SALOMON VS SALOMON AND COMPANY [1872]A.C.22

Introduction

Salomon v. Salomon & Co. is a landmark case in company law that established the principle of separate legal personality of a company. The case has had a significant impact on the development of company law and continues to be cited in modern cases.

Facts of the Case

The case involved a company, Salomon & Co. Ltd, which was formed by Aron Salomon, a leather merchant. Salomon owned 20,001 shares out of a total of 20,007 shares, with his wife and children holding the remaining six shares. The company went into liquidation, and the creditors sought to make Salomon personally liable for the company’s debts.

Key Legal Issues

The key legal issues in the case were:

1. Separate legal personality: Whether the company had a separate legal personality distinct from its members.
2. Limited liability: Whether Salomon’s liability was limited to the amount invested in the company.

Judgment

The House of Lords held that the company was a separate legal personality from its members, and Salomon’s liability was limited to the amount invested in the company. The court recognized that the company had a distinct personality, and the fact that Salomon owned most of the shares did not affect the company’s separate identity.

Impact of the Case

The impact of Salomon’s case has been significant, and it has had far-reaching implications for company law. Some of the key implications include:

1. Establishment of separate legal personality: The case established the principle that a company has a separate legal personality distinct from its members.
2. Limited liability: The case also established the principle of limited liability, which limits the liability of shareholders to the amount invested in the company.
3. Development of company law: The case has had a significant impact on the development of company law, and it continues to be cited in modern cases.

Conclusion

In conclusion, Salomon v. Salomon & Co. is a landmark case that established the principle of separate legal personality of a company. The case has had a significant impact on the development of company law and continues to be cited in modern cases. Its significance lies in its recognition of the company’s separate identity and the limitations and benefits that flow from this principle.

References-

 Salomon v. Salomon & Co. [1897] A.C. 22

– Companies Act 1862 (UK)