Part a)

Help Ltd has three directors and no constitution.The three directors are Harry the managing director, Egbert the non-executive Chairperson and Laurel, a non-executive director.

At the next directors' meeting the board is to consider the renting of a factory from Harry's wife Harriet and the purchase of a new forklift from Industrial Pty Ltd, a company in which the sole member and director is Larry, brother of Laurel.

REQUIRED:

(a) If Help Ltd is to enter into each of the two transactions above, it and its directors, must comply with specific requirements as prescribed by the Corporations Act. Describe in detail what these requirements are and apply them to each transaction:

(i) the rental of the factory;(7 marks)

(ii) the purchase of the forklift. (3 marks.

Part b)

The forklift purchased from Industrial Pty Ltd is found to be unsuitable as it cannot carry the weight required. The directors failed to consider this important feature when purchasing the forklift which has now had to be sold at a loss. Referring to the Corporations Act and case law, describe the duty that the directors may have failed to observe when undertaking the forklift purchase. Include in your answer any defences available to each of the directors.