Business Law Essay For Scallop Marketing Authority. (56 Characters)

Can Bob double his catch by incorporating a company?

Discuss about the Business Law for Scallop Marketing Authority.

In the case, Bob beech is a scallop fisherman, who is engaged in commercial scallop fishing in New South Wales. But the subject of scallops is under protective legislation. The act of Scallop fishing and marketing uses quota based system to each fisherman, which they can get after applying. For individual, the quota is fixed 50 tonnes within a year. Further, the act gives power to Scallop Marketing Authority for purchasing scallops for those fishermen, who have reached their quota limit. But, fishing of scallop more than give quota by authority is offensive.   As per the act of Scallop finishing and marketing, no one has right for Scallop fishing more than the given quota. It means no one has a right to do excess of Scallop fishing otherwise it can be a matter of penalty that can be up to $100,000. Due to the capacity of Bob, his daughter tells him to incorporate a company to get double his catch. In this case, the main issue is “Can Bob double his catch by incorporating a company”.

The corporation law 2001 of Australia, a corporation is also a legal entity. It means, the liability of a corporation can be defined as similar as an individual person (Commonwealth of Australia, 2015). This is because the corporation law of Australia separates the rights of a corporation from the owner of the corporation. The owner and corporation can be both separately sue in the title of their different positions (Commonwealth of Australia, 2015). As per the act of Scallop Marketing Authority, it is not possible to give the exemption to a corporation because the act strongly says that a person will get quota to catch 50 tonnes of Scallops in a year. It means a person whether it is a real person or legal entity such as a corporation may set the quota to catch Scallops under the allotted quota.

Further, the statement of the act of Scallop finishing and marketing includes a particular word such as permit him or her”. It means the law does not allow corporations to enter into the catching areas to catch the Scallop. The statement of act clearly says that the quota will be allotted to a real person rather any legal person. It means a person cannot be able to get the quota for catching Scallop after incorporating a company. Therefore, it can be stated that the daughter of Bob is not correct because her suggestion is just opposite to the provisions of the Scallop fishing and marketing act, which does not consider the corporation for fishing activities. further, the area of Jervis Bay is for the regeneration of Scallops that means the allocation of more quota to a person can affect the regeneration policy of the NSW that will also affect the eco-system and ecology of Jervis Bay, which will affect the entire business of Scallop in negative manner because of the limited availability of the Scallop’s stock (NSW Department of Industry, n.d.). There is limited availability of the Scallop’s stock that means the increment in the yearly quota may affect the regeneration process of Scallops in Bay area negatively.

Liability of the holding company for negligence

The given situation describes that Hard rock band controls the New Nirvana Ltd. this organization manages the activities of band through the help of its several subsidiary companies. This means New Nirvana Ltd is involved in the setting of the business routes and policies for it's every subsidiary company and the action of each company is guided by the holding company. Further, the wrong action of Nuclear Blast Sounds Pty Ltd caused critical harm to the audiences due to its negligence work. But, the company has no insurance to manage its negligence work. In this case, the main issue is “Should the holding company of Nuclear Blast Sound liable for the action of negligence”. It can be explained through the help of some examples and principles related to the holding company and subsidiary company.

Section 588V to Section 588X of corporation law defines the responsibility of the holding company towards the subsidiary company and allows a liquidator for recovering compensation against the action of the subsidiary company from its holding company, if the subsidiary company is involved in unethical or insolvent trading (AUSTLII, 2000).  But, Industrial Equity v Blackburn (1977) 52 ALJR 89 is a case related to liability of the subsidiary. In this case, court held that the subsidiary company may not treat as merely part of a holding company only for the purpose to determine holding company’s profits (AUSTLII, 2000). This is because the court gives the value to the concept of separate legal entity.  As per this case, the subsidiary company may not be considered under the umbrella of a holding company because the concept of separate legal entity defines that actions and decision of holding company and subsidiary company are not mutually related and taken by the different board of directors.

