Salomon v Salomon & Co. Ltd. (1897)

Company Law · Promoters — Duties and Liabilities

Facts.

Aron Salomon incorporated his boot business, holding almost all shares; his wife and children held one each. He also took debentures (secured debt) from the company. The company failed; unsecured creditors argued the company was a “sham” — really just Salomon — so he should pay them.

Issue.

Was the company a person separate from Salomon, or merely his alias?

Held.

The House of Lords held the company was a separate legal person, validly formed. Salomon, as a secured debenture-holder, ranked ahead of unsecured creditors. His liability as a member was limited.

Why it matters.

It is the foundation stone of company law: incorporation creates a distinct person, and limited liability is real even in a one-person business.

📄 Full Company Law notes + Question Bank (₹199) — every topic in depth, model answers to all past exam questions, in one printable PDF. Get the bundle · All landmark cases · All Company Law topics