COMPANY LAW: ASSIGNMENT

Word Limit: Minimum 1,500 words - Maximum 1,700 words [excludes bibliography]

Question 1
Alex is the managing director of Smart Engineering Pty ltd. Alex accepted a very large order, the value of $100,000 for the supply of steel cables to Shifty Sellers Pty Ltd. The order was placed by Max, the director of Shifty Sellers Pty Ltd. The order was delivered, on credit, to Shifty Sellers Pty Ltd which later failed to pay for the steel cables. It appears that Max was well known as a bad credit risk within the engineering industry, including by Alex. Shifty Sellers Pty Ltd went into liquidation without ever paying Smart Engineering Pty Ltd for the steel cables.

Meanwhile, Alex borrowed $500,000 from Eastpac Bank ltd on behalf of Smart Engineering Pty Ltd to exploit expanding the company's business into China. The company had very low cash reserves at the time of taking up this bank loan and, due to the economic downturn in China, the company has made a loss for the past 6 months. Many expert commentators did warn that the Chinese economy is now slowing after the boom of the last decade.

Betty, who is the wife of Alex and also a non-executive director of Smart Engineering Pty Ltd, is happy to leave the management of the company into the safe hands of Alex who, in her opinion, ‘has a better business brain' and understanding of the Chinese market than her. Besides, Alex speaks Mandarin and travels to China regularly for business. Betty signed the bank loan document in her capacity as company director despite having a sneaky feeling that Smart Engineering Pty Ltd has some difficulty paying its bills. Shortly thereafter, one of the cheques issued by Smart Engineering Pty Ltd to pay its electricity bill ‘bounced' (ie. the cheque was retuned by the bank as unpaid). Better, however, is very hopeful that Alex will turn the company's business around in another 12 months' time and make enormous profits. The reason she is hopeful is because Betty tells herself that China is a big market and that, in her view, everyone doing business in China makes a fortune there and that financial success in that large market is more or less guaranteed.

Advise fully, with reference to legal authority (relevant case law and/or relevant statutory provisions under the Corporations Act 2001 (Cth)) whether:

(a) Can Max be held liable for the unpaid debt of Shifty Seller Pty Ltd?

(b) Can Betty be liable for repayment of the $500,000 loan to Eastpac Bank Ltd?

(c) Have Alex and Betty breached any duties owned to Smart Engineering Pty Ltd under the Corporations Act 2001 (Cth)? In answering this part of the question, do not repeat the content of your answer under part (b) of the question. Note: Your answer must offer full legal reasons with reference to relevant course content.

IMPORTANT:

1. Submission Procedure: TOP Office; to be handed to QingQing Ho)

2. Assignment Cover Sheet must be submitted with student signature and with word count

3. Plus Copy of assignment to be lodged at turnitin

4. Late submission will attract penalty (mark deduction of 5 % for each day late)

Most Important: Plagiarism is a serious academic offence and can result in failure of this course. Students are expected to submit answers based on individual effort (this is not a group project).

Requirements for a pass/good mark:

1. A legal analysis of the question with reference to relevant principles of corporations law (case law) and, where appropriate, relevant statutory provisions of the Corporations Act 2001 (Cth).

2. Students are expected to reference the relevant chapters in the prescribed textbook and to draw supporting information from there (Hint: read the relevant parts of Chapters 5, 17 and 18 of your prescribed textbook).

3. You are strongly advised not to use the internet for resource materials (as it is unnecessary and you run the real risk of drawing on irrelevant information and/or foreign law). The Current Edition of your Prescribed Textbook is more than adequate to answer the questions.

4. Students are expected to footnote references and to provide a bibliography.

5. Marks will be deducted if the answer does not meet the minimum word count - a word count must be indicated on the cover sheet.

6. Use of margin of 1.5 and font of 12 (preferably Times New Roman] - with answers on single side of each page.

7. A good answer to Question 1 will do the following (adopt the following structure) with respect to the question:

(a) Identify the material (relevant) facts - and NOT simply repeat the question;

(b) Identify the legal issue (or issues);

(c) Identify the relevant case law;

(d) Apply the legal principles and case law to the given facts;

(e) Offer legal reasons (with legal authority) as to whether various parties are liable (a simply Yes or No answer with personal views is totally inadequate).

8. Satisfactory answers will also

(a) Be proof-read to eliminate spelling and grammatical errors;

(b) Be referenced, with a bibliography;

(c) Meet the minimum word length requirement and

(d) Not simply copy/reproduce the textbook (answer must show own understanding) (e) Not be plagiarised.

Late submission - it is TOP policy that assignments cannot be submitted late without prior approval of the unit coordinator and only in extenuating circumstances supported by satisfactory evidence. Assignments submitted late without prior approval will not be graded.