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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.
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