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BUSINESS ORGANIZATION IN LAW
THIS IS THE PROBLEM QUESTION. IT’S A BUSINESS ORGANIZATION MODULE IN LAW. HENCE IT IS REQUIRED TO BE ANSWERED CRITICALLY AND APPROPRIATELY FROM A LAW ANGLE
Albert, Bob, Claude and Dora are the shareholders and directors of ABC Ltd, the parent company of
three wholly owned subsidiaries DEF Ltd, GHI Ltd and JKL Ltd. ABC Ltd has divided its business into three between the subsidiaries in order to minimise its tax liability and actions in negligence. DEF Ltd buys and mixes chemicals for the paint industry, GHI Ltd owns threetrucks and transports the chemicals and JKL Ltd markets the mixed chemicals. All profits of the subsidiaries go back to the parent company ABC Ltd.
One of GHI Ltd’s vehicles, while transporting hazardous chemicals along the motorway, is involved in a serious accident.Twenty people are badly burned and noxious fumes are released into the air near a town.Chemicals also leak into a water purification plant.
The estimated damages and fines payable by GHI Ltd come to millions of pounds. GHI Ltd is capitalised only so far as is needed to transport chemicals in three of its trucks.There is some liability insurance but only to the amount of £1.5 million.
A few months after the accident GHI Ltd is in insolvent liquidation. In the meantime ABC Ltd has set up another wholly owned subsidiary to carry out the group’s transport business.
Discuss, with reference to recent case law, whether the parent company and/or its members could be liable for the actions of GHI Ltd and critically evaluate the legal outcome.
Your answer should include, but not be restricted to a discussion of ‘lifting the corporate veil’.
