1. Eddie, Ming and Hanh are the only shareholders and directors of Sparrow Pty Ltd, a trading company that supplies food products to cafs around Sydney. In recent times, Sparrow's cash flows have been pressured because a few large customers, including CafeNow (a large franchise coffee shop with hundreds of outlets), have been late in paying their invoices. This has meant that on a number of occasions Sparrow has not had sufficient funds to pay its bills. At the same time as the company's cash flow troubles, the employees write to the directors about an intention to take industrial action in an attempt to recover unpaid wages and entitlements. The cash flow problems are increased, when the company's bank, Bright Bank Ltd, contacts the directors about falling behind on their monthly repayments. The loan from Bright Bank Ltd is secured over all of Sparrow's equipment. In an attempt to ease the financial situation, Eddie on behalf of the company seeks out an unsecured loan from Quick Bucks Pty Ltd for $50,000 which is guaranteed by the directors of Sparrow Pty Ltd. Applied Company Law 79014 20 Question: From the above scenario first identify who are Sparrow Pty Ltd's main creditors? Next, advise each of the main creditors, with reasons, and with reference to the relevant sections of the Corporations Act 2001 (Cth), as to which form of external administration would best suit their needs. What assumptions of fact do you need to make in your answers? (i.e. what further information do you need) 2. Refer to the example of the company in external administration you have previously considered. Do a post in your seminar blog, addressing the following: What is the company what are the characteristics of the companyffi What went wrongffi What form/s of external administration did they undertakeffi Was this successfulffi Who are all the stakeholders who would be, were affected by this and all the issues they would be facingffi Applied Company Law 79014 19 What was the outcome for the companyffi Essential Readings: HBA Chapter 22 Corporations Act 2001 (Cth) Voluntary Administration: ss435A. 436A-436C, 450A Administrator: 55448B, 9, 437A, 437B, 437D, 437E. 439A Scheme of Arrangement: ss411,9 Receivership: 559, 1323, 418, 419, 420A Compulsory Winding Up: 55462, 459A, 461, 472 Voluntary Winding Up: ss491, 494,496 LEARNING OBECTIVES (partly taken from Grace Li and Sophie Riley, Applied Corporate Law: A Bilingual Approach) 2. 3. 4. 5. 6. To understand what is meant by a voluntary administration To understand the difference between voluntary administration, receivership and winding up To understand the different procedures by which a company may be wound up To understand the importance of a notice of statutory demand To understand all the options for a business in distress To identify the impact on relevant stakeholders when a company is in distress 20 out of 22 1 Download 1. Eddie, Ming and Hanh are the only shareholders and directors of Sparrow Pty Ltd, a trading company that supplies food products to cafs around Sydney. In recent times, Sparrow's cash flows have been pressured because a few large customers, including CafeNow (a large franchise coffee shop with hundreds of outlets), have been late in paying their invoices. This has meant that on a number of occasions Sparrow has not had sufficient funds to pay its bills. At the same time as the company's cash flow troubles, the employees write to the directors about an intention to take industrial action in an attempt to recover unpaid wages and entitlements. The cash flow problems are increased, when the company's bank, Bright Bank Ltd, contacts the directors about falling behind on their monthly repayments. The loan from Bright Bank Ltd is secured over all of Sparrow's equipment. In an attempt to ease the financial situation, Eddie on behalf of the company seeks out an unsecured loan from Quick Bucks Pty Ltd for $50,000 which is guaranteed by the directors of Sparrow Pty Ltd. Applied Company Law 79014 20 Question: From the above scenario first identify who are Sparrow Pty Ltd's main creditors? Next, advise each of the main creditors, with reasons, and with reference to the relevant sections of the Corporations Act 2001 (Cth), as to which form of external administration would best suit their needs. What assumptions of fact do you need to make in your answers? (i.e. what further information do you need) 2. Refer to the example of the company in external administration you have previously considered. Do a post in your seminar blog, addressing the following: What is the company what are the characteristics of the companyffi What went wrongffi What form/s of external administration did they undertakeffi Was this successfulffi Who are all the stakeholders who would be, were affected by this and all the issues they would be facingffi Applied Company Law 79014 19 What was the outcome for the companyffi Essential Readings: HBA Chapter 22 Corporations Act 2001 (Cth) Voluntary Administration: ss435A. 436A-436C, 450A Administrator: 55448B, 9, 437A, 437B, 437D, 437E. 439A Scheme of Arrangement: ss411,9 Receivership: 559, 1323, 418, 419, 420A Compulsory Winding Up: 55462, 459A, 461, 472 Voluntary Winding Up: ss491, 494,496 LEARNING OBECTIVES (partly taken from Grace Li and Sophie Riley, Applied Corporate Law: A Bilingual Approach) 2. 3. 4. 5. 6. To understand what is meant by a voluntary administration To understand the difference between voluntary administration, receivership and winding up To understand the different procedures by which a company may be wound up To understand the importance of a notice of statutory demand To understand all the options for a business in distress To identify the impact on relevant stakeholders when a company is in distress 20 out of 22 1 Download