Therefore, relationship between Strongman Pal. And Mayflowers Ltd is parent – subsidiary company.
According to Common Law, the parent company has control over the subsidiary/’ (slide company under common law – lecture 2) but its “separate entities and independent of one another”. However, under common law, a court may “pierce the corporate veil” of the parent if it finds an appearance of impropriety through questionable share transfers or other fraudulent means of avoiding the subsidiary’s liabilities.Courts might also subordinate the parent’s debts to outside creditors if the parent has engaged in unfair conduct, such as influencing new creditors to extend credit to the subsidiary while knowing the absurdity’s poor financial condition (Shah Hudson, Demand Media, smelliness’s. Chronic. Com). Before explaining Strongman and Mayflowers having responsible to pay the debts of Refreshment or not, it’s important to identify the material delivered and orders received of Refreshment Ltd passed or not passed on to Mayflowers Ltd.
I. In case of material delivered to Refreshment Ltd and orders received by Refreshment Ltd were not passed on to Mayflowers Ltd 1. Responsibility of Mayflowers Ltd. Obviously, there is no responsibility of Mayflowers Ltd to Refreshment Ltd, because there is no contract between them. Thus, Michael Ltd cannot ask Mayflowers about the debts of Refreshment Ltd, even though Refreshment Ltd is one subsidiary of Strongman Pal. Or not, because Refreshment Ltd and Mayflowers Ltd is two independent companies. .
Strongman Pal. About Strongman Pal. , because Strongman Pal. Holds the majority of shares in Refreshment Ltd, there are two types of business which can effect to relationship and decision as well as liabilities between Strongman pal. And Refreshment Ltd.
A. Refreshment Ltd is one subsidiary of Strongman Pal. Actually, in most case, the debt of Refreshment Ltd is not related to Strongman pal. However, according to Company contract under common law, Strongman Pal. Is liable to pay damages to each other party to the pre incorporation contract” if Refreshment Ltd is “registered but does not ratify the contract”. (invigorate. Com) b.
If Strongman is one general partner ( Limited partnership) or if Strongman is Corporation in Refreshment Ltd Strongman Pal. Is one shareholder of Refreshment Ltd. However, the company was separate entity from its shareholders. Based on case “Salomon v A Salomon and Co Ltd [1 897] AC 22, Strongman Pal has not liable with the debt of Refreshment Ltd.Overall, with no passed trading from Refreshment Ltd on to Mayflowers Ltd, Mayflowers Ltd has no responsible with the debt of Refreshment Ltd, so Michael cannot obtain the payment from Mayflowers. Besides, Strongman Pal. In most case still have no liable with action of Refreshment Ltd, but if Strongman Pal. Had intervention on the action of Refreshment Ltd, Strongman will have liability to pay debt.
In the end, Michael Ltd can ask Strongman about the payment of the debt of Refreshment. II. There were the passed from Refreshment Ltd on to Mayflowers. 1 .Does Michael can obtain payment from Mayflowers Ltd? In this case, there was a contract between Refreshment Ltd and Mayflowers Ltd. Based on to the agreement between Refreshment and Mayflowers, if Mayflowers accepted the debt of Refreshment, Mayflowers Ltd has liability with this debt. On the other hand, if the agreement between Mayflowers and Refreshment is just passing the materials delivered to Refreshment Ltd and orders received by Refreshment Ltd, not including the debt before, Informers will have no responsibility with the debts of Refreshment Ltd.To sum up, Michael Ltd can ask Mayflowers Ltd about the debt Of Refreshment Ltd.
2. Does Strongman Pal. Eave liability in this case? It’s based on to the form of business between these companies. A. Both Refreshment Ltd and Mayflowers Ltd are subsidiaries of Strongman Pal. In most case, Strongman Pal has no liability with any action of subsidiaries, because it’s separate entity and all parent and subsidiaries dependent on each other by managers and shareholders. However, in Refreshment Ltd.
Strongman Pal. Old majority of shares and the remaining shares are held by two directors, both of whom were appointed by Strongman pal, “this means that if the directors of a wholly-owned subsidiary are accustomed to acting on he instructions of the parent company, the parent company may be considered a “shadow director” of the subsidiary and essentially have the same obligations and liabilities as a director of the subsidiary, including liability for insolvent trading” (Gilbert + Dobbin, eulogy. Com). So Strongman Pal. Is “shadow director” (legislation. Ova. UK) of Refreshment, leading to the activities of Refreshment Ltd based on the decision of Strongman.
Hence, Strongman Pal. May be liable for its subsidiaries’ activities (Kyle Hulled, invigorate. Com) Furthermore, Mayflowers Ltd is wholly owned subsidiary of Strongman Pal.
That means Strongman Pal. Will responsibility with the activity Of Mayflowers Ltd. Therefore, Strongman pal. Must control the problem of subsidiaries, including the debt of Refreshment Ltd.
In conclusion, Michael can ask Strongman Pal. Bout the debts of Refreshment Ltd in term of Refreshment Ltd is one subsidiary of Strongmen Pal. B. Strongman Pal.
Is general partner of Refreshment Ltd According to common law, general partner of limited partnership have unlimited liability and have full management powers according to common law. The members’ liability can be limited, but with the entity, legal entity separate to its members. Strongman pal. Is just a general partner of Refreshment Ltd. So Strongman Pal.
Will not responsibility with the debt of Refreshment Ltd.