Borisda Builder Pty Ltd has five directors: Vesna, Sergey, Ilyych, Mikhail andZviad. Mikhail and Zviad are working directors. They manage the day-to-dayoperations of Borisda Builder Pty Ltd. The company is engaged in all aspects ofhome building.

Ilyych is an accountant and he helps out with the production of monthly financial reports for all the directors.

Vesna has attended University and holds an engineering degree and a Masters of Business Administration (MBA). She has a good knowledge of the building industry and the way company finances work.

Sergey is Zviad's brother and has had a long history of depression and lack of self-esteem. Zviad supported Sergey's wish to become a board member even though he offered little by way of expertise. Zviad thought that it would help Sergey's personal development by giving him a different focus.

Borisda Builder Pty Ltd had a record year in 2010. The government's first home buyers grant meant that the company had many building contracts. The directors met in July and decided to pay a dividend of 9c per share.

The company has experienced a severe decline in new contracts in the last two months. This is due in part to a number of cut-price builders offering cheap building contracts. This has placed the company in financial difficulties. Mikhail and Zviad have been with the company since day one and are attached to the company. It is their main focus and provides them with emotional and financial wellbeing.

Sergey has never read any financial statements that have been sent to him. He did not check the company's financial returns for any of the years before he was appointed and he has never read any reports since he was appointed.

Shareholders of Borisda Builder Pty Ltd number 15 and include the directors and members of the founding family who have held onto shares but take little interest otherwise.

Vesna's brother Doug has a building design company, Doug the Designer Pty Ltd, and Vesna attends its Board meetings and gives advice. Because of her education and experience the Board of Doug the Designer Pty Ltd follows her directions. Recently, Borisda Builder Pty Ltd contracted with this company. It was Vesna that convinced the rest of the Board of Borisda Builder Pty Ltd to enter this contract. It was Vesna that had collected all the quotes for this work and they all exceeded the Doug the Designer Pty Ltd quote. This was due to the

fact that Doug the Designer Pty Ltd had put in a quote below the cost price of the work because Vesna had promised more work from Borisda Builder Pty Ltd in the future.

Ilyych attended a Board meeting a few months ago and brought with him what he believed was a great idea. His proposal was that the company become involved in constructing cubby houses for children out of the leftover materials from around their building sites. The other Board members were not so convinced but Ilyych being an accountant produced some very impressive figures based on information from the company's files. The board voted against the proposal after Vesna, with her MBA training, argued the company should focus on its main game of house building.

Ilyych is disappointed but yesterday signed a deal with another building company known as Canweafixdat? Pty Ltd. The deal involves Ilyych being paid a commission of 10% for every cubby house sold and a place on their Board.

Borisda Builder Pty Ltd is having financial problems yet the Board continues to allow the company to trade without considering the consequences.

Discuss the statutory and common law positions of the directors.