CORPORATION LAW 1

  • Category:
    Law
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    3
  • Words:
    2012

Corporation Law

Corporation Law

  1. Does the incorporation of a company increase fishing rights and the total allowable catch?

The laws of fisheries have been formulated to basically control the interaction of human beings with fish. In Australia, the management of fishing has been controlled by establishing rules in independent fisheries legislation. In order to fish for scallops in the New South Wales waters, a fisher requires having at least one Quota Statutory Fishing Right as stipulated by the regulations that manage fishing in the scallop fishery zone. One Quota Statutory Fishing Right is required for each special type of scallop. The amount of scallops henceforth caught is determined by the number Quota Statutory Fishing Rights that an individual possesses and the total allowable catch for the season. Furthermore the participation in Scallop Fishery requires an access license (Victorian Scallop (Ocean) Fishery Access License) that enables the individual or company to operate. The maximum number of licenses that can be acquired is 91. The numbers of boats that operate in the fishery are estimated at 10 to 15 boats. The rights of fishing apply for both individual fishers and companies. Every year the quota is set and each individual or a company in possession of a license is given an equal share when the season begins. Quotas can however be transferred among individuals and the fishing companies who have the licenses provide that they do not exceed the 91 license limit. The arrangement to transfer individual quotas has been ongoing since the year 1998 under the fishery.

In as much as individuals and companies have the same right to fish with equal quotas given at the start of the season, corporations still benefit from the fact that they are separate entities thus they operate under different rules. A sole proprietor is mandated to pay tax both as an employer and an employee. On the other hand, having a corporation lets an individual get paid via dividends which receive a dividend tax credit. Should the dividend exceed the required limit then the income can be split to family members to keep the amount at a reasonable level (Andres, 2014). The result is that more dividends are drawn with little tax incurred. Bob Beech therefore stands a chance to double his earnings from fishing through venturing as a corporation.

The principle concerning business operations views a corporation as a separate legal entity that can be litigated against without involving the owner or his personal assets. The owner thus gets limited liability as the individual assets are not targeted nor at risk should anything befall the corporation (Mishra, 2013). An instance is the offences that have been stipulated in the Act such as catching more than the quota limit. The corporation will consequently be sued as itself leaving out the owner and his personal belongings. In addition, in the event that one wants to sell the corporation, the return is lucrative thus the investor will not have lost on trading in the corporation. Fishing companies are furthermore not limited to selling their catch to the Fisheries Management Authority as restricted for individual fishers. The companies have the capability to export their products overseas. The prices over the international market are higher than those of the domestic market henceforth giving corporations higher income from the trade of their fish products (Mazur, 2015).

In this light therefore, Bob Beech stands to increase his income in fishing from incorporating a company than from being a sole entrepreneur. Incorporating a company will not necessarily double his potential for fishing to more than 50 tones. He can however buy Quota rights from other fishers following the allowance for the transfer of individual quotas to persons with the appropriate licenses. Additionally, the advantages of incorporating a company to Bob include saving from reduced taxes, increasing income from exports and gaining a transfer of liability from his individual self to a company.

  1. Advice to the injured audience on the possibility of making the chief company, New Nirvana, liable for the negligent act committed by its subsidiary company Nuclear Blast Sounds Pty Ltd

The subsidiary company, Nuclear Blast Sounds Pty Ltd, owed a duty of care to the five audience members given that it was predictable that the setting of the sound levels too highly was bound to cause damage. The subsidiary company thus breached the duty of care as the rational action was to set sound levels that were safe and acceptable to the audience. The loss of hearing to the 5 members of the audience was as a direct result of the loud levels of sound thus a negligent act. Negligence is established when the defendant owes the petitioner a duty of care which is breached and henceforth leading to loss or damage (Barker, 2012). Despite the fact that it is supposed to bear responsibility for the negligent act, the subsidiary company, Nuclear Blast Sounds Pty Ltd however lacks negligence insurance and is unlikely to pay the claims brought about as a result of the damage.

The way in which Australia approaches the regulation of corporate groups has been a subject of interest globally. The exposure to this approach was brought about by the contentious company restructure that was made by James Hardie Ltd, a company in Australia involved in the manufacture of large products. From the reform that was made in the case, a restriction of the limited liability principle was made to narrow the legal responsibility to the holding companies (Lo, 2014). Limited liability involves a restricted accountability to the obligations of the corporation. An individual owner or owners are thus not personally responsible for debts and other commitments to the company aside from those which involve the corporation. Limited liability stems from the principle of a company being a separate entity from its affiliates. The idea behind the reform of applying the limited liability principle in the James Hardie scenario was that should there be personal injury or death involved, the responsibility can be solely put upon the holding company. On the contrary however, if the entity bearing responsibility over the claim has no funds and is unable to meet the requirements of the claim, then the victim of the negligence would lose out.

