Asgard Pty Ltd ("ASGARD") is a company incorporated in 2009. It is a technology company that owns an online casino and operates an online lending platform. Both of these enterprises are operated using "Viking Pennies" or "VPs", a form of cryptocurrency. At the casino, its customers gamble at various online games, making bets using the VPs as the means of exchange, with payouts being made out in VPs. At the lending market, the customers lend VPs to ASGARD, who lends the VPs out to borrowersASGARD is paid "interest", which is designated in VPs and also pays interest (also designated in VPs) to its investors. ASGARD makes it money both by taking a "clip" for the gambling activities and from the spread on its borrowing and lending activities. These returns are in VPs, which ASGARD converts to real, hard currency on the open market. Cryptocurrency casino and lending markets are in what is termed a "pre-regulation" phase, avoiding government regulations, gambling taxes, withholding taxes and financial market licensing requirements. It is expected, however, that this will change in the future, as government bodies will come to terms with cryptocurrencies. In particular, the Australian Taxation Office ("ATO") has begun to review such transactions and aims to ensure that they are taxed correctly. ASGARD follows the replaceable rules. The company has three directors: Heimdall (the chair), Frigga (the managing director) and Thor (a non-executive director). Thor was appointed because he was an investment banker and mathematician, and advises on various applications. Freya is the company secretary and a practising lawyer; Freya also attends board meetings. Each of the directors hold five shares each. There are other shareholders, being Odin (Frigga's ex-husband, who has 55 shares) and Balder (who has 45 shares). Odin's oldest daughter, Sif, at Odin's insistence, attends board meetings although she has never been formally appointed to the board and the other directors do not see her as a director. Balder has never been formally appointed to the board. However, he regularly attends board meetings (sometimes without invitation) and gives his advice on different activities. Frigga and Thor look to Odin for guidance and regularly vote in accordance with his wishes. Also in attendance at most board meetings are Tiw and Hod. Tiw is an independent consultant, a technical engineer who advises ASGARD on its technology platform. Hod is the financial controller, who advises the company on its funding needs and treasury function. The company's head office is in Newcastle, although most of its applications are located in the "cloud", with no fixed address. All its directors and shareholders live in Sydney. The one exception is Odin, who lives in a country estate, Valhalla, on the South Coast of NSW.

Loki ("Loki") is the accountant for ASGARD. It is September 2022 and has been engaged to prepare the accounts for ASGARD for the year ended 30 June 2022. Loki is worried about the liabilities of the company, particularly the large debts that are owed, in cryptocurrency, on its lending platform. A particular foreign owned company, SURTUR Inc ("SURTUR"), has purchased a large amount of VPs and has lent them to ASGARD. ASGARD in turn lent these VPs to HEL Ltd ("HEL"), an offshore borrower. Should HEL fail to repay the amounts, then ASGARD will be unable to repay the amounts owed to SURTUR. Loki also notices that the value of VPs is increasing and, therefore, should ASGARD be required to repay a large sum, this would be far in excess of what was originally recorded in the accounts when these sums were borrowed and on-lent. To compound these issues, Loki notices that the Australian Taxation Office ("the ATO") has issued a notice ASGARD, saying that it will be auditing ASGARD's affairs. Attached to the notice is a Taxpayers Alert, which seems to imply that ASGARD should have been withholding tax on its payments of cryptocurrency "interest" to SURTUR and other lenders. If the ATO is correct, the outstanding withholding tax could be in the millions of dollars. Loki approaches (at different times) Heimdall, Hod, Frigga and Thor about this exposure. Heimdall states that SURTUR is friendly and will not foreclose on the amount outstanding. He does not know about HEL and is not aware of the ATO notice. Frigga states that HEL is a valuable customer and will not renege on the loan; she has no knowledge of SURTUR and, while she was told about the notice from the ATO, she did not really understand it. Hod was not aware of any issues with SURTUR or HEL. However, he does state that he has been dealing with the ATO and that he feels the ATO's view (that there is a withholding tax liability) is incorrect. Thor states that there is nothing to worry about, as the online casino is earning enough VPs to pay off any shortfall; in any event, Thor is using the casino to "raid" a new type of cryptocurrency, "Anglo Saxon Shillings", which are currently of little value but will soon increase twelve-fold, which will earn more than any that will be lost via this loan or in any assessment issued by the ATO. Frigga instructs Loki to record the loan from SURTER as a "non-current liability" and to record that he has no going concern issues about ASGARD. She also instructs Loki to not record any liability (contingent or otherwise) in relation to any unpaid withholding tax. Against his misgivings, Loki complies with Frigga's instructions. HEL fails to repay the loan and, when Freya investigates, it is discovered that HEL is a "woman of straw", a company listed in Panama where it is difficult to find out its shareholders or directors.

ASGARD does not have the funds to pay SURTUR. In a meeting to extend the loan with SURTER, Heimdall inadvertently mentions the ATO audit. SURTUR immediately ceases negotiations issues a statutory demand for its unpaid debts. The ATO issues an assessment for unpaid withholding tax, amount to $10 million. Heimdall calls an emergency board meeting, which is attended by all the directors, as well as the shareholders, and also Sif and Freya. Tiw and Hod are not asked to attend. There is a heated discussion particularly about the classification of the debt as "non-current" and the non-disclosure of liability arising from the ATO audit. Odin and Balder are very worried, as they had no idea about the issues with SURTUR or the ATO. They have not attended any recent board meetings and neither Frigga, Thor nor Sif had advised them of any issues. Sif had attended board meetings, but missed the board meeting where the accounts and Loki's misgivings were discussed. Both SURTUR and HEL had been mentioned in previous board meetings, but no issues had been mentioned in relation to these loans. The ATO audit had also been mentioned in two board meetings prior to the one that Sif had missed, but Sif had not really understood the issues and Hod had assured the board that there was nothing to worry about. Freya had attended all board meetings but has not said anything at any of the board meetings; she has merely recorded what has been said. Even though Hod and Tiw were not invited to the emergency board meeting, they had attended the last 3 board meetings. However, their attendance had merely been to update the board within their respective areas of expertise and they had left before any detailed matters had been discussed in relation to the financial statements, Loki's misgivings, and SURTUR and HEL. Thor and Frigga want to appoint a voluntary administrator, as they are worried that the company is insolvent and they want to limit their liability. Heimdall argues against this, stating that he and Hod are negotiating with both SURTUR, and should be able to get the statutory demand lifted and the payments deferred. Heimdall says that he is in negotiations with another finance company, RAGNAROK Inc ("RAGNAROK"), and they should be able to obtain long term funding that will guarantee the company's future, including paying out SURTUR and funding litigation to have the ATO assessment set aside. However, Heimdall cannot guarantee that this new finance will be obtained before SURTUR applies to wind up the company.

Question 1

Loki comes to you for advice as to his liability for preparing the accounts in accordance with the instructions of Frigga, despite his misgivings. Please advise Loki as to whether, and to what extent, he is liable to the company.

Question 2

Please advise whether any of Freya, Balder, Odin, Sif, Tiw or Hod will be considered to be a director or officer of ASGARD.

Question 3

Please advise whether, and to what extent, any of the directors or officers would be liable under section 180 of the Corporations Act 2001 in relation to any activities up to the current situation.

Question 4

Please advise whether the directors would be liable under the insolvent trading rules and what actions they can take in order to minimise that liability.

Question 5

Assume that the board of ASGARD resolves to appoint a voluntary administrator to minimise their liability. What steps must be taken to appoint this administrator and what is the process that will be undertaken by this administrator?