Reference no: EM13804466

Part A:

1. When it was incorporated in 2003, Sodit Ltd borrowed $10,000 from Fred. The loan was secured by a floating charge over Sodit's business assets. The charge was registered with ASIC within the required time. Later, in 2005, Sodit Ltd borrowed $50,000 from A Bank. The loan was secured with a fixed charge over one of Sodit Ltd's assets and was registered within the required time. A Bank knew of the floating charge granted to Fred.

a. Which charge would have priority, Fred's or A Bank's?

b. If Fred's floating charge was not registered, which charge would have priority?

c. If the company goes into liquidation and Fred's floating charge was not registered, would he be treated as a secured or unsecured creditor?

2. Sue and Dot are directors of a company that they project will not be able to pay its debts in the following months. If there is a prospect the company might be able to be saved, what are their options and what should they do? What happens and who decides the fate of the company? What are its possible fates?

3. Bush fires recently ravaged Greece, destroying many villages, olive tree plantations and killing a lot of people that once worked in the plantations. The board of directors of a successful international fast-food chain (McDonnas Ltd) donate $2 million to the relief appeal. Has McDonnas Ltd breached its duty to act bona fide for the company as a whole?

Part B:

1. For many years Looney Lollies Ltd ("LL Ltd") has been producing spicy lollies. These lollies contain a particular chemical which makes the lollies very hot. If consumed consistently and over a long period of time, a side effect of these bilks is that a person may develop a speech impediment and lose co-ordination. This side effect was known by some directors of LL Ltd. A group of people are suing LL Ltd and also want to pursue LL Ltd's holding company (Holding Ltd) as they are now experiencing the side effects of the lollies produced by LL Ltd. The directors who knew about the side effects of the chemical used in the lollies were receiving a secret commission from the supplier of the chemical to keep quiet about the potential side effects for consumers of the lolly.

Advise Holding Ltd as to the following matters:

(i) As to its potential liability for the side effects of the lollies.

(ii) As to whether the directors of LL Ltd who knew about the side effects of the chemical contained in the lollies have breached their fiduciary duty.

(iii)  If the Board of LL Ltd refuses to sue those directors, whether Holding Ltd can direct it to sue.

(iv) If it cannot direct the Board of LL Ltd to sue, whether it can take legal action itself.

2. Disgruntled with the incompetent talent agencies in Victoria, brothers Mark and Jude, both musicians and performers created Artiste Inc. Ltd., which established a talent school with the purpose to find and train young performers in music and theatre and to provide public performances. The board of directors comprised of Mark, Jude, their dad, John and their sister Nikita. All of them held shares in the company, Mark and Jude together holding 51% of the shares and the other 49% divided amongst John, Nikita, Barbara and Phyllis. However, Mark did not concern himself with the running of the business as he was focusing on a music career. After a few years of initial success, Artiste Inc. Ltd. started to experience severe losses and Jude proposed the company take out a loan from Musician's Tech Ltd., a company that sold musical equipment and in which Jude was also a director, to tide the company over what seemed to be a temporary cash flow problem. John and Nikita were apprehensive about this for Jude had proposed that their talent school act as security for the loan and it was the company's source of income. The Board voted on the matter and the majority was in favor, with John and Nikita dissenting. After a year, the problems continued and the company had to default on the loan. Musician's Tech Ltd. enforced the security, due to which Artiste Inc. Ltd. went bankrupt and a liquidator was appointed. Advice the liquidator if any or all the directors breached their duties to the company and give reasons for your analysis. If yes, how could have the infringing directors prevented this situation? Also explain what could be possible remedies for Barbara and Phyllis.