COMPANY LAW

Mr Smith is a director of his wife's company Easy Market Pty Ltd.He does not take an active part in the company but does receive a small income from the company.

Unfortunately, one of the company's main clients has gone into liquidation, owing Easy Market Pty Ltd $500,000.Easy Market Pty Ltd cannot pay its debts and fulfil its obligations.

Mr Smith's wife suffers a nervous breakdown as a result of the debt and can no longer run the company.Mr Smith takes control of the company and for 3 months tries to restore the company's success.Easy Market Pty Ltd fails financially.

Mr John, a creditor of the company, was engaged by Mr Smith to do some consulting work, and has not been paid $8500 for the last two months. Mr John wishes to bring an action against the company Easy Market Pty Ltd for insolvent trading and against Mr Smith for breach of his Director's Duties under theCorporations Act 2001(Cth).

A)Advise Mr John whether he can take legal action against the directors of Easy Market Pty Ltd for breach of s588G and if he can send a letter of demand and begin compulsory winding up of the company.(5 Marks)

B)Advise whether Mr Smith, as a director of Easy Market Pty Ltd, has breached any of the director duties and if Mr Smith can defend himself under theCorporations Act 2001(Cth).(5 Marks)

C)Advise what penalties may be imposed on Mr Smith as director of Easy Market Pty Ltd for breaching director's duties under theCorporations Act 2001 (Cth).(5 Marks)

Please make sure you refer to statutory provisions and relevant cases to support your arguments.