SCENARIO 3: HarvestDrone Ltd and CropYield PLC wish to form a joint venture to develop AI-driven tractors. They want the new entity to have limited liability, but they want to maintain absolute secrecy over the joint venture's financial accounts, preventing competitors from seeing their R&D spend.
Which business structure should they choose to achieve BOTH limited liability and complete financial secrecy?
ACCA · Question 53 · Corporate and Business Law
SCENARIO 3: HarvestDrone Ltd and CropYield PLC wish to form a joint venture to develop AI-driven tractors. They form 'AgriAI Ltd'. CropYield PLC transfers highly toxic chemical assets to AgriAI Ltd to avoid environmental liability. When a spill occurs, the Environment Agency tries to sue CropYield PLC directly, arguing AgriAI Ltd is just a sham to evade existing legal obligations.
Will the court 'pierce the corporate veil' to hold CropYield PLC liable?
Answer options:
No, the principle in Salomon v Salomon provides absolute protection in all circumstances.
Yes, because the company was used as a sham or facade to evade an existing legal obligation.
No, because CropYield PLC is a corporate shareholder, not an individual.
Yes, because parent companies are always liable for the torts of their subsidiaries.
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