A corporate law change limits the limits of liability...

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A corporate law change limits the limits of liability...

Post by Scott Mayers » Wed Feb 13, 2019 1:43 pm

Recently this occurred here in Canada regarding the limits of how mining corporations operate. These entities are one of the biggest abusers of bankruptcy protection that passes on liability to the public at large everywhere. Here is the recent issue here in Canada that has been or is being addressed:

https://www.theglobeandmail.com/opinion ... 5699917/

I've thought of this kind of thing before and figured this is what we need to do in order to protect society from the secret of success that wealthier people utilize to conserve their power: keep any profits of investment while distributing the loss to society as a whole.

The 'corporate' concept was designed initially to encourage voluntary "taxation" of public projects that utilize the incentive of being able to invest in something while not risking anything beyond the investment. It enables the entity to create fluid certificates of ownership to a project such that the owners are not directly responsible for the risks involved, especially for substantially large public projects, where no individual investors want to take on for fear of being sued should anything go tragically wrong by permitting the potential to profit but not lose more than what you risk to put into it.

The initial kinds of such projects might be like building bridges, where the citizens may think it unfair to be taxed for something that tends to get abused through bureaucratic costs, the tendency of suppliers selling to government entities to be often absurdly higher than is naturally essential, and the benefits of such projects to be only limited to sub-populations at the expense of the whole. Another factor is that the alternative to grant private proprietary owners the privilege to own the benefits of building such a bridge, may risk the public at large when they get extorted or 'trolled' (ie. tolled) to pass when such infrastructure becomes highly demanded.

This was THE major problem in Roman Empire times. Their particular advancements that granted them success was these kinds of projects. Where, say, a bridge or road may have been voluntarily built relatively 'freely' by the powers of capital of Romans, they tended to make obsolete the local's older forms of transport dependent upon the competing ferry industries. But once they become the ONLY means in town to get across some river, the private owners of these bridges (the Romans) tend to begin taxation power as a monopoly enabling them to extort or troll those needing them to cross. The interest of private ownership to keep up repairs and regular maintenance may be excused as to why prices go up, but the reality is that many would prefer to utilize the demand to profit, even beyond any costs of upkeep and often NOT have actual accountability should they refuse to do the actual maintenance.

Thus, the in-corporation was born to try to overcome these difficulties.

Today, though, corporate law is abused to the extreme and now makes billionaires out of those who know how to exploit the system to their advantage. For mining, as the one example extreme, many would set up a company, and if it fails to discover or profit to their expectations, they file for bankruptcy and, given the ownership is privileged to not lose beyond what they invest in AND still have power to pre-distribute how the business can shuffle around assets and liabilities, they VERY SAME actual 'owners' simply create alternative new entities to transfer the better assets to of the intended company they plan to let die at relatively cheap deals, leave the most costly and depreciated liabilities with the company, and THEN, close the company. The new entity appears distinct and not at fault while the debt of the last investment leaves the losses at large left to the public.

In the recent law above, our government likely had to try to stop this abuse as it related to pipeline expansion problems whereby the people, through the government, was being forced to pay penalty fees to bidding companies they 'accepted' federally but were blocked provincially (locally). Also, because of the closing of many corporate interests of the oil mines were able to leave the liability of useless pumping stations behind, they are 'polluting' the environment in many more ways.

Do you think that we should limit the limited-liability concept more broadly? Should, for instance, there be a cap on profitability or the time a company can exist upon set up that they transfer this liability back onto the shareholder? Is there a universal kind of solution? Will this kind of challenge to traditional corporate law contribute to other problems or future abuses?
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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Wed Feb 13, 2019 2:01 pm

NOTE: I just notice that the link above was prior to the law and an opinion that may have lead to the actual recent change here:
https://www.cbc.ca/news/business/suprem ... -1.4998995
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Re: A corporate law change limits the limits of liability...

Post by mack_10 » Sat Feb 16, 2019 9:07 am

I stopped expecting justice from the legal system with regard to corporations, when the Australian government debated the value of human life

Subtract the age of the victim from 65, retirement age, then multiply by the annual income of the victim at time of death.

