5/8/2011 Salomon v Salomon Co Ltd [1897]AC 22 (House of Lords) Salomon was a sole proprietor of his shoemaker business. Business was later incorporated. 7 subscribers:S and his family members. Assets of business transferred to co.In return,S received cash shares secured debentures. Debentures reissued to Broderip,who provided a further loan to co. Co was liquidated and Broderip was repaid (but not in full). Unsecured trade creditors were unpaid. Issue:could the liquidator pursue S to satisfy claims of the other creditors? Key Issues Court of Appeal House of Lords (Broderipv Salomon) (Salomonv Salomon) Overview (judicial position) a consensus view of the time a radical departure Purpose(true intention and meaning)of CA 1862 Nature of Salomon Co Ltd (the whole transaction) Nature of incorporation(fraud)? Independence of directors The relationship between members (characteristics of these members defined in CA?) (Source of)Salomon's liability How to interpret CA 1862?(what is the proper interpretative approach?) How to protect creditor?Legislative or judicial approach? How to apply company law? 10 55/8/2011 5 Salomon v Salomon & Co Ltd [1897] AC 22 (House of Lords) • Salomon was a sole proprietor of his shoemaker business. • Business was later incorporated. • 7 subscribers: S and his family members. • Assets of business transferred to co. In return, S received cash + shares + secured debentures. • Debentures reissued to Broderip, who provided a further loan to co. • Co was liquidated and Broderip was repaid (but not in full). • Unsecured trade creditors were unpaid. • Issue: could the liquidator pursue S to satisfy claims of the other creditors? 9 10 Key Issues Court of Appeal (Broderipv Salomon) House of Lords (Salomonv Salomon) Overview (judicial position) a consensus view of the time a radical departure Purpose (true intention and meaning) of CA 1862 Nature of Salomon Co Ltd (the whole transaction) Nature of incorporation (fraud)? Independence of directors The relationship between members (characteristics of these members defined in CA?) (Source of) Salomon’s liability How to interpret CA 1862? (what is the proper interpretative approach?) How to protect creditor? Legislative or judicial approach? How to apply company law?