decided to convert existing business to limited company.
S held vast majority of shares.
went into liquidation.
sufficient to pay secured but not unsecured creditors.
of Appeal held whole transaction was contrary to true intent of Companies Act
and company was mere sham.
such S liable for trading debts.
of Lords unanimously reversed decision.
Act merely required 7 members holding at least one share each – this satisfied.
belonged to company, not S.
changed company law and world of commerce.
legality of one-man company.
made it possible for trader to limit his liability to money he had put into
allowed trader to limit his liability beyond even this, by subscribing for
debentures rather than shares.
justification is that public deal with limited company at their peril.
case has been criticised, since Salomon,
complete separation of company and its members has never been doubted.
cases in which ‘veil of incorporation’ has been lifted, but not many.]