In March 2010, Emily and Becky incorporated a company (Shoes in the City Ltd) that specialised in selling ladies footwear. Emily and Becky were the company's only members and each owned 100 1 shares. Emily and Becky were the company's only directors.

For the past 18 months, the company has been experiencing financial difficulties. In September 2012, the company's overdraft with the Black Horse Bank plc had reached its limit of 250,000. In return for increasing the overdraft limit to 300,000, the Black Horse Bank plc demanded security and took a floating charge over all the company's assets. The business continued to struggle and, in January 2013, Emily and Becky were informed by the company's auditor that insolvent liquidation was inevitable, although Emily and Becky disagreed and held out hope that the company's financial prospects would improve. Emily and Becky decided to try and trade their way out of their financial difficulties by having a sale. Unfortunately, the sale failed to increase business and in March 2013, Shoes in the City was wound up. By this time, the company's overdraft with Black Horse Bank amounted to 290,000.

Barry has been appointed liquidator and has discovered several disturbing facts (i) in August 2012, Emily and Becky caused the company to repay an unsecured loan of 5,000, which Becky had made to the company some months before; (ii) in addition to the money owed to Black Horse Bank, the company owes 10,000 to the Inland Revenue, 30,000 to employees in wages, and 100,000 to unsecured creditors.

Barry estimates that the total remaining assets of Shoes in the City amount to 150,000. Barry's expenses in acting as liquidator amount to 3,000.

Advise Barry.