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Question 1.

Piercing the corporate veil is basically a legal decision which treat the duties or
rights of any particular corporation as the liabilities or right of the shareholders.
Moreover, a corporation is found to be a separate legal person that has the
obligation for the debt that it incurs emulated by the only beneficiary of the owed
credit (Gelb, 2011). The countries having a common law mainly upload the notion of
separate personhood but in other situations that are exceptional, it may lift or
pierce the corporate veil (Anderson, 2011). The Australian case law demonstrates
that the courts are mainly not willing to pierce the corporate veil. However, the
limits for the courts occasional decision to lift the corporate veil cannot be
concluded (Yeoh, 2014). It is therefore quite troublesome to make a prediction of
such situations where the courts can pierce or lift the corporate veil. If the court
pierces the corporate veil, then the owners, investors, and corporation members
can be held liable for the corporate debts which clearly indicates that the creditors
can reach the owners home, investments, bank account and other several assets so
as to satisfy the corporate debt. However, the courts will definitely impose a
personal liability for those individuals who are responsible for the corporation and
other fraudulent actions that are connected to the parent companies and in this
case, the subsidiaries (Yeoh, 2014).

Case Issue
In this particular case, the decision is to be concluded as to in what circumstances
the court can be willing to lift or pierce the corporate veil or make the parent
company responsible for the mistake committed by the employee of Red Mine Pty
Ltd. In accordance with the Corporations act Sec 50AA, it can be said that a
holding company can only be liable for the subsidiary debts incurred if the
subsidiary is found to be insolvent and in this case, Red Mine Pty Ltd has few assets
of its own which indicates that the subsidiary is close to being insolvent. This is the
case when the amount for loss can be recovered by the liquidator from the holding
or parent company. A subsidiary is considered as an expansion of the parent
company and is not treated as an individual company (Anderson, 2012). It is the
parent company that would appoint the employers being the subsidiary directors.
The directors for a subsidiary can definitely adopt a comfortable approach while
performing their duties on the fact that the sole shareholder of the subsidiary is
parent company (Anderson, 2012).

Sec 50AA states For the purposes of this Act, an entity controls a
second entity if the first entity has the capacity to determine the outcome
of decisions about the second entity's financial and operating policies.

Case Discussion under Australian Law

In accordance with the Australian Law Corporations Act 2001, Sec 9, a
subsidiary has a shadow director in the form of a parent company when it appoints
executives within the board of subsidiary and hence, expects such executives to

exercise powers that are totally based on the wishes and instructions of the parent
company. It can be legally said that there is definitely no general duty to protect the
3rd party from causing a damage to the other and that is why, a parent company
would owe a duty of care for the subsidiary employers if it retains or controls the
overall responsibility for the appropriate matters in relation to the employers
(Nyombi, 2014).
The court would acknowledge that the rare fact that Red Mine Pty Ltd is a subsidiary
of GM Limited would not mean that GM Limited owed to the subsidiarys employers
duty of care. Therefore, the existence of the duty of care between the employer and
a subsidiary cannot prevent another individual while being fixed with a duty of care.
There is no evidence from the Australian law that the Red Mine Pty Ltd acted being
an agent for GML or that the Red Mine Pty Ltd should not be considered a separate
legal entity from the parent company (Anderson, 2011). In order to make a
determination of the fact that whether or not the GM Limited had a duty of care to
the subsidiary employers, the court can adopt an implementation of the 3 staged
test that developed basically in Caparo Industries v Dickman which is also
applicable in Australia. It entails the following:
1. Owing such a duty would be just, fair and reasonable.
2. The relationship between the defendant and claimant was one of the
3. The damages were foreseeable and reasonable.

It is also found to be quite evident in the Corp Act 2001 s 588v which would make
the parent corporation liable for the debts of a subsidiary and in this particular case
it can be said that after the damage caused by the employer of subsidiary, the
subsidiary owes debts to the creditors for the damages caused. Therefore, it is quite
clear from the Australian Corporation act2001 and one of the UK Case Law which is
also applied in Australia that is already mentioned earlier named as Caparo
Industries v Dickman. In this case, Cape Plc was aware of the knowledge of the
employees of subsidiaries and their working conditions and hence, they accepted
that they are solely responsible for the health issues of the employees working in
their subsidiaries since Mr. Chandler was also injured while being an employee in
the subsidiary.

Therefore, keeping in view the above principles of the corporations act 2001 and
their respective sections and the argument related to group enterprises, it entails
that there can be certain circumstances in which a corporate group will operate in a
way that would make an individual entity quite different and therefore, it would be
proper to lift the corporate veil so that the parent company can be made
responsible for the damages done subsidiary. Piercing a corporate veil would be the
effective way to make sure that a parent company which attains the benefits of

being a limited liability could also accept the responsible that are corresponding
(Nyombi, 2014). It can also be argued that when there could be overlapping,
officers, employees, or directors or when there is an association of partnership
between companies within a group. Hence, it is found from all such evidences that
the subsidiary companies are basically the creation of the parent companies and
that they would never be treated as separate legal entities with all the right and the
liabilities would normally be attached to the separate legal entities that is a parent
company GM Limited as per the Corporations Act 2001, Sec50A. The bottom
line is, the parent company GM Limited is liable for the damages caused by the
employers of subsidiary whose act resulted in the damage a valuable experimental
flock of Dorper sheep escaped from the adjacent land and were therefore lost .

