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Questions and Answers
What was the outcome of the Salomon v Salomon & Co. Ltd case?
What was the outcome of the Salomon v Salomon & Co. Ltd case?
- The court found Salomon guilty of fraud.
- The court held that the company has its own rights and liabilities separate from its owner. (correct)
- The court decided that the company was not independent from its owner.
- The court ruled that Salomon's debentures were invalid.
What happened to Salomon's shoe business?
What happened to Salomon's shoe business?
- It was sold to the company formed by Salomon. (correct)
- It was sold to a competitor.
- It was closed down due to bankruptcy.
- It was sold to a private investor.
What was the claim made by the liquidator in the Salomon case?
What was the claim made by the liquidator in the Salomon case?
- The debentures owned by Salomon were invalid.
- The company was insolvent.
- Salomon was personally liable for the company's debts.
- The debentures owned by Salomon belonged to the company. (correct)
What is the principle laid down in Salomon's case?
What is the principle laid down in Salomon's case?
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What is the implication of the transfer of ownership of shareholders according to Abdul Aziz bin Atan v Ladang Renggo Malay Estate Sdn Bhd?
What is the implication of the transfer of ownership of shareholders according to Abdul Aziz bin Atan v Ladang Renggo Malay Estate Sdn Bhd?
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What is the approach of Malaysian courts regarding the principle laid down in Salomon's case?
What is the approach of Malaysian courts regarding the principle laid down in Salomon's case?
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Study Notes
Case Overview: Salomon v. Salomon & Co. Ltd (1897) AC 22
- Salomon owned a shoe business and established Salomon & Co. Ltd to formalize it.
- The company was formed as a separate legal entity, distinct from its owner Salomon.
- Salomon sold his shoe business to the newly incorporated company.
- The company issued debentures (a type of debt security) to Salomon in exchange for the business.
- Eventually, the company became insolvent, prompting a liquidator to examine its debts.
- The liquidator attempted to claim salomon's debentures, questioning their validity due to Salomon's control over the company.
Court Ruling and Principles Established
- The court ruled that once a company is legally incorporated, it operates as an independent entity.
- The rights and liabilities of the company are separate from those of its owner or promoters.
- The court emphasized that the motivations of the promoters are irrelevant when assessing the company's obligations.
Application in Malaysian Law
- The principle from Salomon's case is recognized and applied in Malaysian legal decisions.
- In Goh Hooi Yin v. Lim Teong Ghee, it is noted that Malaysian courts are obliged to adhere to Salomon's principles, barring compelling reasons to deviate.
- In Abdul Aziz Bin Atan v. Ladang Rengo Malay Estate Sdn. Bhd, it was highlighted that a change in the ownership of shareholders does not affect the identity or entity of the company itself.
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