a total of 39000 Pounds. One year later the holder of debentures appointed a receiver.
Issue:
- Whether Saloman & Co. was a company at all.
- Whether the artificial creation of legislation i.e. the company had been validly created.
- Whether Saloman was liable for the debts of the company.
Observation:
- Sole guide should be the statute itself. In this case the act provided that minimum 7 persons should be associated for a lawful purpose. Thus the company was validly formed.
- The company does not lose its identity if the bulk of its capital is held by one person.
- Company is at law a different person than the subscribers.
Decision:
Business belonged to the company and not to Saloman and he was not liable to indemnify the company for its debts. It established the veil of corporate personality.