Business Law Assignment: Bike Monster Legal Implications Analysis

This report analyzes a business law case involving the fictional company Bike Monster, focusing on the legal implications of establishing a subsidiary versus a branch in international business operations. The report examines the potential liabilities of the parent company (Bike Monster Spain) and its subsidiaries (Bike Monster NL and Bike Monster Mexico) in the context of a lawsuit filed by Emma van der Berg for injuries sustained from a rented bike. It explores key differences between branches and subsidiaries, their legal identities, and the implications for taxation and liability. The report also addresses the potential involvement of Bike Monster Mexico in the lawsuit, considering piercing the corporate veil and financial implications. Additionally, it provides advice to Pedro Lopez regarding his personal financial risk and discusses whether the parent company can be annulled by Spanish authorities. The analysis references relevant legal principles and case law to support its conclusions.

Running head: BUSINESS LAW 1
Business Law
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Question 1
Could Spain have incorporated a subsidiary insted of a branch
Bike Monster NL which is a branch of the Spain company Bike Monster could be
incorporated in the Netherlands insted of a branch. Legally, it is possible for companies to
open subsidisaries of the Holding company in other countries like the netherlands where
incorporation will start afresh. The principle of international commercial law is used to
determine whether a company is registered as an on shore or an of shore company. The basic
legislation is understandable that international business corporation( IBC) is of an offshore
companyformed under some of the legislations as a tax neutral company is usually a limited
company in terms of liabilities (Abbott, Pendlebury & Wardman, 2013). The activities it
conducts is not necessarily in the jurisdiction it is registered. Taxation regimes also
determines whether Bike Monster NL will be registered in the Netherlands having the
controlled foreign corporation. Therefore, spain should have incorparated a subsidiary insted
of a branch company for taxation purposes (Slorach & Ellis, n.d.).
Question 2
Difference between a branch of company and a company
The main difference between a company and a branch of company is that a company is a
indepedent legal company or a subsidiary whereas a branch of company is not an indepedent
legal company. A branch company has the same legal identity as the parent of mother

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company (Allison & Prentice, 2009). This should be taken into consideration. A branch
company cannot exist and operate without a parent company approval due to the principles of
a legal entity. For operationalization of a branch office, the foreign company must also be
operating in the same jurisdiction.
Question 3
Expeceted defendant in the anticipated lawsuit
Emma van der Berg wants to sue a company for the injuries sustained from the rented bike.
Bike Monster NL is a subsidiary of the parent company and therefore should be sued. It is a
subsidiary and not a branch. In case of a branch of a company, the parent company which is
foreign should take the responsibility while if the company is a subsidiary, it has its own legal
rights and representation. The legal liability cannot be abdicated to the parent company and
therefore the subsidiary Bike Monster NL should be fully liable and compensate Emma for
the injuries sustained (Cox & Hazen, 2012). A branch company has the same legal identity as
the parent of mother company. This should be taken into consideration.
Question 4
Please, explain if, why, and how can Bike Monster Mexico be implicated in the lawsuit
launched by Emma van der Berg.
A subsidiary company is an independent legal entity, therefore, Bike Monster NL being an
independent legal entity acts on its own even if the day to day decisions are maybe from the
parent company. The basic rule in corporation law is that parent companies are not liable for
the acts of their subsidiaries (Cox & Hazen, 2012). However, Bike Monster Mexico can be
implicated in the lawsuit if the law supports piercing of the corporate veil. If Bike Monster

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Mexico gained financial from let’s say a fraud committed by the subsidiary , then it may be
implicated in the lawsuit. If the judgement finds that the parent company failed to allow the
subsidiary to act financially independent then it may be liable to pay the plaintiff.
Question 5
Advice to Pedro Lopez regarding personal financial implications if he loses the suit.
If the company losses the lawsuit, Bikew Monster NL the subsidiary will be required to pay
Emma van der Berg. The subsidiary that operates in spain will be forced to make the
compensation because the company is registered in Spain (Gevurtz, n.d.). Pedro Lopez will
not have any adverse financial implication personally because the companies are all limited
liability and the owner is shielded by this fact even if he owns 100% of the shares of the
parent company (Gale, 2006).
Question 6
Bike Monster Spain can be ordered annulled by the Spanish authorities
If the parent company is in Spain, then the subsidiary Bike Monster Mexico cannot be
annulled in Spain. This is because, the Mexican authorities recognize Bike Monster Mexico
as a subsidiary and not a branch. If it is a subsidiary, it is incorporated originally as a
subsidiary and therefore has its own legal rights as an original company. Pedro Lopez can
only be concerned of annulment by the Spanish authorities if the company is a branch which

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is not a legal company and is dependent on the parent company (Gale, 2006).Therefore, spain
should have incorparated a subsidiary insted of a branch company for taxation purposes.
References
Abbott, K., Pendlebury, N., & Wardman, K. (2013). Business law. Andover: Cengage
Learning.
Allison, J., & Prentice, R. (2009). Business law. Austin, Tex.: University Co-Op.

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Cox, J., & Hazen, T. (2012). Corporation law. Chicago, Ill.: American Bar Association,
General Pratice, Solo & Small Firm Division.
Gale, S. (2006). Limited liability partnerships. Surrey: Wolters Kluwer (U.K.) Ltd.
Gevurtz, F. Corporation law.
Slorach, J., & Ellis, J. Business law.