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:

  1. Whether Saloman & Co. was a company at all.
  2. Whether the artificial creation of legislation i.e. the company had been validly created.
  3. Whether Saloman was liable for the debts of the company.

Observation:

  1. 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.
  2. The company does not lose its identity if the bulk of its capital is held by one person.
  3. 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.

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