What was the principal decision in Salomon v A Salomon & Co Ltd?
Answer and explanation
Correct answer: A. A properly incorporated company is a separate legal person
- Step 1: Mr Salomon sold his business to a company he controlled.
- Step 2: The House of Lords held the company was a separate legal entity, so he was not personally liable for its debts.
Answer
A properly incorporated company is a separate legal person.
Why not the others: Directors are not personally liable simply because they control the company. A company can be sued in its own name. The case decided the opposite: the business and its owner were separate.
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