After a well-publicised fraud committed by one of its ex-managers, Giacco is appointed by Barnhouse and Co Ltd on 30 August 2020 to sort out its affairs and to determine its financial health. He is asked to advise the directors of Barnhouse of their options to decide on the future direction of the company once he has carried out his investigations. He discovers the following:

Barnhouse owes around $200,000 to three trade creditors. Since 15 August, Wells Ltd has been sending emails every day threatening to go to the media if it is not paid the $40,000 it is owed.

Barnhouse's cash reserves and accounts receivable amount to some $20,000.

Holm Bank Ltd holds a security interest in the building Barnhouse owns and occupies as well as in the machinery used for production. Barnhouse owes Holm Bank $300,000. Holm Bank holds a mortgage over the building and the machinery. In 2014 the building was valued at $500,000.It would cost more to remove the machinery for sale than any price it would fetch.

Barnhouse has three employees. They are owed $6000 each in wages/salary and entitlements that have remained unpaid since June 30 2020. Peacock has claimed $4000 for travel expenses. Axford, a manager, also holds 10% of the shares in Barnhouse and Co and is owed a performance bonus of $7000 from the 2019-20 financial year.

Wilden Pty Ltd, currently owed $5,000, has a circulating security interest over all stock held by Barnhouse. This security interest was granted in July 2020 when Wilden Pty agreed to supply raw materials on 40 day credit terms to Barnhouse for the next 5 years.

Required: Should Giacco recommend that the company be put under the control of an external administrator? By reference to Giacco's findings, explain and justify your answer. Describe the implications for the company, directors, creditors and members of such a move. Describe in brief.

Remember to give reasons and refer to legislation and cases, where relevant, in your answer