Investor Presentaiton
Salomon v Salomon & Co Ltd (1897) AC 22
⚫ The unsecured trade creditors argued that:
Salomon and the company (i.e. Salomon & Co Ltd) were truly the same person
since he and his wife and children owned the company;
therefore, he could not owe money to himself; and
- accordingly, his rights as a debenture holder should not get priority and he
should be paid after making payment to third party unsecured trade creditors.
• Court held: Salomon's company was a separate legal entity from Salomon,
although he owned almost 99% of the shares, and therefore, the debentures issued
to Salomon was a secured debt which should gain priority over the unsecured
debts owed to the trade creditors. Thus Salomon's claim should prevail over that of
the third party trade creditors and proceeds of the assets should be first allocated
to settle the debentures of Salomon.View entire presentation