Mountains Pty Ltd (Mountains) deals with geographic analysis. The Managing Director of Mountains is Kosciuszko. Gravatt is the Company Secretary and Barney is the Director of Innovation. Crosby serves as Marketing and Innovation director, Kangaroo as Finance Director, and Ossa as the Human Resources director.

Two years ago, Mountains was experiencing a downturn in its business due to declining interest in its products and needed a cash injection to remain solvent. The Mountains board offered a 30% stake in the company to Rocky Ltd (Rocky) to inject money into the company. Rocky would only agree to lend money to Mountains if Rocky could have a nominee director on Mountain's board and Mountains agreed to provide Rocky all Mountain's financial details on an on-going basis. The Mountains board agreed. Pebbles, a chartered accountant, was appointed by Rocky to be its nominee director on Mountains board. Pebbles has remained on the Mountains board from this date on.

In 2021, Mountains is worried about the risk posed by a competitor in the geo-industry. Valley Ltd (Valley), in particular, has been laying some of Mountains' businesses low and has caused a reduction in cash flow to Mountains. Ossa reports to the June 2021 board meeting that several high value employees have left Mountains to work for Valley. In the same meeting, Kangaroo informs the board that the departure of these employees has meant several bills were not sent to clients for payment and several bills were not paid by Mountains when they came due for payment. Kosciuszko asked Kangaroo how bad the situation is at the moment. Kangaroo admitted that the financial records were a mess but that it should be sorted by the next board meeting in July. Pebbles steps in at this point and calls the CEO of Rocky for instructions. The CEO of Rocky is put on speaker phone in the Mountains' June board meeting. The CEO of Rocky directs Pebbles and the Mountains board to continue as if nothing is wrong and see what happens in July. After the CEO of Rocky hangs up, Gravatt says "well, I'll just minute our position". Kosciuszko nodded and said "good idea Gravatt and let us move to the next agenda item".

In the July meeting, Kangaroo informed the board that the financial records were still a mess, but to ensure sufficient cash flow he proposed putting on the market a piece of unoccupied and unimproved land owned by Mountains: the Serpent Estate. Ossa asked Kangaroo if that is the land that Mountains tried to sell in 2010, 2011 and 2019 with no luck? Ossa confirms this is the case, but the land value has improved and this sale would sure up finances. Discussion continues and the board has a coffee break. Pebbles rings the CEO of Rocky during the break and Semester Two Final Take Home Assessment, 2021 LAWS3100 Corporations Law Page 5 of 5 when the Mountains board meeting recommences, Pebbles reads out a note he had made which says: "CEO of Rocky says sell the land suggested by Kangaroo: the Serpent Estate. Continue operating as if finances are sorted. Tell Kangaroo to sort finances out ASAP and revisit in August". After Pebbles reads this out, Gravatt says he will write this down in the Mountain board papers as a resolution. No one on the Mountains' board comments and once Gravatt is finished adding this to the board papers, Kosciuszko moves on to the next agenda item.

Just before the August board meeting, several large bills come into Mountains which are unpaid. Ossa reports to the August board meeting that more employees have resigned and Kangaroo reports that there is now a serious cash flow crisis and the sale of the Serpent Estate has not had any offers thus far. Kangaroo says Mountains is in trouble and presents a statutory demand letter by a contractor who has not had their $50,000 bill paid. The letter is dated from April 2021. The bill has not yet been paid.

You work for Mountains and are an accountant who has been given the above facts. The board urgently seeks your advice if any directors' duties under the Corporations Act 2001 (Cth) have been breached.