Queen Consolidated Pty Ltd (QCPL)

CLAW ASSIGNMENT
Student’s Name
Institutional Affiliation
Date
1 Executive Summary
Queen Consolidated Pty Ltd (QCPL) is a multi-business entity incorporated in 2005 and running several subsidiary entities, which deal in different activities, specifically in hi-tech and science. The company has a subsidiary called STAR, which they liaise with another company called ARGUS, a marketing entity to help sell its products to government institutions and other potential buyers. STAR and ARGUS form a trust agency called Palmer, which is to be used as a vehicle to advance the company’s interests. ARGUS forwards Amanda to operate the entity. However, Amanda seeks unconventional means to secure a loan from the SCB to finance the marketing procedure. A disagreement ensues, in which Oliver, one of the directors disowns the guarantor documents signed by Moira and Robert. Ultimately, Moira’s procedures are valid as she follows the correct procedure in signing the documents and seeking board approval.
2 Background Facts
Queen Consolidated Pty Ltd (QCPL) is a multi-business entity incorporated in 2005 and running several subsidiary entities, which deal in different activities, specifically in hi-tech and science. STAR Labs Pty Ltd, henceforth called “STAR” is QCPL’s subsidiary, which was incorporated in 2015 and is charged with the development of Mirakuru, a pharmaceutical compound capable of managing different flu-like viruses. STAR holds the patents to the drug and has undertaken several trials to confirm Mirakuru’s efficacy.
QCPL has five directors
Name

Position

Voting shares

Location

Moira

The chair

2

Brisbane

Walter

The managing director and Moira’s husband

2

Brisbane

Oliver

The finance director and Moira’s son

2

Brisbane

Thea

Director (Moira’s daughter and Oliver’s sister)

2

Sydney

Felicity

Director

2

Brisbane

Malcolm

Major shareholder

5

Brisbane

Robert

Major shareholder

6

Brisbane

These directors are the same ones who run STAR and thus STAR does not appear to hold any board meetings. Instead, the directors simply sign resolutions, which they call “circulating resolutions of STAR” whenever they are at QCPL’s board meetings. In addition, STAR has no employees and instead, its technical and engineering experts are either contracted outside the company or are employed by QCPL.
QCPL operates on replaceable rules, which refers to a set of guidelines that the management can use for an organization’s internal governance. These guidelines are often used in the absence of a company constitution. These rules cover areas such as appointment and removal of directors, remuneration of the directors, powers of the directors, meetings by the directors and the members, and dealings with the company shares and dividends. If a member breaches these rules, the process is not perceived as a breach of the Corporations Act but a breach of contract. In the case of the QCPL Company, the replaceable rules determine the power of the individuals to make decisions on behalf of the company. Based on the powers accorded to each stakeholder, Robert comes across as a shadow director by virtue of having the most number of shares and being consulted by Moira and Walter before making crucial decisions. However, these crucial decisions have to be subjected to the board of directors or the directors have to call a general meeting in which they have to pass important decisions.
After Moira approves the guarantee, the information reaches Oliver, who urgently convenes a board meeting to review the issue. Oliver hurriedly organizes for the directors’ meeting within 24 hours and fails to invite Robert. Robert only manages to access it via a link that Moira sends to him. The meeting does not involve the sharing of ideas as Oliver dictates the amount of time that each member speaks. It eventually ends by Oliver expelling Robert and voting together with Thea and Felicity. Moira, later convenes a general meeting to provide ex post facto approval of the loan documents. She follows the due procedure of holding a general meeting by providing 21 days’ notice and holding the meeting in the QCPL premises. In addition, she provides a summary of what the meeting would be about to allow the members chose whether they would attend or not. Despite Oliver’s protests, the members eventually approve the guarantee documents, which then makes it binding.
3. Analysis
3.1. To what extent does QCPL and STAR responsible for any guarantees or liabilities guaranteed by joint ventures?
3.1.1. What is the relationship between QCPL and STAR
STAR is a subsidiary of QCPL. However, the two exist as separate legal entities based on Salomon’s principle. According to the Salomon’s guideline, each company in a group is a separate legal entity that is distinct from other companies in the group. Thus the creditors of a company in a group can only enforce their rights towards the company. The shareholders of each group have limited liability and hence cannot be held liable for the company’s debts (Walker v Wimborne). Thus, in this case, STAR shareholders cannot be held liable for the company’s debts because they have a limited liability to the company.[Walker v Wimborne [1976] 137 CLR 1) (UCL p42]
QCPL and STAR operate as a joint venture, rather than a partnership. The difference between the two is that in the former, two or more people or entities joint for a particular project. On the contra...