The Law Relating to Companies - Question 1 In this...

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Question 1 In this question, there are two issues should be discussed are whether the corporate veil can lifted to set aside the separate legal personality to let the members be liable. It is because unscrupulous businessmen will undertake dubious activities under the protection from limited liability to seek to evade from this. The first issue is that whether Building Construction Holding Ltd. is liable for Building Experts Ltd.’s negligence of not insuring their employees. According to , property belonging to SSK was acquired by Birmingham Corp compulsorily and it was used by waste paper merchants which is a subsidiary of SSK. SSK owned almost all the shares of the merchants, provided supervision and control, and profit were credited to SSK, whose accounts also were prepared by SSK as well. When the waste paper merchants sue Birmingham Corp for damages, SSK was entitled to compensation. The court held that subsidiary was an agent of SSK and thus SSK was entitled to compensation, which brings a principle of when there is a holding and subsidiary relationship, corporate veil can be lifted to look behind that parent company were also liable for lawsuits of its subsidiary. Applying to the question, after a huge fire broke out, workers discovered that they were not insured by Building Experts Ltd. Therefore, the injured workers wanted to sue the parent company, Building Construction Holding Ltd. Under the protection of separate legal entity of limited liability, Building Construction Holding Ltd. should
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not be liable for compensation for workers since Building Experts Ltd. and Building Construction Holding Ltd. are two separate legal entities. However, referring to the case above, when a holding and subsidiary relationship exists, lifting corporate veil is needed to look at the membership of the company. In the question, it is clearly stated that “…Both then set up a subsidiary company…”, showing that the relationship existed. As a result, Building Construction Holding Ltd. was liable for this, i.e. the parent company should compensate the injured workers. Besides case law, Ho and Lo have offended of not insuring the workers. Therefore, according to the Criminal Procedure Ordinance, s. 101, statutory provision about criminal acts, when the company commits an offence with consent or connivance of directors, they are also guilty for the same offence. The second issue is that corporate veil can be lifted from setting up of New
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The Law Relating to Companies - Question 1 In this...

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