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The Salomon Vs A Salomon Company Limited Case - Essay Example

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The paper "The Salomon Vs A Salomon Company Limited Case" discusses the landmark case in the history of United Kingdom. In that case, according to the decisions of Lords creditors of an insolvent company cannot initiate legal action against the shareholders to pay off outstanding liabilities…
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The Salomon Vs A Salomon Company Limited Case
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Download file to see previous pages The irony is that just after the incorporation of business into the private limited company, an array of strikes started in the shoe making industry thus compelled the government to diversify its orders to other contractors in order to ensure uninterrupted supply of boots and shoes to the government. To meet the financial losses and to rehabilitate the company back to business borrowed pounds 5,000 from Mr. Edmund Broderip (Salomon v A Salomon & Co Ltd).
Alternatively, the company assigned debentures of the same amount. The loan was acquired on a nominal interest against mortgage of property of the business entity (French, 2009). The losses of the company come to such an impasse that it was not in a position even to pay off the interest amount. Keeping in view the situation, the said creditor sued the company to foreclose the assets of the company. The company went into liquidation (French, 2009). The creditor got back his money from the liquidator. Mr. Salomon received back his security which was held by the liquidator (Salomon v A Salomon & Co Ltd).
Later on, the liquidator and Mr. Salomon as defendant counter claimed since debentures become ineffective as a result of the fraudulent transaction. Therefore, liquidator pleaded for all the money back that was invested in the business of Private Limited Company since its formation, revalidation of business contract with the government, call back the payable amount plus void of debentures (Salomon v A Salomon & Co Ltd)....
Edmund Broderip (Salomon v A Salomon & Co Ltd). Alternatively, the company assigned debentures of the same amount. The loan was acquired on a nominal interest against mortgage of property of the business entity (French, 2009). The losses of the company come to such an impasse that it was not in a position even to pay off the interest amount. Keeping in view the situation, the said creditor sued the company to foreclose the assets of the company. The company went into liquidation (French, 2009). The creditor got back his money from liquidator. Mr. Salomon received back his security which was held by the liquidator (Salomon v A Salomon & Co Ltd). Later on the liquidator and Mr. Salomon as defendant counter claimed since debentures become ineffective as a result of fraudulent transaction. Therefore, liquidator pleaded for all the money back that was invested in the business of Private Limited Company since its formation, revalidation of business contract with the government, call back the payable amount plus void of debentures (Salomon v A Salomon & Co Ltd). Initially the High Court accepted the claim of Mr. Edmund Broderip. According to Justice Williams “it was undisputed that 20,000 shares were fully paid up and the company had a right to indemnity against Mr. Salomon. He said the signatories of the memorandum were mere dummies; the company was just Mr. Salomon in another form, an alias, his agent. Therefore, it was entitled to indemnity from the principal.” The claim was materialized accordingly (Salomon v A Salomon & Co Ltd). While confirming the decisions of Justice Williams on the grounds that Mr. Salomon had misused the authority, responsibility, perks that bestowed upon the genuine shareholders and ...Download file to see next pagesRead More
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