Reference no: EM133263108

Question 1

Alan is a Chartered Accountant who was appointed receiver and manager of Propco Pty Ltd, a property development company whose major asset consists of 10 hectares of land at Wanneroo. Alan was appointed receiver and manager under a debenture deed, pursuant to which the Challenger Bank had agreed to advance $100,000 to Propco in return for a mortgage over the Wanneroo land. Alan was appointed after Propco defaulted in its loan repayments. Soon after his appointment Alan received an offer of $150,000 for the land from Bondco Ltd, another big property development company. Alan is also aware that a re-zoning application by Propco which would allow the land to be subdivided into 1 hectare lots for hobby farms is about to be approved. The Challenger Bank is anxious to receive its $100,000 so Alan sells the land to Bondco for $150,000.

Barney is a real estate agent who is owed over $100,000 by Propco for commission payments. He is concerned that there may not be sufficient funds in the company to pay him, and feels that the Wanneroo land could have achieved a much higher price had its sale been widely advertised.

Advise Barney of his common law and statutory rights.

Question 2

Subsid Pty Ltd is a wholly owned subsidiary of Parent Ltd. . The directors of Parent Ltd are Alan, Jane and Joe. The directors of Subsid Pty Ltd are Alan and Jane. Parent Ltd's shareholders are a number of public companies and Alan, Jane and Joe who each hold 5% of the issued share capital. Parent Ltd decided to issue a further 20,000 $1.00 shares in the company. The issue was made pursuant to a resolution of the directors and all the necessary prospectus provisions were complied with. Alan, Jane and Joe decided to apply for 15,000 of the shares, 5,000 shares each. Their applications were successful. Joe paid for his shares from his own resources. Alan and Jane borrowed money from the Large Bank in order to pay for their shares. Large Bank was only prepared to lend the money to them if adequate security was provided. Accordingly, Subsid Pty Ltd agreed to charge its fixed assets as security for the loans. At the time, Subsid did not owe any debts.

Discuss the legal issues raised by the above facts, referring to relevant sections of the Corporations Act.