Is this legal for a company setup multiple companies, one to pay their employees, one act as bank account

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BigManCave

Member
25 September 2021
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My friend's works in a commission based company, however company keep all employee commissions in their company but release approx 30% to them every year. Due to COVID, everyone in his company is worrying about weather if they can get back all their commissions because the company has weird strucutre setup.

The company structure is setup like this: Company A pay employees and Company B collect money from developers. In other words, everyone signs employment contract with company A. Company B then collects money from developers. Every month the company A sends tax invoice to company B, so that company A can use the money to pay employees. Company B changes bank account every year for unknown reasons. He said heard about this from ex-branch director who is currently having legal issue with the company.

My question is, is this leagal? and what happened if company A closed, can they get their money from company B?
 

geedee

Member
27 August 2021
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1
Company A is a labour hire/management company a separate legal entity to company B - seems the only income and expenses is employee as such all employee liabilities would be held by this company who is effectively the employer issuing payment summaries paying super insurances and taxes - if the commission paid is classed as ordinary time earnings and subject to super payments a check of nominated super fund should indicate if company A is currently meeting super liability payments legally payable month following end of quarter
Company B is the trading company and is paying all employee liabilities as they go by using company A to hold those liabilities
You say company B keeps changing bank accounts - I am assuming directors same for both A and B or is controlled by same administration so am then assuming both companies are changing bank accounts for their ease of transfer funds between companies which is really alarming -the pessimist in me is concerned company A is not addressing liabilities and is avoiding auto deductions to address debts by ATO effectively setting up hiding outstanding liabilities debts associated with company B operations - more worrying would be if directors of companies are different which would be a set up to bankruptcy to phoenix Company B un-impeded by company A collapse if company A is bankrupt to short answer is no - if directors are the same would be a very long process and if directors different employees would just become creditors to bankruptcy with little to no hope of getting their money - a ASIC search should clarify public information available of confirmed company set up listed directors etc - other info not revelled is if Company A is an existing trading company set up for employment hire trading in another area and company B is a subsidiary or new associated company not yet trading at profit and able to hold employees independently frequently companies may set up this labour hire invoicing to save on set ups on new entities so yes labour hire set ups are legal as company B is actually paying liability as they go to company A and as company A and B are separate legal entities and employees attached to A there would be no way to get money from company B other than the claim against directors of company A
 

Rod

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