Chace Constructions Ltd is a public company listed on the ASX with a market capitalisation of approximately $$1$ Billion. The Chair of the board of directors is Perry, a non$-$executive director and former auditing partner of a major accounting firm. Perry is also a member of the company$$s remuneration committee and the risk management committee. The CEO of the company is Yan, a daring corporate executive who is known for taking risks and making lots of money for the company through acquisitions funded by big debts. The company$$s Chief Financial Officer is Gemma, who is an experienced finance expert, but is slightly overwhelmed by the complex structure that Yan has forced upon Chace and its board of directors. Both Gemma and Perry get most of their information from Yan and his associates. Gemma is not a director of the company.

In May $2024,$ Yan makes his most ambitious plan to expand Chace by proposing a hostile takeover of one of Chace$$s biggest competitors $($Multibuild$).$ Yan does not consult any other directors before putting the proposal to the board at their June board meeting. The directors receive no independent advice outside of the documents prepared by Yan. However, the board is impressed by Yan$$s presentation and agrees to go forward with the takeover after a four$-$hour board meeting. The takeover proposes to purchase Multibuild at a $30\%$ premium to its current market price. This is seen as being a very expensive bid and the management of Chace is heavily criticised in the media. The bid is greeted enthusiastically by the Multibuild shareholders.

The takeover proposal is funded almost entirely by debt amounting to $$5$ Billion. This is substantially more debt than Chace has previously carried and will put significant pressure on the company$$s profitability, particularly if there is a downturn in the construction industry. In addition, much of the debt will be raised from a syndicate of overseas banks, which creates a significant risk of movements in the foreign exchange rate. Despite advice from senior managers within the company that foreign exchange hedges $($which protect companies that have borrowed in foreign currencies against movements in exchange rates$)$ should be entered into, Gemma decides that they are not necessary and too expensive. When the Australian dollar falls against the Euro in late $2024,$ the cost of funding the takeover skyrockets and the company is left with huge losses.

To make matters worse, Chace has been experiencing cash flow problems for most of $2024.$ Yan has failed to disclose these problems to the Chace board of directors, and has withheld information from Gemma $($the CFO$)$ to conceal the mounting losses. Whilst Chace has been able to service the repayment obligations, it has had to renegotiate with some major creditors. Yan starts cashing in his share options as he is fearful of the company$$s financial future.

All of these problems become public knowledge when rising interest rates in Australia cause a slump in the construction industry and a major share price collapse for Chace. This collapse triggers a loan review clause in the company$$s financing arrangements that requires some debts to be repaid within $90$ days. This would be very difficult. This puts further negative pressure on the share price, culminating in an $85\%$ drop in the company$$s share price in the $2024$ calendar year.

The company teeters on the brink of bankruptcy and investors are furious that Yan and the management team could have been so reckless in mounting the takeover for so high a price and with so much debt during a time of tightening credit markets. Particular criticism has been levelled at Yan, as his remuneration includes a bonus payment of $$2$ million if the company$$s national market share of large new construction projects exceeded $25\%($which it did following the takeover of Multibuild$).$ ASIC has made public statements that it is investigating the company$$s management team for possible breaches of directors$$ duties under Australian law.

$**$Advise the directors of their legal rights and liabilities under the General Law and Corporations Act $2001($Cth$)$ focusing on REMEDIES for ALL directors and any relevant external administration for the company