Legal Nature of Companies and Legal Rights of Employees

Question

THE LEGAL NATURE OF COMPANIES

Myra is the only shareholder and director of Kids Clothes Pty Ltd (Kids Clothes) which makes cheap children's clothing. The company has 10 employees. In the past Kids Clothes had operated profitably, however since 2011 it has been running at a loss. In July 2012 Myra paid herself a large bonus and then transferred all the remaining assets of Kids Clothes to a new company called Clothing for Kids Pty Ltd. The employees continue to be employed by Kids Clothes. Kids Clothes has no assets and owes each of its employees several thousand dollars in accumulated holiday, superannuation and long service leave entitlements.

• a) What possible legal grounds might the employees have to claim their entitlements from Clothing for Kids Pty Ltd?
• b) Could any action be taken against Myra personally?

Summary

This question belongs to corporation’s law and discusses about a shareholders legal rights and legal grounds that employees have to claim for their entitlements from a company.  

Total word count: 923