The argument was whether mr salomon was entitled to

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keep it going. The argument was whether Mr. Salomon was entitled to recover the value of his debentures and whether he was liable personally for the company’s indebtedness to its unsecured creditors. The High Court and the Court of Appeal found against Mr. Salomon, holding that the company should be treated as his agent, alias, or trustee. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 366 CORPORATE PERSONALITY On Mr. Salomon’s appeal to the House of Lords, it was held that upon registration, the company became separate from Mr. Salomon who could not be regarded as its agent or trustee. Mr. Salomon was therefore entitled to recover the value of his debenture in the same manner as any secured creditor would. He was also not liable personally to the other creditors. According to Lord Halsbury: Once the company is legally incorporated, it must be treated like any other independent person with rights and liabilities appropriate to itself, and that the motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are. In Trebanog Working Men’s Club and Institute , and Monkwearmouth Conservative Club , Limited v Smith [1940] 1 KB 576 , it was held that the incorporated societies were legal entities distinct from their members. Even though this principle may in some instances lead to hash results, it is firmly entrenched and fundamental in company law. The effects and advantages of the corporate personality of companies are many and are discussed below. 20.3.1 PERPETUAL SUCCESSION A company enjoys perpetual succession in that members enter and leave it without affecting its existence. Moreover, the death or bankruptcy of a member would not normally affect the life of the company. This contrasts with the position in partnerships (except LLP) which are liable to dissolve on the retirement, death, bankruptcy or incapacity of a partner. 20.3.2 THE COMPANY OWNS ITS BUSINESS AND ASSETS An incorporated company’s business belongs to it and not to its members. Thus, the company enters into contracts and acquires assets in its own name. Only the company can convey title to buyers of its goods, assets or services. Unless they are acting as representatives of the company, members have no right to dispose of the company’s properties. Moreover , subject to exceptions in cases involving directors’ breach of duty, for which see chapter 24, if the company suffers wrongdoing in the hands of third parties, only the company is entitled to sue for remedy. The case of Foss v Harbottle [1843] 2 Hare 461 clearly demonstrates this position. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY CORPORATE PERSONALITY 367 Two shareholders brought an action against their company’s directors to recover losses suffered by the company as a result of the directors’ fraud. It was held that the company could sue if it wished to do so, but that it was not open for individual members to do so in cases like this. According to the court:
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  • Fall '19
  • Corporation, Managing Partner

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