Noodles Ltd operates a wholemeal noodle outlet. The company has three directors, Hong, Li and Luwa. Hong is the managing director. Li left school when he was 15 years old and has no further qualifications other than being an expert on wholemeal noodle manufacturing. He is in charge of the manufacturing process. Luwa is a non-executive director and was only appointed to the Board because she comes from a wealthy family and has connections with financial institutions.

Noodles Ltd has been trading profitably until six months ago when a competitor selling seaweed noodles emerged and is rapidly gaining market share. Hong thinks that Noodles Ltd should open up outlets in major shopping centres. Hong calls a board meeting and tells Li and Luwa that by opening an outlet in the most expensive and prestigious city shopping centre all the companys problems will be solved. He says that they will have to act quickly as the seaweed noodle competitor is also interested in that outlet. Hong does not tell Li and Luwa that he has not carried out a feasibility study into the financial implications of this proposal. Luwa is doubtful about the whole proposal and feels that they are being rushed into making a decision without being given time to consider alternatives. Li however agrees to Hongs proposal without really understanding the financial implications. Within six months of opening the new outlet, it becomes apparent that the company was not in a financial position to have taken such a step and a proper feasibility study would have shown this. The company is unable to pay its debts and a liquidator has been appointed.

Required:

Discuss if the directors of Noodles might have breached any provision of the Corporation Act, 2001 other than s181-193? What defences, if any, may be available to them under these circumstances?