Corporation and Subsidiary Company Essay Example
Individual research assignment
Introduction
The international company which called Buildco Ltd establishes a new company in Australia which is a wholly owned subsidiary of Buildco. The purpose of incorporating the subsidiary is to solve the problem of sourcing debt finance in the international marketplace. However, the property development project which is undertaken by Buildco and funded by Asset Pty Ltd is financially unviable. Consequently, the Buildco expects that the Asset could write-off the loan as a bad debt and claim a tax deduction. Nonetheless, the Commissioner of Tax disallows the deduction for the bad debt because of the significant degree in the overlap in the management of both companies and the very large degree of control over the directors. In order to determine that whether the bad debt can be deducted, the relationship between Asset Pty Ltd and Buildco Ltd should be analyzed.
Case analysis * Statute law
According to the statute law, it is likely that the subsidiary company (Asset Pty Ltd) would not write-off the loan to the parent company (Buildco Ltd) as a debt and could not claim a tax deduction for that debt. After lifting the corporation veil by making the holding company liable for the debts of its subsidiary where there are reasonable grounds for suspecting than the subsidiary is insolvent at the time of incurring the debt. In this present case, due to the failed project which is funded by the Asset Pty Ltd, the Buildco Ltd is financially unviable which lead to the company has to close down the business. As a result, it may be not feasible to solve the dispute through statute law.
* Case law
Type of companies
Companies operate in both private and public sectors of the economy and come in all sizes, large and small. Doubtlessly, the Buildco Ltd is a public company, and the later set up company which called Asset Ltd Pty is a proprietary.
Incorporation
Corporation group
It is more likely to be a number of companies
Introduction
The international company which called Buildco Ltd establishes a new company in Australia which is a wholly owned subsidiary of Buildco. The purpose of incorporating the subsidiary is to solve the problem of sourcing debt finance in the international marketplace. However, the property development project which is undertaken by Buildco and funded by Asset Pty Ltd is financially unviable. Consequently, the Buildco expects that the Asset could write-off the loan as a bad debt and claim a tax deduction. Nonetheless, the Commissioner of Tax disallows the deduction for the bad debt because of the significant degree in the overlap in the management of both companies and the very large degree of control over the directors. In order to determine that whether the bad debt can be deducted, the relationship between Asset Pty Ltd and Buildco Ltd should be analyzed.
Case analysis * Statute law
According to the statute law, it is likely that the subsidiary company (Asset Pty Ltd) would not write-off the loan to the parent company (Buildco Ltd) as a debt and could not claim a tax deduction for that debt. After lifting the corporation veil by making the holding company liable for the debts of its subsidiary where there are reasonable grounds for suspecting than the subsidiary is insolvent at the time of incurring the debt. In this present case, due to the failed project which is funded by the Asset Pty Ltd, the Buildco Ltd is financially unviable which lead to the company has to close down the business. As a result, it may be not feasible to solve the dispute through statute law.
* Case law
Type of companies
Companies operate in both private and public sectors of the economy and come in all sizes, large and small. Doubtlessly, the Buildco Ltd is a public company, and the later set up company which called Asset Ltd Pty is a proprietary.
Incorporation
Corporation group
It is more likely to be a number of companies