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SALOMON VS SALOMON &

COMPANY LIMITED

LEGAL ENVIRONMENT FOR


BUSINESS IN NEPAL

DEEPAK SANJEL 19326


MBA SPRING 2019

11 MARCH 2019
1. FACTS OF CASE

2. ISSUE

3. JUDGEMENT
3.1 COURT OF APPEAL
TABLE 3.2 HOUSE OF LORDS

OF
CONTENT 4. Principle Laid in Salomon Vs Salomon

5. CORPORATE VEIL

6. CONCLUSION

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SALOMON &
COMPANY
LIMITED

FACTS
OF ARON SALOMON

CASE

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COMPANY POSITION INTERMS OF
SHAREHOLDER AND MEMBER

FACTS
OF
CASE

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CREDITORS OF COMPANY:

SECURED
CREDITOR:
SALMON

FACTS (£ 10,000
DEBENTURE)

OF
CREDITOR
CASE
UNSECURED
CREDITOR:
(£7000)

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SALOMON & COMPANY LIMITED

AFTER SOME YEAR

FACTS LIQUIDATION
OF
CASE
ASSETS: LIABILITIES:
£ 6,000 1. SECURED
2. UNSECURED

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ISSUE

Whether, regardless of the separate


legal identity of a company, a
shareholder/controller could be held
liable for its debt, over and above
capital contribution, so as to expose
such a member to unlimited personal
liability.
JUDGEMENT: COURT OF
APPEAL


The Court of Appeal, declaring the company
to be a myth, reasoned that Salomon had
incorporated the company contrary to the
true intent of the Companies Act, 1862, and
that the latter had conducted the business as
an agent of Salomon, who should, therefore,
be responsible for the debt incurred in the
course of such agency.

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JUDGEMENT: HOUSE OF
LORDS
The company is different person altogether from
subscribers… and, though it may be that after
incorporation the business is precisely the same as it
was before and same persons are managers, and
same hand receive the profit, the company is not
agent for subscriber or trustee for them. Nor are the
subscribers as member liable, in any shape or form,
except to the extent and manner prescribed by the
Act.

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1. Artificial Person

Principle 2.Limited Liability

Laid in
Salomon 3.Fraudulent Conduct

Vs
Salomon 4. Liability for Ultra Vires Acts

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COMPANY MEMBERS

CORPORATE
VEIL NOT AN
CAN
TRANSER
AGENT OF
PROPERTY
MEMBER
TO COMPANY

CORPORATE
VEIL
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For while, by fiction of law, a
corporation is a distinct entity, yet in
reality, it is an association of persons
who are in fact the beneficiaries of
LIFTING corporate property.

THE VEIL
OF Since an artificial person is not
CORPORATION capable of doing anything illegal or
fraudulent, the facade of corporate
personality might have to be
removed to identify the persons who
are really guilty.

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DECISION in this case ESTABLISHED the SLP of company which
allowing shareholders to carry on trading with minimal exposure
to the risk of personal insolvency in the event of a collapse.

EXCEPTIONS of SPL principle wherein the court may justifiably


CONCLUSION disregard and make ruling contrary to SPL.

Salomon’s case has become a landmark company case law in


the UK and is often cited in most cases within the area of
company law.

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THANKS!
Any questions?

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