shareholders and directors,shareholders and directors

Hodari, Karim, Borris and Matilda are the shareholders and directors of Q Ltd, the parent company of wholly owned subsidiaries W Ltd, R Ltd and X Ltd. Q Ltd has divided its business into three between the subsidiaries specifically to minimise its liability for tax and tortious actions. W Ltd buys and mixes chemicals for the paint industry, R Ltd transports the chemicals and X Ltd markets the mixed chemicals. All the profits of the subsidiaries flow back to Q Ltd. An accident occurs while R Ltd is transporting hazardous chemicals along the highway. Ten people are badly burned and noxious fumes are released into the air near a town. Additionally, chemicals leak into a major river contaminating the water downstream for hundreds of miles. The projected damages and fines payable by R Ltd come to millions of shillings. R Ltd is capitalised only to the extent it needed to transport chemicals in the two trucks it owns. It has some liability insurance but only to the amount of Kshs. 1 million. After a few months R Ltd is in insolvent liquidation. In the meantime, Q Ltd has set up another wholly owned subsidiary to carry out the group’s transport needs. With the aid of case law discuss whether the parent company and/or its members could be liable for the actions of R Ltd. When you have done that critically evaluate the legal outcome.

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Hodari, Karim, Borris and Matilda are the shareholders and directors of Q Ltd, the parent company of wholly owned subsidiaries W Ltd, R Ltd and X Ltd. Q Ltd has divided its business into three between the subsidiaries specifically to minimise its liability for tax and tortious actions. W Ltd buys and mixes chemicals for the paint industry, R Ltd transports the chemicals and X Ltd markets the mixed chemicals. All the profits of the subsidiaries flow back to Q Ltd. An accident occurs while R Ltd is transporting hazardous chemicals along the highway. Ten people are badly burned and noxious fumes are released into the air near a town. Additionally, chemicals leak into a major river contaminating the water downstream for hundreds of miles. The projected damages and fines payable by R Ltd come to millions of shillings. R Ltd is capitalised only to the extent it needed to transport chemicals in the two trucks it owns. It has some liability insurance but only to the amount of Kshs. 1 million. After a few months R Ltd is in insolvent liquidation. In the meantime, Q Ltd has set up another wholly owned subsidiary to carry out the group’s transport needs. With the aid of case law discuss whether the parent company and/or its members could be liable for the actions of R Ltd. When you have done that critically evaluate the legal outcome.

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