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To choose the type of the business structure, the owners have to consider various factors such as the licenses required, tax to be paid, potential personal liability, control over the business and paper work. A company is considered to be the business structure that may be considered at the time of starting or growing the business. A company is regarded as a separate legal entity and is different from the sole trader or partnership structure. This implies that a company functions like a person by incurring debt in its name and having the power to sue or be sued. The liability of the owners may be limited or not depending on the business structure adopted by the owners. The shareholders in the limited liability company are not liable to company debts. Although it is the most favourable business structure it is expensive in terms of setting up costs and he administrative costs with the reporting requirements. The types of companies that are present are that of the private companies or a public company. The responsibility of the company falls on the directors of the company and the they are responsible for the day-to-day functioning of the company and ensuring the obligations. A person that is bankrupt, convicted of an offence a minor may not be the director of any company. (Harris, 2013)
The name of the business is considered as the most important asset as it identifies the business to the customers. It also allows to differentiate from the other competitors create a brand loyalty. The business names are connected with the Australian Business Number or ABN. The registration of the business name shall be made at the time of registering the company. It is also determined that the when the business name is the first or last name of the owners then the registration is not required. Thereby, if the family wants to name the company, Ridali or Rich’s Guaranteed Olives then they will have to register the company name. The cost of registering the business name is $34 for 1 year and $80 for 3 years. The business name is checked for the availability to be registered before beginning the application. The circumstances while the business name is available to the entity under the Business Name Registration Act, 2011. The review for the business name may be asked by the company when the registration application is rejected. (Mitchell, 2011)
Before registration of the company the important terms governing the company are to be decided. A decision is to be made whether the company will be governed by the replaceable rules, constitution or combination of both. The replaceable rules are considered to be the rules provided under the Corporation Act and are the basic understanding of running a business. If the owners do not want to create a constitution then the replaceable rules would be able to assist in the running of the business. Although, the company when drafting a constitution shall copy the same into the company’s records. The share structure that a company may be governed by is clear for the proprietary company having no more than 50 non-employee shareholder that may be either limited by the share or an unlimited company that may have a share capital.
Selection of the registered office requires to provide the address of the registered office and the principal place of business, the residential address of each shareholder, address of each member in the proprietary company and the contact address of the company. The registered office need not be the same as the principal place of business and cannot be a post office box. The change of address should be notified within 28 days. For registration of the company the private service providers may be contacted to get it done. They manage the application for a fee. The registration form with the ASIC shall be filled in and signed to create a registration request. The Form 201- Application for registration as an Australia company should be sent to the ASIC authorities. The fees should be included. The ASIC after receiving the application should provide the company with an CAN, registers the company and provides a certificate of registration. A written consent from the Director, Secretary and Member is to be acquired of which at least one director or secretary should ordinarily reside in Australia. If the office does not belong to the company, then the written permission to use the address is to be required. (Stewart and Stuhmcke, 2012)
When a company is registered the association becomes a corporate with perpetual succession by continuing indefinitely to the membership. The incorporation shall have a common seal. The ownership of the real and personal property is automatically transferred to the trustees and the members. The same changes are to be registered. The contracts of association continue to operate as it is. The liability of debts is not the responsibility of the incorporated association but would be responsible for the incurred debts on the part of the incorporation. The payment to the member shall not be made by association unless the Commission’s approval is not gathered. The exception to these is the reasonable payment of the work done. The company after registration have an annual review date that is the anniversary of the registration date. After the annual review the ASIC issues the annual statement and invoice statement for the annual review. An annual review fees is to be paid for scheme registration.
According to the facts of the case CSR Limited & Anor. V Young, Mrs. Olsen had contracted mesothelioma from the exposure to the blue asbestos. The exposure was to the tailings used for roads, airport and golf course. According to the Dust Diseases Tribunal Mrs. Olsen was owed the duty of care. It was determined that the asbestos had not affected form the consumption but a background in the community. The court found CSR and ABA liable and awarded damages to Mrs. Olsen. This was because the duty of care was owed to the employees of mine but also the residents of the town of Wittenoom. The breach of duty of care took place for not warning the plaintiff’s mother of the risk of injury. In the judgement it was determined that the corporate veil between the CSR and ABA could be pierced making the parent company responsible for subsidiary company for its negligent behaviour. On appeal it was decided that the kind of damage was foreseeable. On reassessment the damages were recalculated to reduce the costs by 20%. Therefore, the negligence had taken place resulting in damages to the plaintiff’s son.
