Grace and Frank are the two equal shareholders in the highly successful company Oldies Are Better Pty Ltd (OAB), which supplies walking sticks and other aids to older people. The company's executive directors are Bud and Mallory, the children of Grace of Frank. Mallory is the CEO of OAB. Grace is a non-executive director. Frank does not involve himself in the business at all.

Grace wants to start a skin care business, selling products for older people, but needs capital to do so. She has no savings and banks will not lend her money. This is because of Grace's history of business failures. When Grace previously tried to run a skin care business, she was unsuccessful and she lost nearly $1 million of her own money. Grace does not want to sell her shares in OAB, so she persuades Mallory that OAB should lend $500,000 to her new company, Wrinkles Are Gone Pty Ltd (WAG). Mallory agrees to the loan on an unsecured basis because she wants to please her mother. There is no interest payable on the loan, and it does not have a date due for repayment. At the next board meeting of OAB, neither Grace nor Mallory tell Bud that WAG is Grace's company, because they know he would disapprove of the loan. OAB then

lends WAG the money.

(a) Advise ASIC whether it can take action against Grace or Mallory in relation to the loan and the board meeting. Do not discuss s 182 - 183 of the Corporations Act 2001 (Cth) or their general law equivalents.

(b) Grace wants to obtain some raw materials to make WAG's skin care products. She knows that suppliers are unlikely to supply to WAG on credit because it is a newly created company. She goes to Gunk Ltd (Gunk) and orders a large supply of raw materials from it in the name of OAB, using her OAB business card as proof that she is a non-executive director of OAB. Gunk 3 knows that OAB is a very successful company and does not ask any other questions. Gunk delivers the raw materials to Grace and then sends an invoice for payment to OAB. Both Mallory and Bud say that OAB will not pay Gunk. Can Gunk enforce the contract against OAB?