Eastfield (UK) Ltd is a small privately owned company based in Essex. They design and manufacture a comprehensive range of architectural and drainage products,
Background key information:
Eastfield Ltd (Eastfield) requires debt financing and thus a new company validly incorporated called Capital Pty Ltd (Capital) provides finance to Eastfield. After Eastfield encounters an area of business where it is financially unviable for the continuation of the project, the directors decided to close down that business. Capital therefore wrote off the bad debts and claimed a tax deduction on the bad debts but was issued a notice from the Commissioner of Tax that claimed Capital is just an extension of Eastfield and thus is exclude for the allowance to claim a tax deduction. The underlying issues of this case are the separate legal entity of Capital, individual to its parent company Eastfield. If it was a separate legal entity, the commissioner of tax need to consider whether if it is possible to pierce the corporate veil through agent relationship or by labelling Capital as a sham. In consideration to these issues, some other key facts to consider are the relationships between the parent company, Eastfield and Capital. The employees of Capital are supplied and funded by Eastfield, Capital distributes all of its earning to Eastfield as dividends, Eastfield determines the capital structure which Capital then implements to meet the demands if its parent company
Separate Legal Entity:
Capital is established by Eastfield as a subsidiary company and was validly incorporated on March 2010. The Commissioner of Tax holds to disallow the claim on tax for a bad debt write off between the parent and subsidiary companies as it suggests that there i...
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11. Walker V Wimborne [1976] 137 CLR 1
Academic Journals:
1. Bainbridge S, ‘Abolishing Veil Piercing’ (2001) 26 Journal of Corporation Law 479 at 506-514
2. Harris J, ‘Lifting the Corporate Veil in Industrial Disputes’ (2004) 22 Company and Securities Law Journal 69
3. Harris J, ‘Lifting the Corporate Veil on the Basis of an Implied Agency: A Re-evaluation of Smith, Stone and Knight’ (2005) 23 Company and Securities Law Journal 7
4. Hargovan, A. (2006). Company law and securities: Breah of Directors’ Duties and the Piercing of the Corporate Veil’. Australian Business Law Review, 34(4), 304-308
5. Hargovan A and Harris J, ‘Together Alone: Corporate Group Structures and Their Legal Status Revisited’ (2011) 39 Australian Business Law Review 85.
Book:
1. Harris, Hargovan and Adams, Australian Corporate Law, 4th edition, 2013, LexisNexis/Butterworths
The value of Poor Son declined significantly since external economic conditions. It shows that the fair value of Poor Son, the emerging entity, should be way less than its book value, and the value of assets is less than the total of liabilities and claims. Additionally, Parent will receive 100% voting shares of Poor Son and have the ability to name all members of Poor Son’s board of directors. This means that existing voting shares receive less than 50% of the voting shares of the emerging entity. For that reasons, Poor Son should apply “Fresh-Start” under ASC 852-10-45-19.
R v International Stock Exchange of the UK and the Republic of Ireland Ltd, ex p Else (1982) Ltd and others [1993] 2 CMLR 677
The IRS usually do not need to validate ordinary business transactions since both the involved parties behave on their own self-interests. However, the IRS is skeptic of any transactions when it comes to evasion of estate taxes and international subsidiaries. When two unrelated companies enter in a transaction, they are involved in arm’s length transaction. However, such is not the case for related companies as they may try to distort the price of the transaction to avoid tax burden. As the boundary of tax evasion and tax avoidance is very thin, especially when it comes to estate tax and international subsidiaries, people often tend to topple over to the evasion side. The case of Estate of H.A. True, Jr. v Commissioner of Internal Revenue in 2005 illustrates the difficulty of obtaining the objective of tax avoidance and how expensive the failed effort of tax avoidance can be (Journal of Financial Service Professionals). Numerous cases of tax avoidance and evasion such as XILINX Inc. and H.A. True illustrate the confusion surrounding the arm’s length standards (ALS) and its application to cost sharing agreements (CSAs). In case of XILINX, the court altered its decisions few times considering the uncertainties of the arm’s length standards. Meanwhile the company believed to have satisfied the standards. Due to the complexity of the arm’s length standards, these cases were compared to other similar transactions. However, it is rare to find two identical cases which meet all the criteria. In both of these cases, the court couldn’t pin point what the actual standards of the arm’s length standards were, giving rise to opportunities of tax evasion. To put the arm’s length standards to a simplest form, the standard requires the two related parties to structure their transactions in such a manner as they would if they were two unrelated parties in similar
Since the SEC had been doubted for a long time that whether they had the authority to promulgate proxy access rules, especially the doubts arose by the filing of the Business Roundtable complaint , the Dodd-Frank Act’s providing of such statutory authority to the SEC was necessary to erase such doubts. And the SEC has already taken advantages of such authority and approved a rule that allows shareholders with at least 3% of a company’s stock to include nominees for up to 25% of the directorial positions.
