Corporate Law- Marty - Jack - Max - Child Toy Supreme Ptd Ltd - Assessment Answer

December 19, 2018
Author : Ashley Simons

Solution Code: 1ADBA

Question: Corporate Law

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Corporate Law Assignment

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Question 1

Most of the startups have crumbled back to their knees because of lack or poor work structure. The life cycle of any business relies and depends on the types of structures involved. For that reason, Jack, Max, and Jill have the responsibility of making intelligent decisions as early as possible in order to keep the profitability of the company as high as possible. At this point the structure must focus on the sales or merger of the businesses. In case of mergers the company needs legal and binding documents to show how the operations of the company are going to grow. For example, in case of a merger, there should be a binding decision to show how much acquisition has taken place. Moreover, it is important to know who have the largest shares and whether they have a huge influence at the board of governance of the company in case of a merger. On the other hand the structure can be tailored around the individual needs of the consumers and be adaptable to the changes in the environment. However, starting a company at this stage will not be advisable because of the limitation of capital. Moreover, the business has only been in operation for 12 months only. Partnership will only be the best option for the three. Through partnership they will all be directly owning and controlling the business. The business and the capital will jointly be owned by the partnership agreement. However, in partnership the liabilities of the three will not be limited. According to the Corporations Regulations of 2001 (Cth) a partnership can consist of around 50 share brokers, stockbrokers, trademark attorneys or 400 legal practitioners. For Max, Jack, and Jill partnership is less expensive, it is easy to start, and has a broader management base. The other advantage is that there is a wider pool of expertise and ability for the partners to pool more capital. On the other hand the three members can form a limited partnership. That has the provision of at least one general partner and one limited partner. The other advantage is that there are no limits in terms of the number the limited partners in the business structure. The three members will be required to obtain an Australian Business Number for the partnership. That can be applied through the Australian Trade Organization. Besides that the Business Tax File Number will be required. However, the partnership will not be taxed directly but the individuals within the business will be taxed. My advice is that the three go for limited liability partnership. That will ensure that the liabilities of the partners are limited. Moreover, a partnership is easy to establish and does not require a larger pool of capital to establish. The partners have also the option of increasing the number of partners to 20 and that would increase the capital base for the partnership. In addition, each member become responsible for the organization and the owner of the business hence giving them equal chances to control the organization. Meanwhile as a corporate adviser there should be sufficiently proximate relationship to create duty of care. In this case the party offering corporate advice should be careful enough to ensure that they avoid negligence of duty due to the special relationship that is already established between the corporate advisor and the three parties. That is in reference to of Hedley Byrne v Heller (1963) on the liability of professional advisers.

Question 2

Corporate liability refers to the extent at which the business organization or the company can be liable for acts of omission regarding the employees. The purpose of corporate liability law is to control the criminal liability of corporations hence regulating the company. According to the scenario Betty can be sued for tort of negligence. The company will also be sued separately for negligence. That is because she gave false information regarding the chemical nature of the toys. The toys have chemicals which can cause harm to the children. However, Betty has concealed the information and her negligence has led to harm of child. In reference to the Caparo Industries Plc v. Dickman [1990] the duty of care has three principles. There must be harm that is reasonably foreseeable, there must also be a relationship between the defendant and the plaintiff and thirdly there must be fair and just reasonable to impose liability. According to the scenario all the principles of the duty of care can be seen to have been met hence leading to the charges. The company is therefore liable for Betty’s negligence and risk barn from operation. Besides the company also risks being sued because of negligence of duty on their part. A similar case is with reference to Bolton v. Stone [1951].The organizational should have been the first one to identify the mistake and deal with Betty before the issue is exposed to the consumers. According to the duty of care Betty ought to have acted in a manner that is likely not to cause harm to the consumers of the toys who are the children in this case. For that reason, it can be argued that Betty acted carelessly on her decisions to remain quiet regarding the issue of harmful chemicals on the toys. Betty and the Child Toys Pty Ltd is also exposed to the breach of duty because the organization failed to realize the substantial risk or loss that it caused the consumers. Meanwhile Child Toys Pty Ltd can also sue Betty for breach of duty. Her actions of failing to identify the chemicals on the toys has caused the company losses. It must be noted that all members of a society have the duty to ensure that they do not cause especially intended harm hence must observe professional duty of care. The effect of the decision of this case also seeks to verify whether the parties were insured or who would afford the loss. Apart from the child who suffered the injury how many others still seek compensation and what is the moral reason for the imposing of the duty. With reference to the Hedley Byrne v Heller [1963] there will be no act of negligence if the product or service has no responsibility condition.

According to the scenario Child Toys Pty Ltd have no legal obligation with regard to Better Toys Pty Ltd. That is because the company is legally registered under the Australian legal and business laws. The business has also been inspected and awarded certificate of incorporation. That means the company is free to trade and compete according to the fair laws of competition in the industry. Moreover, May is the sole proprietor in the company. Charles is a shareholder in the company. However, despite the clause of retirement that bars him from competing with Child Toys Pty Ltd Charles is free to trade and invest in any business as any other free business man would wish. The retirement clause does not prohibit him from doing any business and if it does it goes against the human rights which require that Charles be free to trade and invest in any organization. The other reason for liability is that Charles is not competing Child Toys Pty Ltd directly. He is just a shareholder and the person competing against the company directly is May who is the sole proprietor of the company.

Childs Toy Pty Ltd has the chance of taking legal action against Charles. The legal action can be based on breach of contract. While Charles was retiring he came into a contract with the Child Toys Pty Ltd that he will not compete directly with the company for two years. However, the duration of terms and agreement has not been exhausted and Charles is already competing directly with the company. However, the decision to be the sole shareholder in the company means that Charles is competing directly with Childs Toys Pty Ltd even though he is not the sole proprietor. That is a breach of contract which is punishable before the law. Despite the fact that Charles promised that he will not deal or confront any of the Childs Toys Pty Ltd directly he has gone against their contractual agreement and his organization has already confronted the Childs Toys Pty Ltd customers with intention to make sales. Breach is a legal cause of action that is usually a binding agreement between two parties. At this point one of the parties fail to fulfill the contractual agreement as agreed by the two parties. In reference to the Donoghue v. Stevenson [1932] a case that involved a snail being found in a beer. Donoghue who was taking a beer realized that there was a snail in the beer at the end. He sued the supplier Stevenson David who was Scottish. The case collapsed because there was no binding contract between the supplier and the consumer since Donoghue did not buy the beer direct from the supplier but from a shop.

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