No-Cal Foods Pty Ltd was a family company that marketed meals for dieters. Its directors were Caroline and Herbert. Herbert owned the majority of the company's shares. There had recently been a worrying fall in business and an advertising campaign aimed at male dieters was planned. Carolyn the independently wealthy wife of Herbert agreed to lend the company the necessary funds for the campaign. Under the security agreement the loan was repayable on demand and was secured by a circulating security interest over the company's inventory. Two months later, Carolyn discovered Herbert's long-standing affair with his secretary and demanded immediate repayment of the loan. No Cal Foods Pty Ltd was unable to comply with this demand and Carolyn exercised her right under the loan agreement and appointed a receiver to take possession and sell the company's inventory.

Explain how the Corporations Act affects Carolyn's security interest in these circumstances.