In the case of Smith, Stone & Knight Limited v Birmingham it was provided that the dispute arose in terms of compensation payable by the respondent for the acquisition of land owned by Smith Stone and held by Birmingham as a tenant. It was a wholly owned subsidiary of Smith Stone and was said to function as a separate department. Being a tenant Birmingham had no claim for compensation. It is to be determined if the parent company is capable of drawing a claim for the disturbance to the business on the premises. The court held that the parent company would be allowed to claim the compensation with respect to the business of the subsidiary as the subsidiary is conducting the business on behalf of the parent company. (Tully, 2012)
To determine if the subsidiary company was an implied agent of the parent company it was determined that the ownership of the subsidiary was with the parent company. The business so operated shall be on behalf of the parent company and the no staff was appointed by the parent company or participated on the capital required. The criteria to decide the same was realised to be in terms of the profits treated for the parent company, person appointed by parent company, control over the regular functioning of the subsidiary, governance over the subsidiary, profits made from the skill and direction and the effectual function of the subsidiary.
The case of Creasey v Breachwood Motors Ltd provides that Mr. Creasey was dismissed from Breachwood Welwyn Ltd. as a general manager. It was claimed to be a wrongful dismissal. Before the claim could be made the operations of the company were ceased and the assets were transferred to Breachwood Motors Ltd. by continuing the business. However, the creditors were paid off and no money was left for his claim, Mr Creasey had applied for the judgement against the Breachwood Motors Ltd. The Breachwood Motors Ltd, had filed for an appeal then. The corporate veil of the Breachwood Motors Ltd was lifted in order to provide Mr. Creasey with the wrongful dismissal claim. The directors of both the companies were the same and had ignored the legal identity of the company by transferring the assets between the companies. However, the Court of Appeal had overruled the decision as the motives behind the façade are as important as the breach of duties as directors. (Barker, 2012)
According to the case facts provided the Terry is he employee of the CMS that is a subsidiary of the CM. CMS functions according to mine for lead, zinc and copper. In an arrangement, CM leases the equipment from the New Vision Bank Ltd. and then subleases to the subsidiary CMS in return for a leasing charge. CMS’s mine had been discovered to have contaminated the nearby river and the residents and the former employees including Terry have contracted cancer. CMS has been now sold to Lazarus Pty Ltd. on winding up.
It is derived from the above-mentioned cases that the CMS is a subsidiary of the parent company CM. Thereby, the operations and functioning of the subsidiary is the responsibility of the CM. The duty of care so owed is towards the employees as well as the neighbouring houses to inform of the possible harms from consuming contaminated water at the river. Thereby, anyone who has contracted cancer may be able to claim from CM as it was the parent company at the time this incident happened. The corporate veil would be lifted as the duty of directors had not been followed for the benefit of the company. As CM could foresee the possible harm and did not take any precaution or inform regarding the same to the people in danger a tort of negligence had been undertaken by CM on behalf of CMS. As a parent company CM would be liable for the breach conducted from the subsidiary company CMS.
Terry will not be able to claim the compensation from CM as the directors of CMS and Lazarus Pty Ltd were same and the new company was a façade to cover up the legal identity of CMS and escape liability by transferring funds from within the same companies. The corporate veil will be lifted and the will be termed as the breach of director’s duties. Terry would have no compensation due from the CMS as the same was a subsidiary company of the parent company of CM. Therefore, Terry and other affected parties may be able to reach CM for the breach of duty of directors as well as the negligence caused from the contraction of cancer by the affected parties. (Stewart and Stuhmcke, 2012)
Barker, K. (2012). The law of torts in Australia. South Melbourne: Oxford University Press.
Hanrahan, P., Ramsay, I. and Stapledon, G. (2012). Commercial applications of company law. North Ryde, NSW: CCH Australia.
Harris, J. (2013). Australian corporate law. Chatswood: Butterworths.
Mitchell, R. (2011). Law, corporate governance and partnerships at work. Farnham, Surrey, England: Ashgate Pub.
Stewart, P. and Stuhmcke, A. (2012). Australian principles of tort law. Annandale, NSW: The Federation Press.
Tully, S. (2012). International corporate legal responsibility. Alphen aan den Rijn: Kluwer Law International.