Turns out rich people are "worth more"
Killing a 16 year old apprentice cost $980,000 (maximum)
Killing a 64 year CEO costs $4.36 million (average)
So a rich old guy is worth 4.4 x apprentices

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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Sat Feb 16, 2019 9:20 am

Scott Mayers wrote:
Wed Feb 13, 2019 1:43 pm
Do you think that we should limit the limited-liability concept more broadly?
Just the opposite: we should APPLY the concept as the law already applies for but is not used/ignored. Corps are most easily PUNISHED by imposing fines: not done enough. Or by removing their charters: never done at all. Or, my favorite: finding collusion/fraud/conspiracy engaged in by the Corporation (fine them, de-charter them) and corporate Officers/stockholders ===>fine, imprison, de-charter them too. Rarely done.
Scott Mayers wrote:
Wed Feb 13, 2019 1:43 pm
there be a cap on profitability
This should be addressed in the tax code to all corps. It used to be.....but % income from Corp Taxation is declining all the time. Tax the entire corp where they make their money.......no offshoring. Every winks and thinks tax avoidance is so complicated. Its not: its right in our faces ..........just read the law and go where the law directs cheats. The $$ is all right there....just waiting.
Scott Mayers wrote:
Wed Feb 13, 2019 1:43 pm
or the time a company can exist upon set up that they transfer this liability back onto the shareholder?
This is changing the nature of the beast....not good in general...but could be for certain situations. EG: March of Dimes: formed to fight polio. Polio Loses. MOD still raising money and over paying executives 40 years later.
Scott Mayers wrote:
Wed Feb 13, 2019 1:43 pm
Is there a universal kind of solution?
Fair and enforced taxation.
Scott Mayers wrote:
Wed Feb 13, 2019 1:43 pm
Will this kind of challenge to traditional corporate law contribute to other problems or future abuses?
Yes, incessant whining by our over privileged already too rich.
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Re: A corporate law change limits the limits of liability...

Post by Tom Palven » Sun Feb 17, 2019 9:02 am

mack_10 wrote:
Sat Feb 16, 2019 9:07 am
I stopped expecting justice from the legal system with regard to corporations, when the Australian government debated the value of human life
As well you should, but where is the logic of the folks who think that tinkering with corporate law could change the direction of a super-aggressive international pariah that is $22 trillion in debt and hell-bent on a path toward virtual bankruptcy?

It's like rearranging the deck chairs on the Titanic, to employ an old cliché, perhaps not the best use of one's time and energy.
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Re: A corporate law change limits the limits of liability...

Post by Matthew Ellard » Mon Feb 18, 2019 12:58 am

Scott Mayers wrote: Do you think that we should limit the limited-liability concept more broadly?
We do. The whole legal concept comes from Salomon v A Salomon & Co Ltd (1896). All new legislation and commonlaw decisions update those original decisions in Salomon v A Salomon & Co Ltd.

The world's economic and trading entities are continuously changing and thus new laws have to be made.

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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Mon Feb 18, 2019 5:49 pm

Thanks Matthew. I figured this may be true in tweaking details but haven't heard an exclusionary law of this degree before. I know the corporate lawyers (or, rather, who they represent) find this threatening and was the reason they took it to the higher courts. The way it has evolved many today seem to think the concept is a function of free private rights rather than as a public acceptance (through government and/or their specified charters) to set up an entity for public concerns. The means of a single proprietor today to prevent risk and utilize to manipulate personal money through is to incorporate. How is it justified by the governments (the people) to provide special privilege of incorporation to be used by and for the interest of private citizens only? I know many SINGLE proprietors who incorporate themselves and use tactics to hide their own personal losses, transfer gains to themselves or their loved ones, and to evade the taxes they'd otherwise have to pay. The means to evade tax is most troubling considering it is the governments granting them the very privilege intent for the public, not their own personal needs at the expense of the public.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Mon Feb 18, 2019 8:19 pm

Matthew Ellard wrote:
Mon Feb 18, 2019 12:58 am
Scott Mayers wrote: Do you think that we should limit the limited-liability concept more broadly?
We do. The whole legal concept comes from Salomon v A Salomon & Co Ltd (1896). All new legislation and commonlaw decisions update those original decisions in Salomon v A Salomon & Co Ltd.

