Salmon's Case: Salomon Vs. Salmon & Co Ltd

Introduction
Salomon v Salomon & Co Ltd is a case focusing on a person called Salomon, who changed his business to a limited company. In order to meet the minimum requirements for a limited company, Salomon named his wife and five children as members. The company gave Salomon￡10,000 in debentures, ￡20,000 in shares and ￡9,000 cash to purchase his business. However, the company declared bankruptcy within the year of formation. The debentures held solely by Salomon could not be discharged because the company 's assets were insufficient to meet the outstanding amount. Thus, the unsecured creditors received nothing from the company. The aim of part (a) is to critique the decision made by the House of Lords in this case and to examine the reasons

In order to transfer a company to a limited company under the terms of the Companies Act [1862], a minimum of seven people must be named, with or without liability. Therefore, the addition of Salomon 's wife and five children constituted the minimum requirement of seven persons needed for Salomon 's company to assume limited liability, according to LJ Lindley.
Lord Macnaghten 's opinion of this argument was that the investors chose to invest money in this company based on trust. In other words, the investors invested according to their own judgement. Thus, they must take personal responsibility for their choice. In the transfer of the Salomon company, the contract is between the investors and the company, not the investors and Salomon himself.
The judgment in the case of Continental Tyre & Rubber Co (Great Britain Ltd) v Daimler Co Ltd states that a company as a 'virtual person ' is an artificial construct for the sole purposes of the law, and the 'mind ' of the company therefore reflects the corporate mind of the members. Therefore , there was some insufficiency in the Companies law of

VTB Capital plc v Nutritek International Corp and Prest v Petrodel Resources Limited gives guidance on issues which have arisen in English Law. In the first case, the argument is that lifting the veil been used to attribute liability to a person who was regarded as the party. The court held that lifting the veil does not mean that the corporate controller must be regarded as the person who signed the contract for the company. The controller does not need to afford the duty of the contract. This action would violate the principles on which the contractual liabilities and rights were