The Sarbanes-Oxley Act is a legislation aimed at increasing the accuracy of financial statements that were issued by companies that are publicly held (Livingstone, 2011). The passing of this act was a response to some of the financial malpractices that took place at companies such as WorldCom and Enron. According to Livingstone, making ethical decisions is critical because ethical lapses can lead to severe unforeseen consequences (Livingstone, 2011). This paper will discuss the effects of the Act on the audit committees of public company boards of directors as well as outside independent audit firms. The main advantages and disadvantages of the Act and recommendations of the changes that should be made to the act will also be included.
Holt, Michael F. The Sarbanes-Oxley Act: overview and implementation procedures. Oxford: CIMA Publishing, 2006. Print.
This research question is regarding to the case of ASIC v Healey (2011) 196 FCR 291. On October 2009, they were sued by The Australian Securities and Investments Commission (ASIC). There were many controversy regarding this matter as overly harsh and unduly harsh. Some considered this as a wake-up call for directors by Katz, Lipton, Rosen and Wachtell to take responsibility by fulfilling their duties so they will act with a degree of care and diligence. On the contrary, some considered it as overly harsh due to the requirement to the understanding of financial literacy. This essay will provide a summary of the ASIC v Healey case followed by the decision made by judges and why they made the decision then lastly followed by our opinion regarding
Tighe, Carla and Ron Michener. "The Political Economy of Insider-Trading Laws." The American Economic Review May 1994: 164-168.
Public Law 107-204 of the 107thCongress was enacted by the senate and House of Representatives to “To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.” This law is better known as the Sarbanes Oxley Act, consists of a number of sections designed to oversee and prevent securities fraud, and enhancements to white-collar crime. Thesix key principles of the SOX internal controlsaccording to Internal Control and Cash are: establishment of responsibility, segregation of duties, documentation procedures, independent verification, physical controls, and other controls. Sarbanes Oxley has changed internal controls through risk mitigation and accountability. A key factor, the establishment of responsibility includes authorization and approval of transactions by a ...
A Critical Review of the Royal Mail’s Capital Structure Introduction This report will critically review the capital structure of the Royal Mail (RM) and the implications this has for the company, with reference to its apparent value and the return required by equity investors. The report will take data from the latest set of accounts published by the RM and accompanying investor reports. It will also refer to investors analysis and news item in an attempt to gain a qualitative impression of RM’s share value. The report also focuses on the market and its potential future.
“…separate legal entity possessed of separate legal rights and liabilities so that the rights of one company in a group cannot be exercised by another company in that group …”
There is a restriction on net asset that is capital improvements of $21,015,837 for governmental activities and $20,209,227 for business type activities, and they have strong, unrestricted net assets for both governmental activities and business type activities of $213,670,245, $109,292,512 respectively. A large part of their net assets are invested in the capital assets for both governmental activities and the business type activities. Under the government wide financial statement, the statement of net position shows that a large portion of the money is used for investment in capital assets such as: land, buildings, equipment, park facilities, roads, highways, bridges and construction in
As a framework for identifying and analyzing many common business ethics problems, the contractual theory focuses our attention on the need to provide adequate safeguards for each constituency's interests. Corporate governance is concerned primarily with protecting shareholder interests, in part because the special contracting problems of shareholders are best met by the residual claims that the law of corporate governance creates. The comparative neglect of other constituencies in corporate law is not a matter of concern as long as their interests are adequately protected in some way. How the interests of each constituency are protected--whether by means of corporate governance structures or other means--is a matter of what works best in practice. Before we can devise means for protecting the interests of each ...
When starting a business an important question arises, how to finance the company. The steady economic growth combined with low interest rates has produced a lot of liquidity in debt and equity markets. For example, in 2005, non-financial corporate business borrowing increased dramatically to $289 billion, compared to the mere $174 billion it was in 2004 and the $85 billion it was in 2003 (Chung). The outcome of using only debt financing or only equity financing is mostly direct. Businesses run ino the issue when a company’s finance requires both debt and equity characteristics, changing the tax effects greatly (Hanke).
Furthermore, the new entity had a solid capital structure with 40% equity and also 43.3% subordinated debt