Big Suits Ltd is a successful men’s wear company. It has five directors. It would like to raise additional equity capital. It is proposing to make an offer of shares by way of private placement to its five directors. Each director will be offered $1 million worth of new shares.

a) With regards to the share offer to the directors, would shareholder approval for the share offer be required because the share offer can be considered to be giving a financial benefit to a related party

b) Assume a few years later, Big Suits Ltd is in financial difficulty. Liquidators were appointed and the following liabilities were discovered:

Australian Taxation Office $500,000

Secured creditors $700,000

Other (unsecured) liabilities $500,000

Employee entitlements $200,000

Total $1,900,000

Assume that the costs associated with the liquidation together with the liquidator’s fees amount to $100,000. Also assume that the liquidators do not anticipate that there will be any funds left over for members.

Using this information, first explain the order of priorities for the distribution of a company’s assets in a liquidation under the Corporations Act, citing relevant sections of the Corporations Act. Second, using the information provided in the question, set out the order of priorities in a table.