Assignment Topic: Andrew, Brian, Colin, Diana and Elizabeth were the directors of Gemsales Pvt Ltd, a company engaged in the business of importing and supplying jewellery as wholesalers to the local market.
The company decided that as the market was becoming more competitive it required expanding its business as it felt with increased volumes of sales it would be capable to lower its prices and be more competitive. In order to do so it obtained a $4 million dollar loan from the Friendly Bank Ltd. $3 million was employed to buy more stock and $1 million was used to purchase a large new warehouse and showrooms from Traders Pvt Ltd.
Colin was not at the meeting that had made such decisions as he was in hospital recovering from a serious accident. Elizabeth, as was her usual custom, had not attended the meeting however signed the requisite documentation agreeing to the expansion of the business and the getting of the loan. Diana, who attended, stated she didn’t know if she agreed and abstained from voting. Andrew and Brian both voted to go ahead with the expansion and the getting of loan.
At about this time Brian has established contact with Victor, who was setting up the new business as a retailer of jewellery. Victor was looking for consistent suppliers, however said he would not deal with Gemsales Pvt Ltd as he did not like Andrew, the Managing Director. Not wishing to miss out on such a lucrative business opportunity, Brian arranged to set up his own business as the jewellery wholesaler and a contract was entered into between Victor and Brian for the supply of jewellery.
Six months later, Brian resigned as a director. At similar time it was clear the company had over-extended itself and was insolvent and could not pay the interest on its loans.
This as well became clear that Brian was a main shareholder in Traders Pvt Ltd and the other directors were unaware of this at the time of the purchase of the warehouse and showrooms. Moreover, Brian had been approaching other established customers of Gemsales Pvt Ltd and had secured orders for his own business.
Advise as to the liability of ALL the parties both beneath common law and the Corporations Law. In your answer you must address all the issues associating to each of the directors and their duties to the corporation.
Please note the given Instructions:
References should be cited in Harvard referencing style (eg: Smith 1992). The assignment should comprise a bibliography (list of references used in the assignment). The Internet might be employed for authoritative reference material provided the source, author, date of access and site address is clearly shown in footnote format.
In addition to sources from the Internet, at least three hard-copy sources should as well be used. These can be either books or articles or both. Materials from any common law jurisdiction might be used.