Corporate Law Limited Liability of Parent Companies

Question: Discuss about the Corporate Law for Limited Liability of Parent Companies. Answer: Legal Issues on Cases under Section 206 In the cases of ASIC v Somerville [2009]NSWSC 1149, there was the refusal by Somerville to leave from managing his legal practice that is incorporated under Section 206G of the Corporations Act of 2001. It is because the business partner of Somerville and his co-director had already the entire responsibility that was imposed by Section 140 of the Legal Profession Act of 2004 for making the management of the legal services that are provided by the said corporation. The said burden as a responsibility in the statutory terms is not subject to increase in case the person is left as the only director. Section 206A of the Corporations Act of 2001 stipulates expressly that the persons who are disqualified, cannot be engaged in managing corporations. Under Section 206G of the Corporations Act 2001, it is provided expressly that the Court bears the power to give leave. According to the first subsection of Section 206G, it is provided that in case any person is disqualified from the management of the corporations, may make an application to the Court for leaving to manage any corporation, any specified class of corporation or any particular corporation. The Section in its second subsection mentioned that the person willing to leave any corporation must make the lodging of a notice with the ASIC before at least 21 days that is before the commencement of the proceedings. The notice also needs to be in the form that is prescribed. The Section also states that the order that grants the leave must be expressed to certain conditions and exceptions, which are subject to determination by the Court. In case the Court gives any person the permission to leave the management of any corporation, then such person might be appointed as a secretary or director of any company. The section also provides that any person must be involved in lodging a copy of that order that grants the order of leave with the ASIC within a time of 14 days after such order is delivered[2]. The Court under Section 206G of the Corporations Act of 2001, grants the power to the Court to make the revocation of an order of leave by an application by ASIC[3]. The Section also m akes it clear that the order that revokes the leave does not come into effect unless the same is served on that person. Legal Issues on Cases on Section 79 In the case of ASIC v Somerville (no 2) [2009]NSWSC 998, it was held by the Court that Somerville would be disqualified from doing the management of companies for a time-period of six years. The judgment that emerged, in this case, depicts that there happens to be the breach of the duties of the directors that is related to the activity of Phoenix. The Court also makes the finding that the solicitor on behalf of the company was complicit in the relation to the misconduct of the directors under Section 79 of the Corporations Act of 2001[4]. The said section also involved in the imposition of liability to those persons who are involved in making the contravention of law by other persons. The announcement of the commencement of the proceedings of the Court was made in the year 2008 by ASIC. In that announcement ASIC made the allegation against the activity of phoenix. The Court made the hearing of the argument that it is supposed to be extraordinary if any solicitor only by rendering advice becomes liable under Section 79 of the Corporation Act of 2001[5]. The Judge made the point that the issue of an extraordinary factor depends on upon the advise that was rendered actually. The Court held that in case the advise that is given results in bringing about an action of breach of significant sections of the Corporations Act by the directors and the solicitors perform all the function in carrying out those activities other than putting their signature, then there arise no questions on whose part the liability arises. In the simple terms, the Court held that in case any solicitor gives advice for carrying out any improper activity to any director, and the solicitor carries out the entire work without signing the documents, then there would be the liability on the part of the solicitors. It was mentioned by ASIC that the activity of phoenix is an important issue, and its focus has also been broadened by the ASIC that is related to the misconduct for making the inclusion of not only the directors of the company but also the other persons who are helped in helping in the facilitation of those transactions. The ASIC also mentioned that the other persons might include the accountants, financial advertisers, and the solicitors. Conclusion There are certain sections that are contained in the Corporations Act of 2001 that clearly states that any person who is involved significantly in the contravention of the Act by another person, then that person would also hold to be doing the contravention of the Act. This makes that person expose to several orders such as orders of civil penalty, orders of compensation and orders from disqualification from the management of corporations for a fixed period of time that the Court decides. It is provided expressly by Section 79 of the Corporations Act of 2001 that if any person is involved in making the contravention of the provisions of the Act if he has aided, counseled, procured or abetted the contravention. The Section also states that any party would be liable for contravening the Act in case he induced any other party by way of promise or threat to contravene any provisions of the Act. If any person also makes any omission or act that directly leads to the contravention or leads to conspire with any other to make the contravention, then such person would also e liable for the contravention of the Act. Reference List Anderson, Helen. "Challenging the Limited Liability of Parent Companies: A Reform Agenda for Piercing the Corporate Veil."Australian Accounting Review22.2 (2012): 129-141. Btiz-Lazo, Bernardo, and Masayoshi Noguchi. "Auditors and the supervision of retail finance: Evidence from two small-sized building societies, 19761978."Accounting History18.1 (2013): 77-97. Corporations ACT 2001 - SECT 206G(1st ed, 2001) Corporations ACT 2001 - SECT 79(1st ed, 2001) Vasudev, Palladam Madhavrao, and Susan Watson, eds.Corporate governance after the financial crisis. Edward Elgar Publishing, 2012. Zindoga, Washington Tawanda.Piercing of the corporate veil in terms of Gore: Section 20 (9) of the new Companies Act 17 of 2008. Diss. University of Cape Town, 2015