Mr Kaur started a software business. He decided to incorporate. He did so, calling his company Kaur and Sons Pty Ltd. Mr Kaur sold the assets and goodwill of his software business to Kaur and Sons Pty Ltd for $30,000. Rather than the company paying him $20,000 in cash, the company issued 20,000 shares worth $1.00 each to Mr Kaur. At the time of the sale, the company still owes $10,000 to Mr Kaur. This debt relates to $10,000 of personal property which becomes the company's property at settlement. A loan or mortgage is put in place. Mr Kaur became a secured party, with a registered Purchase Money Security Interest (PMSI) in his favour. Mr Kaur became the Managing Director at settlement.

Six months later, Kaur and Sons Pty Ltd borrowed $50,000 to finance its growth. Twelve months later, the company lost its primary contract and was then unable to pay its creditors. The creditors sought to recover from Mr Kaur.

Use the HIRAC model to answer this question if you choose to do so.

Consider both the common law and legislation.

Referring to the above Facts, explain particularly the relationship between shareholders, directors, the company and creditors.