Consequences of the veil of incorporation

Assignment Help Business Law and Ethics
Reference no: EM13670090

OHS Solutions Pty. Ltd. is a company formed by three friends (Des, Satish and Emma) who bring different skills and abilities to the business.  Emma is an accounting graduate, Des has expertise in occupational health and safety (OHS) and Satish has an IT degree. They decided to start up a business which would provide a portal through which the public and businesses could access (for free) information on all aspects of OHS.  OHS Solutions would finance its business, and make profits, by charging businesses to advertise via their website. 

The directors of OHS Solutions are: 

Managing Director - Des

Finance Director - Emma (non executive)

Director - Satish (executive - employed also to run the technological side of the business)

Director - Ying (non executive) - a friend of Des' and director of Support Pty. Ltd.  (Support Pty. Ltd. has gone guarantor for a $50,000 loan from the Business Bank Ltd. to OHS Solutions)

The Shareholders of OHS Solutions (holding equal amounts of ordinary shares) are Des, Emma, Satish and Support Pty. Ltd.

As at January 2007 OHS Solutions had been operating for six months.  It had some initial IT problems which prevented some of the advertisers' material from being accessed.  In order to try to help overcome these technical problems Satish engaged Trouble Shooters Pty. Ltd. 

At the February Board meeting, Satish reported that two businesses who had paid to advertise on the website were dissatisfied with what was happening and were threatening to sue for breach of contract.  Emma was unable to table any financial information as the employee who had been doing the accounts had been sick and when Emma looked at the records she found that they seemed to be in a bit of a mess.  She did find a large account from Trouble Shooters that was over due.  Des reported that he was disturbed by this news.  He had been told by Satish that the IT problems had been fixed since Trouble Shooters had been engaged, and he had just signed a $10,000 advertising contract with Promotions Plus Pty. Ltd. to advertise the website and signed up to go to a trade show to be held in conjunction with a forthcoming OHS conference.  He said this was needed because a number of high profile advertisers were threatening to discontinue their association with OHS Solutions unless the portal became better known.

Ying just listens in disbelief at the March Board meeting.  It seemed to her that OHS Solutions is being poorly managed and is failing to make the most of a potentially profitable business opportunity.  This could present an opportunity for Support Pty. Ltd. to make an offer to buy OHS Solutions at a good price.  On the other hand Support Pty. Ltd. is exposed as a guarantor.

Assume she consults you, an accountant, for your preliminary view about the predicament of OHS Solutions and what she should do.   Assume also that the first thing that comes to your mind is whether Ying herself may be vulnerable as a director of OHS Solutions for failing to prevent OHS Solutions from trading when it is insolvent.

YOUR TASK

Part A

Write a brief explanation about why the directors' duty to prevent insolvent trading exists and the circumstances and consequences of the 'veil of incorporation' being lifted for insolvent trading.

And

Part B

From what you know of OHS Solutions' predicament, DISCUSS whether any of the directors may be about to breach or have already breached the duty to prevent insolvent trading.  (In order to do this you will need to compare what is happening in OHS Solutions case with other precedent cases and refer to the relevant sections in the Corporations Act.)  What will you advise Ying?

Reference no: EM13670090

Obtain secrets from a large competitor in state z

Ecks Co. never appeared to appeal this decision to State Z's appellate courts. Subsequent efforts by Ecks Co. to set up a new branch in State Z were disallowed - Are there a

Have apollo and rocky breached their directors duties

Have the directors of Citrus Ltd breached their directors' duties (in particular duty to act for good faith in the best interests of the company and for a proper purpose) in

What are community corrections

What are community corrections? How do community corrections affect the society in which they are practiced? What hypothesis can you make about community corrections and

Do apollo and rocky have an arguable defence

Have the directors of Citrus Ltd breached their directors' duties (in particular duty to act for good faith in the best interests of the company and for a proper purpose) in

Determine the primary manner

a) Determine the primary manner in which an Attorney General at both the state and federal level would use the "Restatement of the Law Third, Agency". Describe the potent

Analyze the importance of the validity of the information

Analyze the importance of the validity of the information/research on which the criminal profile is based, the strengths and benefits of criminal profiling as a tool of in

Show what are key ethical challenges facing businesses

What are the key ethical challenges facing businesses in the 21st century and what recommendations would you make to companies (such as in your case) to improve and create a m

What are the key ethical challenges facing businesses

What are the key ethical challenges facing businesses in the 21st century and what recommendations would you make to companies (such as in your case) to improve and create a m

Reviews

Write a Review

 
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd