Use the fact situation in Q2 to answer the related question that follows. In order to recover the amount of George's shareholders loan,the trustee in bankruptcy of General Widgets will

Question

Quizplus · Accepted Answer

The trustee can apply to the court to have the transaction nullified under section 307 of the Companies Act, which provides for the avoidance of certain transactions entered into by or on behalf of the company within the period of 5 years ending with the commencement of the winding up, if they were entered into with the intent to defraud creditors or for any fraudulent purpose. This would allow recovery of the amount of George's shareholders loan. Suing George for damages for breach of duty of care or breach of fiduciary duty may not be efficient in recovering the loan, as it would require proving George's wrongdoing and collecting the judgement. Applying to the court to enquire whether it is a reviewable transaction may be a consideration but not the best option, as it would require an investigation and review of the transaction by the court before taking any action, which may not result in recovery of the loan.

Use the Fact Situation in Q2 to Answer the Related