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Table of Contents Checklist:
1. What is the relationship?
2. If subsidiary?
a. Obligation for director b. Other issues
3. If related corporate body?
a. Obligation for director
4. Holding company's liability for trading insolvent? S 588VX a. Whether liable: s 588V b. Consequences - liquidator can sue holding corp: s 588W c. Defences: s 588X
5. If trading when insolvent?
6. Consider: a. Whether officers of co A are officers/directors of co B (like in Asic v Adler - Adler was an officer of HIHC etc) b. Analogise with: i. Walker v wimbourne ii. Equiticorp finance
1. What is the relationship between the companies? Subsidiary? Control?
1. Issue: Is co A a subsidiary of co B? or is co A controlled by co B?
2. Four ways for corporation A to be a subsidiary of corporation B : s 46. (Note that any shares held or power exercisable by Co B in a fiduciary capacity are treated as not held or exercisable by it: s 48(2)). i. Corporation B controls the composition of Co A's board: s 46(a)(i). Ie if Co B, by a power exercisable (with/without consent of any other person) by it, can appoint or remove all or the majority of the directors of Co A: s 47. Ie if: (a) a person cannot be appointed as a director of co A without the exercise by co B of such a power in the person's favour: s 47(a); or (b) a person's appointment as director of co A follows necessarily from the person being a director or other officer of co B: s 47(b). (Discount exercisable power held in fiduciary capacity: s 48(2)). ii. Co B is in a position to cast or control casting of more than 1/2 of max no of votes iii.
at Co A's AGM: s 46(a)(ii) Co B holds more than 1/2 of issued share capital: s 46(a)(iii). (Discount shares held in fiduciary capacity: s 48(2)). Co A is a subsidiary of corps X, which is a subsidiary of Co B: s 46(b)
iv. 3. Significance if co A is a subsidiary of co B - are related: under s 50; holding co liable if subsidiary traded when insolvent under s 588VX
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