Part A

Brad is the Managing Director of Toys 4 U. He has recently purchased a large order of stuffed toys for a major AFL match. The toys were merchandising for football matches for the 2019 and 2020 seasons. The main customers were football fans attending the match. The orders were made pre Covid. Once the pandemic struck and the football matches did not go ahead Brad found that the purchases from customers did not eventuate. He is now in a position that he cannot pay the supplier of the stuffed toys. At the time of the purchase Brad was aware that the company was in financial trouble but he hoped that the merchandising of the football toys, which was a new area for his company which was traditionally involved in educational games, would help to get it to make profits and become successful again.

Please answer ALL of the following sub-questions:

What is Brad's duty to prevent insolvent trading?

How is insolvency determined?

What are the consequences for directors for trading while insolvent?

Does Brad have any defences to insolvent trading?

Part B

At XYZ Company, Isha, the Managing Director, is concerned about the level of fighting among its members. She decides to contact those members and offer to acquire their shares. As managing director, Isha knows there is a good chance that the XZY company will soon enter into a supply agreement with a major food processor in Malaysia that will greatly enhance the value of the business. She believes now is the right time to make an offer for the shares, before the deal is finalised and announced. Isha knows that, as a director of XZY Company, she owes duties to the company.

What duties does Isha owe in these circumstances?