The world's economic and trading entities are continuously changing and thus new laws have to be made.
To Scott: Nothing there says the new laws are LIMITING limited-liability aspects of corporate actions. I think: just the opposite. More freedom of action, more insualtion from liability is what these new laws are bringing us.

I don't know why USA Congress has not acted to limit the limited-liability aspects of corportions........eg: pass a law that says their money is NOT speech. Easy........but not done because CongressCreeps love being talked to.
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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Mon Feb 18, 2019 10:45 pm

bobbo_the_Pragmatist wrote:
Mon Feb 18, 2019 8:19 pm
Matthew Ellard wrote:
Mon Feb 18, 2019 12:58 am
Scott Mayers wrote: Do you think that we should limit the limited-liability concept more broadly?
We do. The whole legal concept comes from Salomon v A Salomon & Co Ltd (1896). All new legislation and commonlaw decisions update those original decisions in Salomon v A Salomon & Co Ltd.

The world's economic and trading entities are continuously changing and thus new laws have to be made.
To Scott: Nothing there says the new laws are LIMITING limited-liability aspects of corporate actions. I think: just the opposite. More freedom of action, more insualtion from liability is what these new laws are bringing us.

I don't know why USA Congress has not acted to limit the limited-liability aspects of corportions........eg: pass a law that says their money is NOT speech. Easy........but not done because CongressCreeps love being talked to.
That is my own reflection of it given the 'liabilities' of the damages they cause can no longer be passed that cancel the liability of the investments going in.

The particular law here cancels the right of Mining Corporations to be permitted to redistribute the debt to creditors with priority when going bankrupt. That is, normally when a company fails and applies to bankruptcy, they transfer the higher valued assets to the creditors they owe, if or where they exist. But because the company management who often own the shares in the very company going bankrupt AND the companies that are 'creditors', they can technically KEEP the assets when they go bankrupt and do so in a way that maximizes total transfer of the assets, and LEAVE the remnants of the company with the most debt, these 'company' shareholders/owners actually have far less risk in the investment losses, something corporate liability was NOT intended to do.

Also, when bankrupt, because the company is only a virtual person, the shareholders cannot be held liable should they abusively harm the environment. The nature of the same owners to be understood to be doing this, even though they are often hidden, makes the public be held liable for environmental damages of these companies.

So now that they are required to FIRST have all assets left behind go to repair their environmental hazards when going bankrupt, the prior advantage to pass on the assets to creditors (when they are usually the owners of those creditor companies also) forces these kind of cons to be reduced at least with regards to the environmental debt. They cannot have the power to decide to pay the creditors (themselves in disguise) with priority BEFORE they use the remaining assets to be used to fix as much of the environment as possible.

I'm sure they'll likely try and find some other indirect means to do this. But for now it is at least a means to curtail this form of abuse.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Mon Feb 18, 2019 10:52 pm

There is no such thing as "liability of the investments going in."

Use the dictionary.
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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Tue Feb 19, 2019 1:17 am

bobbo_the_Pragmatist wrote:
Mon Feb 18, 2019 10:52 pm
There is no such thing as "liability of the investments going in."

Use the dictionary.
The 'limit' of liability is that you ONLY lose what you invest in, not the debt of the company. That is, you can buy a lottery ticket to win but you are not expected the liability to pay if you don't win (and thus lose). The liability is limited to the cost of the ticket.

But the investors in these mining companies found a way to also NOT lose money in the investment part as well. Thus they are the ones illegitimately making their limits go beyond the debt incurred by the loophole that the owners of corporations can remain anonymous and thus they can own companies that are set up (shells) to manipulate how their investments can be preserved. This amount of money they 'save' of investment loss goes back to them through those shell companies whereby they can transfer the gains back to themselves and in essence extend their limits to include the investment itself.