The parent company nonetheless can still be held liable if there is an attachment of responsibility. As noted from one of the weekly law reports in South Wales, 2011, there exists nothing in the general law that mentions that the duty of care can only be established if the company has absolute responsibility over the subsidiary company. In this scenario, the subsidiary company Nuclear Blast Sounds Pty Ltd is a wholly owned subsidiary company thus making New Nirvana absolutely responsible for the negligent act as it controls the full percentage of the secondary company’s stock (Lang, 2014). In this light, the injured audience has a right to lay claims on New Nirvana given the duty of care as perceived from the sufficient level of engagement of control over the subsidiary company Nuclear Blast Sounds Pty Ltd.

  1. What is the legal position of Millennium Pty Ltd on the legal action brought by Don?

Arbitration is among the chief methods of alternative dispute resolutions. In various ways it resembles litigation given that various parties use the process to facilitate for negotiations. The decisions made in arbitration are mostly final and are rarely appealed. Arbitration basically involves a proceeding out of court in which there is a third party involved who hears evidence and deliberates then makes a decision that is binding (Drahozal, 2016) . In the case of Millennium Pty Ltd and Don, there was a previous agreement based on the articles that should there be any dispute then it will be solved through an arbitrator before there are any court proceedings. The type of arbitration enacted was thus a contractual arbitration, otherwise known as private arbitration which is drafted when the parties involved enter into a relationship and on the anticipation of disputes; they mutually agree to keep them out of court unless the dispute calls for settlement in court (Drahozal, 2016).

The conflict of interest between Millennium Pty Ltd and Don was on the basis of competency. A conflict of interest undermines the solicitor’s ability to perform as per the requirements of the client. Solicitor competency is of high importance in legal representation as the client expects the application of relevant skills and values in way that is suitable to each context of the legal operations of the client (Hamilton, 2013). Upon retention of the solicitor, the client expects the solicitor to possess the ability and capacity to deal with all matters arising in the allowance of the client. The solicitor is thus bound to be competent or else risk bringing loss to the client. In the event that the solicitor is unable to fulfill these requirements, there is an obligation to provide information to assist the client to retain a different solicitor who has the capability to handle the client’s affairs (Hamilton, 2013). Millennium Pty Ltd was thus justified in seeking another solicitor to handle their affairs as they viewed Don’s performance to be below the standards that they had expected.

The solicitor Don however did not see himself as incompetent given that he went forward to lay a claim against his contract being terminated. The Australian Solicitors conduct rules expect the solicitors to act in consideration with ethics placed and in line with the Common Law and rules therein. The solicitor is mandated to provide services with the interest of the client in mind. The solicitor is additionally expected to deliver legal services in a competent manner. The move by Don to seek legal action was rash and premature given that he went into the solicitor client relationship with knowledge that should there be a dispute then they would seek an arbitrator. Primarily, when parties are bound by arbitration clauses, they are not supposed to seek legal action before going through the arbitration.

From the contract law, termination of contact is done upon the breach of contract which in this case is the failure of the previous solicitor to act competently. There is however an arbitration clause in the contract law where the party may refer the dispute to arbitration if the party chooses to. The termination of engagement between a solicitor and a client can be done through an operation of law as stipulated in the Australian Solicitors conduct rules. Based on the arbitration law in Australia, Millennium Pty Ltd is in a position to file an application seeking a reference of the dispute to arbitration. In the event that this is allowed the two parties will then be required to appoint an arbitrator to hear and determine the issue of canceling Don’s contract in favor of the appointment of a more competent solicitor.

References

Andres, C., Betzer, A., Van den Bongard, I., & Goergen, M. (2014). Dividend policy, corporate

control and the tax status of the controlling shareholder. Corporate Control and the Tax

Status of the Controlling Shareholder (July 2014).

Australian Fisheries Management Authority

Barker, K., Cane, P., Lunney, M., & Trindade, F. (2012). The law of torts in Australia. Oxford

Commercial Arbitration Act 2010 NSW

Drahozal, C. R. (2016). Innovation in Arbitration Law: The Case of Delaware. Pepperdine Law

Review, Forthcoming.

Fisheries Management Act 1991

Hamilton, N. W. (2013). The Qualities of the Professional Lawyer. Chapter in ESSENTIAL

QUALITIES OF THE PROFESSIONAL LAWYER (ed. Paul Haskins, ABAPublishing

2013), 14-22.

Lang, J. T. (2014). How Can the Problem of the Liability of a Parent Company for Price Fixing

by a Wholly-owned Subsidiary Be Resolved?. Fordham Int’l LJ, 37, 1481-1859.

Lo, S. H. (2014). A Parent Company’s Tort Liability to Employees of a Subsidiary.

Mazur, K. (2015). Fisheries: Outlook to 2019-20. Agricultural Commodities, 5(1), 146.

Mishra, A. J., & Kar, S. (2013). Broader social implication of the strategies of business

corporations. International Journal of Indian Culture and Business Management, 7(2),

213-225.

THE LAW SOCIETY OF NEW SOUTH WALES Uniform Conduct, Practice and CPD Rules

for Solicitors 2015

WLR South Wales 2011 (3011)