Question 1

Buzz and Neil are the directors of Moon Pty Ltd. Moon Pty Ltd has been experiencing financial difficulty for some time. Indeed, the company received a report from its accountant stating that it was insolvent. Buzz and Neil decide to place the company into voluntary administration. Immediately prior to appointing the voluntary administrator, Buzz transferred a motor vehicle owned by the company into his own name. The company was subsequently place into liquidation. The liquidator is desirous of recovering the car or its value from Buzz. Which of the following is most accurate?

Accepted Answer

(c) and (d) could both be correct as sections 588FB or 588FDA of the Corporations Act 2001 (Cth) respectively may apply. With respect to (a) although the powers under section 198 of the Corporations Act 2001 (Cth) are broad that section subject to specific provisions such as sections 588FB or 588FDA of the Corporations Act 2001 (Cth) and with respect to (b) s588 FA of the Corporations Act 2001 (Cth) deals with preference given to creditors the facts do not disclose that Buzz is a creditor.

Question 2

Insolvency is defined in section 95A to mean a company is not able to pay its debts as and when that become due and payable.

Accepted Answer

Section 95A of the Corporations Act 2001 (Australia) defines insolvency as the inability of a company to pay its debts as and when they become due and payable.

Question 3

Mega Bank Ltd is a secured creditor of Wasted Ltd. Wasted Ltd recently appointed a voluntary administrator. Mega Bank Ltd wants to enforce its security interest. Which of the following is the best answer?

Accepted Answer

Pursuant to the Corporations Act 2001 (Cth) section 441A a secured creditor holding a security interest over substantial assets of the company can enforce their security interest within 13 days after notice of the Voluntary Administrator's appointment is given. Other secured creditors must wait until the company is out of administration, Corporations Act 2001 (Cth) sections 440B and 441B unless they obtain a court order or if the creditor has sold perishable goods to the company.

Question 4

Lulu, Bucky and Mookie are directors of Baseball Pty Ltd. Mookie also holds 1% of the shares issued by Baseball Pty Ltd with Lulu and Bucky holding the balance of the shares. Lulu and Bucky vote Mookie off the board, increase their directors' fees, cease all dividend payments and take certain corporate opportunities belonging to Baseball Pty Ltd for their own benefit. Which of the following is correct:

Accepted Answer

Answer (d) is the best answer, as s 233 sets out the variety of orders that a court can make if there has been oppression. There is no law to support answers (b), (c) & (e). Answer (a) misinterprets the facts as Mookie is a member as well as a director, so would be applying for the remedy in her capacity as member.

Question 5

Roch, Paco and Talbot are the directors of Mountain Breeze Pty Ltd ("Mountain Breeze"). Roch and Paco hold all the shares issued by Mountain Breeze between them. Mountain Breeze has a significant amount of debt. Roch and Paco pass a directors' resolution approving the sale of certain assets held by Mountain Breeze to another company they control at below market prices. This is clearly a breach of Roch and Paco's duty to avoid a conflict of interest and also a breach of sections 182 and 183 of the Corporations Act 2001 (Cth). Which of the following is correct:

Accepted Answer

Answer (a) is incorrect as s 237 allows officers r former officers to bring a derivative action; answer b is incorrect as only the company or ASIC can directly enforce the duties owed to the company; answer c is correct as creditors may be able to establish that they are persons whose interest have been or would be affected by conduct that contravenes the Corporations Act 2001 (Cth); answer (d) is incorrect as only members can bring an oppression action and Talbot is a director; answer e is incorrect as one director cannot can directly enforce the duties owed to the company.

Quiz 7: Liquidation , Members Remedies, Receivership and Administration

Insolvency is defined in section 95A to mean a company is not able to pay its debts as and when that become due and payable.

Mega Bank Ltd is a secured creditor of Wasted Ltd. Wasted Ltd recently appointed a voluntary administrator. Mega Bank Ltd wants to enforce its security interest. Which of the following is the best answer?