The law thus is set up to limit the (extended) limit of their investment that these companies cleverly set up. It makes the assets of shares owned in the collective businesses they own [the mining company, its shell, and the newly created company they set up later] keep the initial investment of the first company they set up in the chain of companies and enable them to be unable to lose for any risk.

But.... all the real losses are transferred to the public through bankruptcy. So it means the taxpayers actually pay for company's collective debts. Although this is universally being done, with mining companies, this abuse is more noticeable in the form of environmental costs. It is so extensive in Alberta right now that these can no longer be go unnoticed by the public.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 1:30 am

Your explanation is correct, its your initial phrasing that is muddled. Better: An investors liability is limited to his investment. Its precision in language helping to let others know what you are talking about.

Your muddled BS about "liability of the investment" is called: "Externalized Costs" and yes is a real shame. If anyone wanted to, regulators could go after the stockholders at least for their investments and income derived.....but they don't because too many people think its some kind of "clever" to screw the government which in reality as you note is actually screwing you and me: the taxpayers.

If you ever want to be understood for anything you want to say: use the dictionary.
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Re: A corporate law change limits the limits of liability...

Post by Matthew Ellard » Tue Feb 19, 2019 1:56 am

Scott Mayers wrote: But the investors in these mining companies found a way to also NOT lose money in the investment part as well.
You mean there is an underwriter?

For most listed companies going through a float, there is an underwriter who guarantees to preserve a nominated portion of the investor's capital.


Scott Mayers wrote: But.... all the real losses are transferred to the public through bankruptcy.
Only if there is a government underwriter. Anyone who trades with any form of company risks that company going bankrupt. That's why, if you trade with a risky company, you enter into a retention of title contract.

In theory, directors become personally liable if they trade when the company is known to be insolvent.

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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Tue Feb 19, 2019 3:24 am

bobbo, I've already tried to express to you your own error in thinking about definitions.

Because you can't seem to think for yourself, here is what Berkeley says about the definition of 'science' as one point:
Though they might seem elementary, these questions are actually quite difficult to answer satisfactorily. Opinions on such issues vary widely within the field (and occasionally part ways with the views of scientists themselves — who mainly spend their time doing science, not analyzing it abstractly). Despite this diversity of opinion, philosophers of science can largely agree on one thing: there is no single, simple way to define science!

From https://undsci.berkeley.edu/article/philosophy
That page is also an introduction page to philosophy of science with some pointers to the evolution of the scientific methods and how it was extensively debated. If you want more on this, we can open a thread on definition. I might even have a few here a while back if not others. Matthew's background on law may also prove interesting given every act in law begins by specifically listing the definitions they use in each specific case or reference which one is used from another place explicitly.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 3:49 am

I've never commented on the word/definition/concept of science. Only that "whatever" you want to say will be better understood if you use dictionary meanings of words, that modifed definitions for the context of what is being discussed is appropriate.......................AND.............. that creating your own vocabulary is the first step towards crazy.

Your complaint is against Lance.........or is who actually said anything also not important?
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 4:10 am

Thinking about it some more..........I agree you should use the dictionary definition.

science: Study of the physical and natural world using theoretical models and data from experiments or observation //// I do notice as much as I can understand your garbled message that you use more of a speculative/armchair approach as did many early Greeks. You know: "Sounds Good?" No progress made until "science" was actually followed. ymwv. (your mileage won't vary).
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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Tue Feb 19, 2019 4:22 am

Matthew Ellard wrote:
Tue Feb 19, 2019 1:56 am
Scott Mayers wrote: But the investors in these mining companies found a way to also NOT lose money in the investment part as well.
You mean there is an underwriter?

For most listed companies going through a float, there is an underwriter who guarantees to preserve a nominated portion of the investor's capital.
I don't know these details and they'd likely be different everywhere. Aren't underwriters for insurance purposes?

