... family each subscribing for one share. The company then purchased the business for £38,782, the purchase price being payable to the claimant by way of the issue of 20,000 £1 shares, the issue of debenture for £10,000 (effectively making Salomon a secured creditor) and the payment of £8,782 in cash. The company did not prosper and became insolvent a year later, at which point it liabilities exceeded its assets. The liquidator, representing unsecured trade coeditors of the company, claimed that the company's business was in effect still the claimant's (he owned 20,001 of 20,007 shares) and that he should bear liability for its debts and that payment of debenture debt to him should be postponed until the company's trade creditors were paid. The House of Lords, reversing the Court of Appeal, held that the company had been properly form and was a legal person in its own right, notwithstanding the ...

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