Company Law Cases
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Company Law Cases
Hickman v Kent or Romney Marsh Sheep-Breeders’ Association [1915] 1 Ch 881
‘Outsider rights’
The question of whether a person who is not a member of the company has rights to sue on the ‘statutory contract’ provide by what is now section 33 of the Companies Act 2006 was considered.
It was held that an outsider to whom rights are purportedly given by the company’s articles in his capacity as an outsider cannot sue in that capacity, whether he is also a member of the company or not.
Salomon v A Salomon and Co Ltd [1897] AC 22
Corporate separate personality
Salomon conducted his business as a sole trader. He sold it to a company incorporated for the purpose called A Salomon and Co Ltd. The only members were Mr Salomon, his wife, and their five children. Each member took one £1 share each. The company bought the business for £39,000. Mr Salomon subscribed for 20,000 further shares. However, £10,000 was not paid by the company, which instead issued Salomon with series of debentures and gave him a floating charge on its assets. When the company failed the company’s liquidator contended that the floating charge should not be honoured, and Salomon should be made responsible for the company’s debts.
Lord Halsbury LC stated (at 30-31):
“… it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its 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.”
From this case comes the fundamental concept that a company has a legal personality or identity separate from its members. A company is thus a legal ‘person’.
Macaura v Northern Assurance Co Ltd [1925] AC 619
Members have no interest in a company’s property
The owner of a timber estate sold all the timber to a company which was owned almost solely by him. He was...
Company Law Cases
Hickman v Kent or Romney Marsh Sheep-Breeders’ Association [1915] 1 Ch 881
‘Outsider rights’
The question of whether a person who is not a member of the company has rights to sue on the ‘statutory contract’ provide by what is now section 33 of the Companies Act 2006 was considered.
It was held that an outsider to whom rights are purportedly given by the company’s articles in his capacity as an outsider cannot sue in that capacity, whether he is also a member of the company or not.
Salomon v A Salomon and Co Ltd [1897] AC 22
Corporate separate personality
Salomon conducted his business as a sole trader. He sold it to a company incorporated for the purpose called A Salomon and Co Ltd. The only members were Mr Salomon, his wife, and their five children. Each member took one £1 share each. The company bought the business for £39,000. Mr Salomon subscribed for 20,000 further shares. However, £10,000 was not paid by the company, which instead issued Salomon with series of debentures and gave him a floating charge on its assets. When the company failed the company’s liquidator contended that the floating charge should not be honoured, and Salomon should be made responsible for the company’s debts.
Lord Halsbury LC stated (at 30-31):
“… it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its 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.”
From this case comes the fundamental concept that a company has a legal personality or identity separate from its members. A company is thus a legal ‘person’.
Macaura v Northern Assurance Co Ltd [1925] AC 619
Members have no interest in a company’s property
The owner of a timber estate sold all the timber to a company which was owned almost solely by him. He was...