As a famous case setting up the doctrine of independent corporate personality, Salomon v Salomon & Co.Ltd should be the best description of the panegyric of legal person at that time. Though the company law has bee putting forward for less than decades of years, we could see the importance and influence of this great system inovation in law. We can never say it too much because this rulling and decision is the foundmental case in the company law area.
Salomon is a merchant (who ran a leather business) and he would like to make his business into a limited liablity campany by shares. As the law required there should be at least seven shareholders in the Co.Ltd at that time, he and his wife、sons distribute the 20007 shares and he was the principal shareholder(20001). After the company was set up, the board of directors had made a dicision that to borrow money(10000) from Salomon in the mortgage of the whole company's asset. One year later, the Salomon& Co.Ltd could not make the assets equal to the debt and go into liquidation. Then the problem is if the assets of Corporation compensate the secured debt of Salomom himself, the other unsecured creditors will get nothing.
First, we should get an clear defination of what is the independent corporate personality and what is legal person. In law, legal person is not a real person such as you and me but a suppositional incorporation in law. It should be set up in the process and procedure which are prescribed by law. And the independent corporate personality is the nature and character of a legal person. That means all the assets and debts are owned by the corporation but not the shareholder and the the shareholders only enjoy the assets when the company go into the liquidation and compensate all the debts of creditors.
Second, the limited corporation enjoy the limited liability. The limited liability means that the shareholders are responsible for the debts only by the capital and practicality they invest into the corporation except the particular conditions.
Third, from what we have discussed above we could make a **** analysis of this classical case.
1| Salomon Cor.Ltd is a company which was set up in the procedure of law. As a legal peoson, its shareholders could take advantages of the limited liability.
2| As the principal shareholder and creditor of the Salomom Cor.Ltd, the management director Salomon has the right to call the directors together and make the decision that make an mortgage loan from Salomon himself if there was no conflicting opinions by the majority.
3| When the Salomon Cor.Ltd go into liquidation, the ranking of the debt compensation should be the secured creditor, the unsecured creditor. Shareholders will get the remaining assets by shares if there will be any.
4| Though Salomon case seem flawless in the logic, but there still have been some questions we should consider.
(1) Whether the procedure of the board of directors who made the decision is legal or not?
(2) Whether the condition of this case belongs to the particular conditions which are prescribed by law or not?
whatever the case recieved,praise or criticism, we could not neglect the positive and affirmative significance.
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