I was giving a logical summary of what can or does occur in general for many corporations. But for mining, they are ones that are routinely abusing this with respect to speculation of the value of the investment beforehand.
Matthew Ellard wrote:
Tue Feb 19, 2019 1:56 am
Scott Mayers wrote: But.... all the real losses are transferred to the public through bankruptcy.
Only if there is a government underwriter. Anyone who trades with any form of company risks that company going bankrupt. That's why, if you trade with a risky company, you enter into a retention of title contract.

In theory, directors become personally liable if they trade when the company is known to be insolvent.
I didn't know management was considered liable other than to the risk of their jobs. (?) I know that this is being challenged more and more but still, how often is management held accountable personally? Aren't the directors simply the major owners or their proxies? As shareholders, they only direct management behind closed doors but can hold the CEO responsible. And the CEO can simply just fired for bad decisions outside of things like insider trading.

Was my general logic sound though? We can see the results of environmental loss that is harder not to see, especially in harder economic times. For the details, Google "mining + bankruptcy + Canada". There are many links to law firms discussing it and some that you may have access to that I can't for their pay-walls on the specific papers discussing these.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 4:30 am

Holy Cow: you think "logical summaries" can be offered on a subject you know virtually nothing about.........like light? Ha, ha.........or corporate law/liability. You don't know the basic building blocks of corporate form of business or of insurance.

Use the DicKtionary, Look UP:
Corporation
Director
Stockholder
Underwriter
management liability
Board Member
Board Member Liability
outside
logic

Such a mess is rarely posted here................outside of Woo.
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Re: A corporate law change limits the limits of liability...

Post by Matthew Ellard » Tue Feb 19, 2019 4:45 am

Scott Mayers wrote: I don't know these details and they'd likely be different everywhere. Aren't underwriters for insurance purposes?
Underwriters are indeed a form of insurance. We used them in film production as "completion guarantors", meaning if we screwed up, the completion guarantor, steps into our shoes and finishes the movie. Most building companies and resource companies have completion guarantors.

However I read the article and court ruling you posted. It is more to do with priority of payment for when a resources company goes bankrupt. It has to tidy up its environmental legacy. What that simply means is that the directors of future companies have to maintain a stronger balance sheet to meet such costs or risk insolvency, which would be noted by the company's auditor. If the directors don't maintain a strong balance sheet and therefore become technically insolvent, then they may attract the liability personally.
Scott Mayers wrote:I didn't know management was considered liable other than to the risk of their jobs.
Directors are the executive management and have a whole long list of additional obligations.
Scott Mayers wrote:Aren't the directors simply the major owners or their proxies?
No. https://diligent.com/blog/roles-respons ... ors-canada
Scott Mayers wrote:As shareholders, they only direct management behind closed doors but can hold the CEO responsible. And the CEO can simply just fired for bad decisions outside of things like insider trading.
A director does not need to be a shareholder and visa-versa. It is the registered directors who become liable, not the non-director management team, unless of course there has been negligence or deceptive conduct, which is not related to the corporation act.
Scott Mayers wrote:Was my general logic sound though?
Investment is all about risk VS potential return on investment. If I buy shares in a limited liability company I really need to assess the risk I will lose all my money. If I want a safe no-risk investment I would stick to a bank deposit.

Mathematically, if I invest in more than 20 high risk limited liability companies, the chances are slim that all will go bankrupt simultaneously. Therefore corporate investors and smart individuals, take the higher risks by having large diversified portfolios.

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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Tue Feb 19, 2019 4:52 am

bobbo_the_Pragmatist wrote:
Tue Feb 19, 2019 4:10 am
Thinking about it some more..........I agree you should use the dictionary definition.

science: Study of the physical and natural world using theoretical models and data from experiments or observation //// I do notice as much as I can understand your garbled message that you use more of a speculative/armchair approach as did many early Greeks. You know: "Sounds Good?" No progress made until "science" was actually followed. ymwv. (your mileage won't vary).
We all are here as "philosophers" when we discuss and debate the issues. As such, while you can opt to select dictionary definitions, there is still a need to redefine your terms personally with those you are discussing things with. All that matters is that you agree. But if you don't like someone's given definition, or the symbols (words, or phrases) that summarize the meaning, you are forced to write out the whole definition each and every time. If you don't like it, you'd have to offer something you prefer. But if you choose a term that sets up the speaker to your terms, you are likely staging a scarecrow you can easily tear down, or pick terms that you 'feel' undersells the view you don't like.

