Reference no: EM13140073 , Length: 2000 words

Pandora Diamonds and Gems Pty Ltd is a company engaged in the business of importing, wholesaling and retailing jewellery nationally all across Australia. 

Andrew, Brian, Colin, Diana and Elizabeth are the directors of Pandora Diamonds. 
The company decided that as the market is becoming more competitive it needs to expand its business and it feels with the increased volumes of sales it would be able to lower its prices and become more competitive. In order to do so it obtains a $4 million dollar loan from Bonza Bank Ltd. $3 million is used to buy more stock and $1 million is used to buy a large new warehouse and showrooms from Space Solutions Pty Ltd. 

Colin was not present at the meeting when these decisions were made, as he was in hospital recovering from a serious accident. Elizabeth, as her usual custom, had not attended the meeting but signed the requisite documentation agreeing to the expansion of the business and the getting of the loan. Diana who attended, said she did not know if she agreed and abstained from voting. Andrew and Brian both voted to go ahead with the expansion and the getting of the loan. 
At about this time Brian had established contact with Victor, who was setting up a new business as a jewellery retailer. Victor was looking for reliable suppliers, but said he would not deal with Pandora Diamonds and Gems Pty 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 a 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 of Pandora Diamonds and Gems Pty Ltd. At the same time it was clear the company had over-extended itself and was insolvent and could not pay the interest on its loans. 

It also became clear that Brian was a major shareholder in Space Solutions Pty Ltd and the other directors were unaware of this at the time of the purchase of the warehouse and showrooms. Furthermore, Brian had been approaching other established customers of Pandora Diamonds and Gems Pty Ltd and had secured orders for his own business.