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Ray Atkinson
Ray Atkinson, Graduate Student
Category: Homework
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Experience:  Inner-city high school substitute teacher. Degrees in mathemetics, accounting, and education. Years and years of tutoring.
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ABC Inc. an incorporated association is organising an international

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ABC Inc. an incorporated association is organising an international event. In order to protect its assets, it has formed a compay 123 Pty.Ltd which is wholy owned by ABC Inc.
123 Pty.Ltd will collect all the revenu and pay out the expenses. At the end of the event it, in order to minimise company tax, it will pay ABC Inc for "services".

My question is this:
In case 123 Pty.Ltd. has unfunded liabilities, can the creditor(s) make a claim against its holding Company, ABC Inc.?

Ray Atkinson :

It depends quite a bit whether the two companies have separate funds. If ABC files a separate tax return, has its assets completely separate from 123, and is not marketed as one company or team of companies, then there is a "corporate veil." That said, if 123 has the unpaid debts because the funds are moved back to ABC through these payments for "services," then that is fraud that is something that a judge can have cause to "pierce" that "veil."


Thank you. It was short and sharp but told us what we wanted to know.

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