Objectives

Answer the following questions with reference to the relevant statute law and general common law principles operating in Australia concerning the incorporation and registration of the company, the consequences of the company being a separate legal entity and the limits of the separate entity doctrine. Do not consider the effects of legislation potentially applicable other than that specifically identified. As a guide, students should write about 2000 words (+/- 10%), or about 1000 (+/- 10%) words per 20 mark allocation.

Assessment Task

Terry was an employee of Cosmo Mining Services Pty Ltd (CMS). CMS is a subsidiary of Cosmo Mine Ltd (CM) as CM owns 120 of the 200 issued shares in CMS. CMS owns and operates a lead, zinc and copper mine at Gunbarrel, Western Queensland. CM has an arrangement with the New Vision Bank Ltd whereby it leases all of the mining equipment and then subleases the equipment to CMS which pays CM a leasing charge per annum equal to the bank’s leasing costs plus 10 per cent.

Recently, CMS has attracted considerable media attention as scientists have discovered that CMS’s mining activities have contaminated a nearby river which supplies the water to the

mine and Gunbarrel. A number of Gunbarrel residents and former employees, including Terry, have contracted cancer because they drank the contaminated water. The CMS shareholders call a general meeting for the purpose of addressing CMS’s potential liability to its employees (current and former) as well as the residents of Gunbarrel. The CMS shareholders unanimously vote in favour of selling CMS’s business to a newly formed company, Lazarus Pty Ltd, and winding up of CMS. Advise Terry if he can take action against Lazarus Pty Ltd, CMS and/or CM.