salomon
Aron Salomon was a successful leather merchant who specialized in manufacturing leather boots. For many years he ran his business as a sole proprietor. By 1892, his sons had become interested in taking part in the business. Salomon decided to incorporate his business as a Limited company, Salomon & Co. Ltd.
At the time the legal requirement for incorporation was that at least seven persons subscribe as members of a company i.e. as shareholders. Mr. Salomon himself was managing director. Mr. Salomon owned 20,001 of the company's 20,007 shares - the remaining six were shared individually between the other six shareholders (wife, daughter and four sons). Mr. Salomon sold his business to the new corporation for almost £39,000, of which £10,000 was a debt to him. He was thus simultaneously the company's principal shareholder and its principal creditor
Read more: Salomon v Salomon & Co is a foundational decision | Law Teacher http://www.lawteacher.net/company-law/essays/salomon-v-salomon-co-foundation-company-law-essay.php#ixzz2h9lnK81u
Follow us: @lawteachernet on Twitter | LawTeacherNet on FacebookHe asked the company to issue a debenture of £10,000 to him. However, a sudden slow down in business occurred and the company could no longer pay interests to Salomon. Even the wife puts money, but the company still cannot pay. Finally, Salomon transfers the debenture to one B, but still the company could not pay. B is here a secured creditor, in relation to the company, as he holds in respect of his a security over property of the company in term of the debenture. B called for a receiver and therefore, sold the easiest part of the company, i.e., the factory to cover his debts. That led to the end of the business. This left the debts of the general creditors, for instance, the general suppliers to be covered. The company had to be hence liquidated and the assets were to be sold to pay them.
When the winding up order was made the official receiver became
At the time the legal requirement for incorporation was that at least seven persons subscribe as members of a company i.e. as shareholders. Mr. Salomon himself was managing director. Mr. Salomon owned 20,001 of the company's 20,007 shares - the remaining six were shared individually between the other six shareholders (wife, daughter and four sons). Mr. Salomon sold his business to the new corporation for almost £39,000, of which £10,000 was a debt to him. He was thus simultaneously the company's principal shareholder and its principal creditor
Read more: Salomon v Salomon & Co is a foundational decision | Law Teacher http://www.lawteacher.net/company-law/essays/salomon-v-salomon-co-foundation-company-law-essay.php#ixzz2h9lnK81u
Follow us: @lawteachernet on Twitter | LawTeacherNet on FacebookHe asked the company to issue a debenture of £10,000 to him. However, a sudden slow down in business occurred and the company could no longer pay interests to Salomon. Even the wife puts money, but the company still cannot pay. Finally, Salomon transfers the debenture to one B, but still the company could not pay. B is here a secured creditor, in relation to the company, as he holds in respect of his a security over property of the company in term of the debenture. B called for a receiver and therefore, sold the easiest part of the company, i.e., the factory to cover his debts. That led to the end of the business. This left the debts of the general creditors, for instance, the general suppliers to be covered. The company had to be hence liquidated and the assets were to be sold to pay them.
When the winding up order was made the official receiver became