Angus and Jock are the only directors and shareholders of Upmarket Pooches Pty Ltd which is a company that makes designer dog clothes which they sell from their store in South Yarra. Due to an unusually warm winter, they have not sold as many dog clothes as they had anticipated this year. As a consequence, they have struggled to pay some of their creditors. One of their secured creditors is Shark Ripoff Bank Ltd, which is threatening legal action in relation to Upmarket Pooches Pty Ltd's unpaid mortgage instalments. Upmarket Pooches Pty Ltd does not have the funds to make those payments.

What is Shark Ripoff Bank Ltd's best option to recover the money owed to it? What could Angus and Jock do with their company before the bank exercised that option? Explain.

Are the directors of an insolvent company ever permitted to cause the company to take on further debt in an attempt to place the company back into solvency?

Explain using the law to support your answer.