On the basis of this, the corporate veil can be lifted if following points are available:

• Profit of a subsidiary company is treated as profit of holding company. It is clearly shown in the case of New Nirvana Ltd because it gives the business to its subsidiary company that means profits of Subsidiary company will be considered as the profit of New Nirvana.
• Business of the subsidiary must be allotted by the holding company. The similar situation is presented in the case of New Nirvana.
• Holding company should be brain and head of trading venture. Similar situation is also presented in the case of New Nirvana.
• Holding company should be controlled by the business.
• Profits earned by subsidiary company should be based on holding company's direction and skills and
• Holding company should be in effective control.

As per above points, it is clear that New Nirvana company directs the business functions of its subsidiary company. On the basis of the above result, it can be stated that the injured audience members can make new nirvana Ltd liable for the Nuclear Blast Sound Pty Ltd’s negligence. This is because the actions and decisions made the Nuclear Blast are fully controlled by its holding company. This is because holding company such as New Nirvana Ltd makes planning for the event of the band and the distribute the responsibility of the works to its subsidiary company. 

Changes in a company's constitution

As per the situation, Simon, Michael and Don develop a project management company. According to the constitution of the company, Don is a solicitor and he will be the solicitor for purchase or sales of any land. On the other hand, the article of company defines that any disputes between company and its members will bring to the arbitrator before any court proceeding. Further, Michael and Simon took the decision to change the solicitor. In this case, there are two issues. First issue is related to the validity of decision made by the directors of the company and the second issue is related to changes in the company’s constitution and article.

As per the corporation law of Australia, internal management of a company may govern by:

• Provisions of Corporations Act 2001
• Constitution of company or
• Both above (ASIC, 2016)

Section 135 and section 136 of corporation law defines that a company can be run through the help of the constitution of a company that is changeable, while the provisions of the corporation act 2001 may help to run the business but it may not be changed by the company (ASIC, 2016). The section 139 of the Corporation law 2001 defines that the up-to-date copy of the changed constitution must be provided to members of the company within 7 days (ASIC, 2016). Overall, it can be said that the actions of directors are governed by the constitution of the company.

As per the case, the director of Project Company does not make any change in the constitution of the company in regard of the changes in the existing solicitor but the two directors have taken the decision to change company’s solicitor. In this context, the company can be stated that the new solicitor is more effective for the survival and profits of the company. And Don is not outside and he will also gain his profit share. Further, both directors may argue in court that they have already informed Don about their decision and the decision is taken by majority that means the company is going to make changes in the constitution of company to give solicitor post to other persons. Simon and Michael may argue that the post of solicitor and director is related to conflict of interest. It means responsibility under both positions may not perform by a single person. Therefore, the majority of the directors have taken the decision to appoint the new solicitor for the company to hold the best interest of its shareholders. Finally, both directors of the company may argue that the action of Don is just against the constitution of the company because it needs to contact the arbitrator initially before court. But Don did not do this action and violated the rule of the company. Therefore, he has no legal right to raise the issue against the decision taken by the directors. Hence, the company can request to the court to reject the case of Don.

References

ASIC 2016, Constitution and replaceable rules, Available at: https://asic.gov.au/for-business/starting-a-company/constitution-and-replaceable-rules/ (Accessed: 14 October 2016).

AUSTLII 2000, A Two-Edged Sword: Salomon and the Separate Legal Entity Doctrine, Available at: https://www.austlii.edu.au/au/journals/MurUEJL/2000/32.html (Accessed: 14 October 2016).

AUSTLII 2000, Corpoartions Act 2001 - SECT 588V, Available at: https://www.austlii.edu.au/au/journals/MurUEJL/2000/32.html (Accessed: 14 October 2016).

Commonwealth of Australia. 2015, Company, Available at:  https://abr.gov.au/For-Business,-Super-funds---Charities/Applying-for-an-ABN/Business-structures/Company/ (Accessed: 11 October 2016).

NSW Department of Industry (n.d.) Scallops - research information sheet, Available at: https://www.dpi.nsw.gov.au/fishing/aquaculture/publications/species-saltwater/scallops (Accessed: 13 October 2016).