AUSTRALIAN COMMERCIAL LAW QUESTION

Isabella, Henrietta and May changed business form. The business has now been operating

as a company with Isabella, Henrietta and May as directors. However, the trouble for the

business does not end there. Henrietta is upset for being blamed for the incident with the

customer and wants to make it up to Isabella and May. She finds out that the neighbouring

shop is available for sale for $140,000 - a price that she considers a bargain. Henrietta

decides to take out a loan for $170,000 in order to buy the shop and have some spare

money for renovation.

The constitution/ replaceable rules of the business state that a director has power to manage

the ordinary affairs of the company, however any contract for goods and services (including

a loan) exceeding $100,000 must be signed by a director and another person authorised by

the board for that purpose. Henrietta did not discuss this with any of her colleagues before

signing the contract.

Has Henrietta breached any duties as director under the Corporations Act 2001 (Cth) by taking up the loan?