In March 2012, 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 1000 Shs1 shares. Emily and Becky were the company's only directors. For the past

18 months, the company has been experiencing financial difficulties. In September 2014, the

company's overdraft with the Black Horse Bank Ltd had reached its limit of Shs. 2,500,000. In

return for increasing the overdraft limit to Shs. 3,000,000, the Black Horse Bank Ltd demanded

security and took a floating charge over all the company's assets. The business continued to

struggle and, in January 2015, 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 2015, Shoes in the City was wound up. By this time, the

company's overdraft with Black Horse Bank amounted to Shs. 2,900,000.

Barry has been appointed liquidator and has discovered several disturbing facts

i. In August 2014, Emily and Becky caused the company to repay an unsecured loan of

Shs.50,000, which Becky had made to the company some months before;

ii. In addition to the money owed to Black Horse Bank, the company owes Shs.100,000 to

the Inland Revenue, Shs.300,000 to employees in wages, and Shs.1,000,000 to unsecured

creditors.

Barry estimates that the total remaining assets of Shoes in the City amount to Shs.1,500,000.

Barry's expenses in acting as liquidator amount to Shs.30,000.

Required: Advise Barry