Question 2

It is quite clear that the constitution is independently draft by every organization
and hence, it is quite appropriate and relevant to develop a discussion on the
constitution in regulation context under the Corporations Act. This is due to the fact
that the Act incorporates several essential provisions that relates to the
constitutions of the company. At the point when application is made to structure a
new public company, any Constitution must be lodged with ASIC. This unique
Constitution must be marked by all the first individuals from the organization
(Behrendt, 2011). Additionally, any resulting (part affirmed) adjustment to, then
again [repealing and] substitution of, the Constitution must be upheld up as well.
Taking after the Gambotto choice, expropriation is allowable where the minority's
shareholding would be inconvenient to an organization, a minority shareholder is
contending with an organization, it is important to guarantee an organization could
keep on consenting to regulations representing the essential business which it
carries on, or is important to secure or advance the hobbies of an organization.
Seizure is totally not permissible where the majority of it is only looking to keep it
quite secure for them in order to have the profit of another business advantage or
corporate structure.
The most important fact is that the section 140 indicates that the constitution of the
company has an influence as a contract that is between the following:
1. The member and company
2. A member and every other member
3. The company and every member.
The consitition of the company has the status for a contract that is statutory which
indicates that it includes several features that mainly depart from the general
principles of the law of contract. In accordance with the ordinary contract, the initial
parties are bound by the contract (Duffy, 2010).

Case Issue
Nick Galli has a real passion for organic wine and would like Family Organic Wine Pty
Ltd (FOW) to adopt a constitution that includes a provision guaranteeing his position
as head winemaker at FOW. The case will be discussed in accordance with the
section 140 of the Corporations Act. Therefore, the case is discussed in accordance
with the following question:
Having regard to s.140 of the Corporations Act and the relevant case law, would
Nick be able to enforce such a provision against FOW?

Case Discussion
An organization may exploit the replaceable guidelines in the Act to represent its
internal administration - it doesn't have to have a composed constitution of its own.
This implies that organizations deciding to be represented by the replaceable
principles won't cause the cost of staying up with up to date law - even in case the
replaceable tenets are corrected. An organization may repeal or modify its
constitution, or a provision of its constitution, by passing an extraordinary
resolution. This entails that a special resolution requires no less than a notice of 21
days (28 days for public listed company) and the general agreement of a 75%
majority shares of the votes cast. An organization constitution may not be corrected
compliant with the power as in section 136(2) of the Corporations Act if the
constitution indicates extra prerequisites that must be followed before any change
is powerful. This may incorporate a necessity that an extra condition be satisfied,
the assent of a specific individual acquired or the determination be passed
collectively by the shareholders. Where any such extra necessity is determined in
an organization's constitution the extra prerequisite itself should first be consented
to before it can be corrected. In spite of the fact that the opportunity for minority
shareholders to arrange such extra necessities may give some security to minority
shareholders against choices by the larger part that may have antagonistic
monetary results for them and make it more troublesome for an organization
constitution to be altered, an organization can't limit its statutory power to adjust its
constitution and the constitution can't express that it can't be corrected, as any
such confinement or procurement would be invalid. Care needs to be taken to
guarantee that any extra necessities don't confine this force. This all indicates that
the company FOW can alter its constitution if that can favor the interest
administration and success for the company since Nick Galli will be provided a
status and that would definitely enhance the companys productivity (Duffy, 2010).
However, The minority shareholders' interests of nearly held privately owned
businesses are secured against amendments to a constitution as they are not bound
by corrections made after the date on which they turned into a shareholder and
obliges a shareholder to take up extra shares, builds a shareholder's obligation to
add to the offer capital of an organization, or forces or expands confinements on the
privilege to exchange imparts effectively that the shareholder hold and unless the
shareholder agrees to the correction. In accordance with the Sec 140 of the
Corporation Act 2001, this further raises the issues and the amendment of the
constitution is dependent on the shareholders of the company.

An organization may change or annulment the constitution by unique shareholders
determination, being a determination went by no less than 75 percent of votes. This
is as opposed to different types of agreement, which oblige all parties to consent to
any correction. With respect to section 9, 136, 137, 140, 249H and 249L of the
Corporation Act 2001, a 75% greater part might hence revise a constitution and
those alterations would tie the minority, despite the fact that the minority can have
voted against the corrections, unless there are extra necessities in the constitution
or normal law or the statutory protections. An exclusive organization does not have
to lodge a duplicate copy of its constitution. On the off chance that an exceptional
determination is passed influencing the organization's name, offer capital or sort,
then the suitable record for that change ought to be lodged inside the needed
period of lodgement (Anderson, 2011).

Melbourne University Law Review .
Anderson, H., 2012. Challenging the Limited Liability of Parent Companies: A Reform
Agenda for Piercing the Corporate Veil. Australian Accounting Review, 22(2), pp.
Behrendt, L., 2011. Australian Constitutional reform to recognise Aboriginal and
Torres Strait Islander, s.l.: Australian Indigenous Law Review.
Duffy, M. J., 2010. Shareholders Agreements and Shareholders Remedies Contract
Versus Statute?, s.l.: Bond Law Review.
Gelb, H., 2011. Piercing the Corporate Veil - The Undercapitalization Factor, s.l.:
Chicago-Kent Law Review.
Nyombi, C., 2014. Lifting the veil of incorporation under common law and statute.
International Journal of Law and Management, 56(1), pp. 66-81.
Yeoh, P., 2014. Whistleblowing: motivations, corporate self-regulation, and the law.
International Journal of Law and Management, 56(6), pp. 459-474.