Reference no: EM131683513

Meanwhile, Lee borrowed $750,000 from Friendly Bank ltd on behalf of Top Engineering Pty Ltd to exploit expanding the company's business into Beijing. 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.

Susan, who is the wife of Lee and also a non-executive director of Top Engineering Pty Ltd, is happy to leave the management of the company into the safe hands of Lee who, in her opinion, 'has a better business brain' and understanding of the Chinese market than her. Besides, Lee speaks Mandarin and travels to Beijing regularly for business. Susan signed the bank loan document in her capacity as company director despite having a sneaky feeling that Top Engineering Pty Ltd has some difficulty paying its bills. Shortly thereafter, one of the cheques issued by Top Engineering Pty Ltd to pay its electricity bill 'bounced' (ie. the cheque was retuned by the bank as unpaid). Susan, however, is very hopeful that Lee will turn the company's business around in another 12 months' time and make enormous profits. The reason she is hopeful is because Susan 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.

(b) Can Susan be liable for repayment of the $750,000 loan to Friendly Bank Ltd? Discuss fully with reference to relevant provisions of the Corporations Act 2001 (Cth) ; and

(c) If Susan has breached the Corporations Act 2001 (Cth), what are the legal consequences under the Act? Your answer must identify which statutory provision of the Act has been breached