Company Law
Issue
The issue here is whether john could prevail in court by alleging the he was breach the contract with Diamond Car Sales, does he should stop his trading. This essay will apply law theory and precedent cases to distinguish john case. The principle of corporate entity was established in the case of Salomon v A. Salomon, now referred to as the 'Salomon' principle
Legal
The House of Lords’ decision in Salomon v A Salomon & Co Ltd [1897] established the separate identity of the company.
Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to uphold firmly the rule of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay up outstanding debts.
Mr Salomon had a boot manufacturing business which he decided to incorporate into a private limited company. His sons wanted to become business partners, so he turned the business into a limited company, A Salomon & Co Ltd. His wife and five children became subscribers, and took his payment by shares and a debenture or debt of £10,000. Mr Salomon owned 20,001 shares, and his wife and five children owned one share each. The price fixed by the contract for the sale of the business to the company was £39,000.Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder. The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.
However, the House of Lords held that the company was a different legal person from the shareholders, and thus Mr Salomon, as a shareholder and creditor, was totally separate in law from the company A Salomon & Co Ltd. The result was that Mr Salomon was entitled to be repaid the debt as the first secured creditor. In this case, Mr Salomon was the major shareholder, a
The issue here is whether john could prevail in court by alleging the he was breach the contract with Diamond Car Sales, does he should stop his trading. This essay will apply law theory and precedent cases to distinguish john case. The principle of corporate entity was established in the case of Salomon v A. Salomon, now referred to as the 'Salomon' principle
Legal
The House of Lords’ decision in Salomon v A Salomon & Co Ltd [1897] established the separate identity of the company.
Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords' unanimous ruling was to uphold firmly the rule of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders to pay up outstanding debts.
Mr Salomon had a boot manufacturing business which he decided to incorporate into a private limited company. His sons wanted to become business partners, so he turned the business into a limited company, A Salomon & Co Ltd. His wife and five children became subscribers, and took his payment by shares and a debenture or debt of £10,000. Mr Salomon owned 20,001 shares, and his wife and five children owned one share each. The price fixed by the contract for the sale of the business to the company was £39,000.Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder. The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.
However, the House of Lords held that the company was a different legal person from the shareholders, and thus Mr Salomon, as a shareholder and creditor, was totally separate in law from the company A Salomon & Co Ltd. The result was that Mr Salomon was entitled to be repaid the debt as the first secured creditor. In this case, Mr Salomon was the major shareholder, a
Bibliography: Gilford motors ltd v Horne (1933) All ER Rep 109 Jones v Lipman [1962] 1WLR 832 Andrew H, S.H. Goo 2001, Cases and Materials in Company Law, 7th Edition, Butterworth, Oxford University Press Douglas.S, 1999, Company Law, 1st Edition, Butterworth- Heinemann, Linacre House, Jordan Hill, Oxford OX2 8DP, 223 Wildwood Avenue