Advise Bernie, Jesse and John in relation to the potential breaches of statutory director's obligations that occurred in this scenario. Make sure to focus on the following aspects in your answer1. Which of them will be subject to directors statutory obligations in the context of this scenario?2. Which statutory directors obligations were breached and what are the potential consequences of that?Thanks
Happy Homes Pty Ltd is a family-owned company that specialises in home renovations. Bernie has been the sole director of the company since the company's registration. The shareholders of the company are Bernie (who holds 60% of the issued shares), Bernie's wife, Astrid (who holds 10% of the issued shares) and his two sons, Jesse and John (who each holds 15% of the issued shares). Bernie is getting close to retirement age and has been leaving management decisions in the hands of Jesse and John on an increasingly regular basis. Happy Homes Pty Ltd has recently started experiencing cash flow problems, mainly due to a downturn in business as a result of a general decline in economic conditions. Bernie is very distressed about this, with dire consequences for his health. Jesse and John, who are concerned for their father's welfare, decide that he desperately needs a break from it all, and convince Bernie that the company should fund an all- expenses paid, luxurious overseas holiday for Bernie and Astrid, as recognition for all their hard work over the years. Bernie appreciates the concern shown by his sons and feels very relieved that he can leave the company in their capable hands to go on the luxury holiday with Astrid, paid for by the company. Happy Homes Pty Ltd owes a significant amount to subcontractors that were involved with home renovation projects. The subcontractors are attempting to pressure Happy Homes Pty Ltd into paying the outstanding amounts by refusing to do any more work until they are paid. Jesse and John are concerned about the impact that this would have on the business, and the delays that will be caused to current renovation projects. Unfortunately, Happy Homes Pty Ltd does not have sufficient funds to be able to pay all of the subcontractors. The company currently has a poor relationship with its bank due to its precarious financial situation, and is also in arrears with tax obligations. In an attempt to keep the company afloat, Jesse and John decide to negotiate with Lucky Loans Pty Ltd for an unsecured, short-term loan of $150 OOO to 'tie them over' and pay subcontractors until business picks up again. In spite of their best efforts, Jesse and John are unsuccessful in turning the company around, and during November a winding up order is granted in respect of Happy Homes Pty Ltd on the basis of the company's insolvency. Eric Smith is appointed as the liquidator. Eric indicates to Bernie, Jesse and John that he wishes to meet with them to discuss potential breaches of directors' duties. Bernie, Jesse and John are not aware of having breached any duties. Jesse and John also dispute that any 'directors' duties' will be relevant to them, as they were not appointed as directors. Bernie, Jesse and John decide to approach you to obtain more information about this. Advise Bernie, Jesse and John in relation to the potential breaches of statutory directors' obligations that occurred in this scenario. Make sure to focus on the following aspects in your answer: (1.1) Which of them will be subject to directors' statutory obligations in the context of this scenario? [10 marks]
