Case Facts

Sweet, Ness and Light Pty Ltd has been making chocolates in Perth since 1923. The company was commenced by Ivan Light (now deceased) and has had a member of the Light family as chair of the board ever since. At present William (Bill) Light is the chair and he holds 30% of the shares. The other shareholders are Bills sons Jack (20% of the shares) and Daniel (20% of the shares) and their wives, Yvette (10% of the shares) and Jacinta (10% of the shares). There are two non-family shareholders, the long- time company secretary Maxwell Sweet (5% of the shares) and Ivan Lights former business associate Elliot Ness (5% of the shares).

The directors of the company are Bill (Chair), Jack (Managing Director), Daniel (an architect), Yvette (an accountant), Maxwell (also secretary of the company) and Elliot (an irregular attender of meetings).

Jacinta has long harboured feelings of powerlessness as Bills sons lamely follow whatever their father wants in relation to company matters. Maxwell maintains absolute loyalty to Bill when it comes to company decisions and Elliot takes no active interest in the company.

Sweet, Ness and Light Pty Ltd has been making chocolates in Perth since 1923. The company was commenced by Ivan Light (now deceased) and has had a member of the Light family as chair of the board ever since. At present William (Bill) Light is the chair and he holds 30% of the shares. The other shareholders are Bills sons Jack (20% of the shares) and Daniel (20% of the shares) and their wives, Yvette (10% of the shares) and Jacinta (10% of the shares). There are two non-family shareholders, the long- time company secretary Maxwell Sweet (5% of the shares) and Ivan Lights former business associate Elliot Ness (5% of the shares).

The directors of the company are Bill (Chair), Jack (Managing Director), Daniel (an architect), Yvette (an accountant), Maxwell (also secretary of the company) and Elliot (an irregular attender of meetings).

Jacinta has long harboured feelings of powerlessness as Bills sons lamely follow whatever their father wants in relation to company matters. Maxwell maintains absolute loyalty to Bill when it comes to company decisions and Elliot takes no active interest in the company.

The directors of the company are Bill (Chair), Jack (Managing Director), Daniel (an architect), Yvette (an accountant), Maxwell (also secretary of the company) and Elliot (an irregular attender of meetings). The directors have recently entered into a contract to acquire a business which they are advised will add lucrative profits to their continuing business. To facilitate this a large loan is arranged with the Bigger Bank Ltd.

Jack has negotiated the purchase of the business and the loan from Bigger Bank. He is to be paid a special fee by the company which is selling the business in recognition of his efforts in successfully negotiating the transaction and winning the agreement of Sweet, Ness and Light Pty Ltd.

Shortly after the acquisition of the new business there is a downturn in the business of the company during the prevalence of a pandemic and more generally prevalent advice for health reasons against eating chocolate. The company is worried that it may not be able to service the large loan from the Bigger Bank. Figures provided at a board meeting are not encouraging but the directors decide to continue buying cocoa beans from a local supplier prices are attractive and so a larger quantity than normal is purchased. It is noted by Maxwell at the meeting that trade creditors have gone out to 90 days and that many retail customers have reduced their orders. The local supplier is threatening legal action if the amount due ($45,000) for supplies is not paid immediately.

Question;

Daniel and Yvette consult you as to their position and what action (if any) they should take to protect themselves as they feel very worried about the solvency of the company.