Aaron Salomon, ran a profitable business as sole trader as a leather and boot manufacturer in Whitechapel, London and on advise decided to register a company and sell to it, his business for the sum of ₤39,000 sterling. He received payment by way of 20,000 ₤1 shares, which he divided among his family, issuing one each to his five children and another to his wife. He kept the remaining shares. The outstanding sum was issued to Salomon by way of a debenture and the company was in debt to him. This placed Salomon in the position of principal shareholder and creditor of Salomon & Co. Ltd.
Due to a downturn in the business at the time the company experienced some difficulties and Salomon took out a further mortgage to help keep the company afloat.
But when this loan fell into arrears an action was brought by the liquidator Mr. Broderip against the appellant, Aran Salomon, which was tried before Mr. Justice Vaughan Williams.
The liquidator tried to maintain that the original debenture issued to Salomon was invalid as Salomon and Salomon & Co. were in fact the same person and he was operating as he had done so in the past, that the company was merely an agent of Salomon and therefore he was personally liable for the debts of... [continues]
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