, Mr. Salomon, who carried on a prosperous business as a leather merchant, sold his business for the sum of £30,000 to -Salomon & Co Ltd', which consisted of Salomon himself, his Fife mad daughter and his four sons The purchase consideration was paid by the company by allotment of 20,000 folly paid '£1 shares and £10,000 in debentures conferring a floating charge over all the company s assets, to Mr. Salomon One share of £1 each was subscribed for in cash by the redeeming six members of iris faith Salomon was the Managing Director of the company
40 ’S: SECRETARIAL PRACTICE
and as he held virtually the whole of its stock he had absolute . Only a year later, the company became insolvent and winding up commenced. On w ending up the statement of affairs was roughly like his Assets £6,000; Labializes, Salomon as debenture-hostler £10,000 and unsecured creditors £7,000: This, its assets wererunmngshortofits liabilities by £11,000. The Unsecured creditors claimed priority over the debenture holder (hi r Salomon) on the ground that a person cannot owe to himself and. that Salomon and the company were one and he same person The further contended that the con patty as a mere "alas" or agent for Salon on, the business was solely his, conducted solely for him and by him and the company was a- mere sham and raU4 hence Salomon was liable to indemnify the company against its trading debts. But the. House or Lords held that the. existence of a company is quite independent a d district from its members ' and that the company’s assets must be applied run payment of the. debar as f rest in priority to unsecured creditors Olsen atone. Lord Macnaghten observed in this case: "The company is at law a different person altogether from the subscnbeis to the grandma; and though it may be that after incorporation Use business is Precisely the same as it was before. and the same persons are massaged, and the same hands receive the profits, the company is not in law the agent of the subscribers or trusty for them. Nor are the snbscnbers, as members liable, in any shape or form, except to the extent and in the Manner provided by the Act."
Not a citizen. Al though a company is a legal person having nationality in accords cue with the country of its incorporator or registration, it is not :cozen(Say Trading Corporation 4 A company cannot, therefore, cantle protection of those indumenta rights which are expressly guaranteed to cities Dryly, e.g., the right of franchise. Buff still they are'sufficientlyprotected underthetheir freedom of trade or commerce cannot be curio there care be no compulsory acquisition of their properly, and no unjust discrimination in any matter whatsoever can be done aghast them This company has the rig lit to challenge a law if the law happens to violate fundamental rights of citizens (Pr thieve Coition Eli less vs. Broach Borough MunicipaRty). •
4. Perpetual existence. Accompany is a stable form of business orgamsation its life does not depend upon the death insolvency or retirement of any or all shareholders(s) or director(s), Law creates it and law alone can do solve it. Members may come and go but the company can go on for ever. "Dung the war all the members of one private' company, while in general
netting, were killed by a bomb. But the coronary survived; not-even a hydrogen bomb could have destroyed: it. The company may be'.cornpared
INCORPORATION OF A COMPANY 39
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