For an example in law, see https://laws-lois.justice.gc.ca/eng/act ... age-1.html
There, under "Interpretation" for this example, they specifically define each term for that document, even if it isn't the 'dictionary' meaning!

See this: The importance of defining terms
I only gave it a quick glance but see that the author uses examples of skeptic debates. A further check on the site tell us that it is a Christian apologist site. Regardless, the points of this article are valid and given we here debate them, they serve as explanations of why we need to define the terms.

For a science writer, see Science Communication BreakdownScience Communication Breakdown. This is Matt Shipman's Wordpress site.
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 4:54 am

Matthew Ellard wrote:
Tue Feb 19, 2019 4:45 am
If I want a safe no-risk investment I would stick to a bank deposit.
Tax Free Bonds.
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Re: A corporate law change limits the limits of liability...

Post by Scott Mayers » Tue Feb 19, 2019 5:19 am

Matthew Ellard wrote:
Tue Feb 19, 2019 4:45 am
Scott Mayers wrote: I don't know these details and they'd likely be different everywhere. Aren't underwriters for insurance purposes?
Underwriters are indeed a form of insurance. We used them in film production as "completion guarantors", meaning if we screwed up, the completion guarantor, steps into our shoes and finishes the movie. Most building companies and resource companies have completion guarantors.

However I read the article and court ruling you posted. It is more to do with priority of payment for when a resources company goes bankrupt. It has to tidy up its environmental legacy. What that simply means is that the directors of future companies have to maintain a stronger balance sheet to meet such costs or risk insolvency, which would be noted by the company's auditor. If the directors don't maintain a strong balance sheet and therefore become technically insolvent, then they may attract the liability personally.
Yes, on our particular case in Canada, I followed that and thought I had said as much earlier. I was adding more context to the logic of corporate abuse to which I believed this case stood out to me as novel and related to something I thought of before about: making restrictions on the limits of the limits of liability.

I can only nod on the rest of what you say in specifics of the law as you are aware of in Australia or International courts.
I eat without fear of certain Death from The Tree of Knowledge because with wisdom, we may one day break free from its mortal curse.

bobbo_the_Pragmatist
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Re: A corporate law change limits the limits of liability...

Post by bobbo_the_Pragmatist » Tue Feb 19, 2019 5:30 am

Scott: I'm not a philosophizer. Nor a skeptic. Just comparing what I know/think/read/can look up with what is posted. When I find an error in myself by this process..........I get a warm fuzzy feeling. I post incongruities for what joy others may gain from the process. Slim picking from what gets posted back..........like YOU. AKA: really intelligent people refusing to grow.

Rarely is there a need for anything but the dictionary. Its a touchstone third party reality check..............NOT the firs step towards crazy.

More than agreement is required. People have to actually understand what the other people are saying. Much harder to do with made up words.

Definitions already all written out in the DICKTIONARY. Thats why it should b used.

Dictionary: not "my terms"/ no set up. Just objective utilitarian connection using language.

Scarecrow can mean strawman but ambiguously introduces an element of fear or dread? Do you mean to do that when you don't use the standard terms? Such an innocent malapropism, and other very basic faulty terminology, makes me think English is not your first/primary language??????????????? Nothing wrong with that. Could explain a lot and give you some leeway?

Your link not viewed. Of coruse there are special circumstances where special definitions apply. YOU on this forum: ain't one of them.

Second link also not viewed. Of course terms need to be defined: BY THE DICTIONARY. Not going to put up with nonsense otherwise.

Third Link.....not viewed. Well aware of the breakdown in communicating science. Thats not the issue with you.

Silly Hooman.........unless you...........no, even then.
Real Name: bobbo the contrarian existential pragmatic evangelical anti-theist and Class Warrior.
Asking: What is the most good for the most people?
Sample Issue: Should the Feds provide all babies with free diapers?