Albert and Tom develop a vehicle able to be driven across-country and be converted into a motor boat. They call this vehicle "The Dreamboat". On the recommendation of their friend Marie (who is appointed by them as a third director), they set up a new company, Dreamboat Ltd, to sell them. To obtain premises and machinery, Dreamboat Ltd borrows $1 million from Big Bank. Albert and Tom have only built two vehicles as yet and there are a few issues to resolve (like the fact they have not yet worked out how to convert the Dreamboat from a boat back to a car). Postings by Albert on Facebook have attracted interest in the concept from dealers and tourist operators although none have ordered any vehicles. Albert and Tom believe the best way to get orders is to produce some Dreamboats for display and thus generate consumer demand. To do it, they need more money. Being innovative and creative, they decide to appeal directly to potential investors by showing them exactly what they will be supporting. Albert and Tom embark on a tour of the country, holding demonstrations of the vehicle at local investment fairs. To ensure interest in their demonstrations, they send out personal invitations to all those registered to attend these fairs and invite them to apply for tickets to attend "this special event". Spectators are invited to invest in $1000 blocks in the company and, should they either provide money or promise to do so, are handed a document headed "Our Offer to You" (with space for the recipient's name) that describes the company, what the money is to be used for (to build 5,000 vehicles in the first year), projected sales (at least 3,000 in the first year and 5,000 in the second) and how the money will be repaid (10% per year over 12 years, a sum that includes a return on investment). There is no mention of any issues with the vehicles or the fact none have yet been sold. Further, it states that if the recipient completes, signs and returns the form on the last page (which contains the commitment to invest) and ticks the box at the bottom, Dreamboat will give them shares worth $1500 each. About 30 eager would-be investors are very impressed and Albert and Tom collect $100,000 in cash and another $100,000 in pledges by the end of 4 weeks. They plan to use the cash to pay off their credit cards (that they had used to pay for their travel and accommodation on the tour) and put the rest in the bank for later.

At the last venue, Lee, an accountant, approached them, asking whether they had complied with the disclosure rules under the Corporations Act 2001.Albert and Tom look blank.

Required: Advise Albert and Tom whether Chapter 6D of the Corporations Act 2001 applies, whether what they are doing does or does not comply, and the potential consequences should they not comply. If you believe they do NOT need to comply with any or all of this part of the Act, justify your position in detail manner

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