Salomon v Salomon: The “One-Man Company”

Possibly the most important case in company law.

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Art by the amazing Xiao Tong! Please feel free to check her stuff out here:

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ADDITIONAL NOTES ON THE FACTS OF SALOMON V SALOMON:
Mr Salomon was actually a debenture-holder of his company. A debenture is, broadly speaking, a long-term loan, and this is only important because debentures are often "secured" by the assets of the company (i.e. if you don't repay, I'll sell your stuff to get the money back instead). This made Salomon a "secured creditor" of his own company.

Why is this important? Well, it gives Salomon's own claim against his own company "priority" once the company goes bust and has to sell its stuff to pay off its debts. Usually, under this process, control over the company is granted to a "liquidator" who will "liquidate" the company's assets and pay off its debts, starting with secured creditors and ending at unsecured creditors. And quite a lot of the time, there isn't enough money left to pay the unsecured creditors.

If the principle of separate legal personality was not upheld, then Salomon would not just have to personally account for the debts of the unsecured creditors--he would also have lost his priority over them in claiming back the money loaned.

[WhatIsLawEven]

PLEASE NOTE: The “Borrow $” arrow at 1:34 was drawn the wrong way around! The company (debtor) borrows money from you (creditor). My bad, sorry!

[luwamalem]

this was actually really well explained, thank you! :)

[AppleArmy]

Conclusion: Separate legal entity would stand even the business seems to be the same as before (1man business)

[maggiemauno]

Thank you soo much for taking time to explain this🙏

I think "separate legal personality" and the extent to which it should be adhered to is the key issue in this case.

[murna_u]

Been trying to understand this case for the longest time and this made it so easy!!!!

[justheresohereiam_]

This is a very valuable video with nice animation thank u also for the notes in the description
Thank u

[yoyoong]

finally understand this case until i found your video. Thanks, u guys are amazing

[im._.dio]

Thank you so much this made it so much easier to fully understand!!

[japhetmasatu]

Thank you sir for briefing the material facts!

[tahmie]

YouTube education channels be saving lives

[shrijitkhande]

Watching it 10 mins before exam gimme a kiss boy

[rowinhammer]

Hello, if have a question regarding the people that invested money in the business. Because they invested money in the company without becoming a shareholder; but why did they invest this money into the company, and how would they be compensated for these investments?

[hgm]

nice job, .. sounds like a Singapore accent so no wonder you know law lol

[drgyt]

Thank you, a bad law among most others. You need to make your accent clearer for an English audience.