Exclusive Emerald Gems Pty Ltd ("EEG") is an Australian resident company that imports jewellery which it sells directly to retail shops around Australia. The business premises are located in Macquarie Park, Sydney. The company has five directors, Aaron, Blake, Carlos, Dana and Emma.

The company decided that as the market was becoming more competitive, it needed to expand its business. EEG felt that with increased volumes of sales it would be able to lower its prices and thus be more competitive. In order to do so, it obtained a $8 million loan from the AU Bank Ltd. From the loan proceeds, $6 million was used to buy more inventories while $2 million was used to buy from James Pty Ltd a large new warehouse and showrooms.

Carlos was not at the meeting when the above decisions was made as he was in the hospital recovering from a serious accident. Emma, in her usual ways, did not attend the meeting but signed the requisite documentation agreeing to the expansion of the business and the taking up the loan. Dana who attended, said she did not know whether she should agree and abstained from voting. Aaron and Blake both voted to go ahead with the expansion and taking up the loan.

At about this time, Blake established contact with Vance, who was setting up a new business which retails jewellery. Vance was looking for reliable suppliers, but said he would not deal with EEG as he did not like Aaron, the Managing Director. Not wishing to miss out on such a seemingly lucrative business opportunity, Blake arranged to set up his own business as a jewellery wholesaler and a contract was entered into between Vance and Blake for the supply of jewellery.

Six months later, Blake resigned as a director. At the same time, it was clear EEG had overextended itself, became insolvent and could not pay interest on its loans. Subsequently, EEG was placed under administration by its creditors.

It also became clear to the other directors later that Blake was always a major shareholder in James Pty Ltd although they were unaware of this fact at the time of the purchase of the warehouse and showrooms. Furthermore, Blake had been poaching established customers of EEG and had secured orders from them for his own business.

Required: As the in-house consultant, advise the Administrator on the following issues:

a) liability of all the EEG directors under Company Law;

b) defences that are likely to be put up by the directors and whether these defences would succeed.