PART B HK Enterprises Limited (HKEL) has three shareholders: Really Smart Holdings Limited ("RSHL") which owns 51% of its shares; . Mr. John Wong ("JW") who owns 34% of its shares (who is also a director); and Mrs. Jill Chan ("JC") who owns 15% of its shares. HKEL has been very successful since establishment and in order to encourage its directors to remain with the company, it: sold one of its investment properties (then worth HK$10,000,000) to JW for HK$5,000,000; gifted one of its investment properties worth HK$2,000,000 to JC's spouse. In December 2018, HKEL obtained a short-term unsecured loan of HK$40,000,000 from Big Bank. However, in February 2019 HKEL's business suffered a downturn which put HKEL into financial difficulties. As HKEL was unable to meet its debt service obligations to its creditors, it again approached Big Bank for an additional loan. Big Bank at HKEL's request agreed to provide an additional loan to HKEL on the terms set out in Annex 1 ("2nd Loan"). The 2nd Loan was advanced on 28" February 2019. HKEL's financial position did on not improve and as various creditors were threatening legal action, on 15th March 2019 HKEL repaid a HK$6,000,000 loan then owing to JW and executed a debenture (2nd Debenture) in favour of JW to secure all amounts owing to JW. On 30th June 2019 HKEL obtained a 12-month loan of HK$20,000,000 at an interest rate of 0.2% per day from Corona Finance Limited (CFL) guaranteed by RSHL, JW and JC. On 15 January 2020, two employees filed a winding up petition against HKEL on the basis of unpaid wages. A winding up order was made against the Company on 16 February 2020.On 30 January 2020, JC died. The liquidator of the Company has obtained the following information by the end of February 2020. ' Assets of the Company: 0 Uncollected book debts: HK$10 million; 0 Inventory (market value: HK$15 million); 0 Cash: HK$6 million. Outstanding debts of the Company: HK$40 million owed to Big Bank; HK$20 million owed to CF L; HK$5 million owed to its employees as wages; l-IKSS million to the Inland Revenue Department as undischarged tax liability; HK$7 million owed to other unsecured creditors HK$2.5 million owed to J W; HK$2 million owed to JC's estate. Answer the following questions: (a) Big Bank on the nature and validity of its security, the perfection requirements and what action it can take and against whom to recover amounts owed to it (7 marks); (b) [s the loan by CFL valid and recoverable and what action can CF L take' to recover the amounts owed to it? (7 marks) (c) HKBL, RSI-IL, .l W and JC (or their respective liquidators I pelsonal representatives, as the case may be) as to their potential risk exposures (13 marks); (1:!) the Liquidator as to what action it could take and the order of payment from its recoveries in HKEL's insolvency (13 marks). Annex 1 (a) Lender: Big Bank. (b) Borrower: Really Smart Holdings Limited, a company incorporated in Hong Kong. (c) Loan Amount: HK$30,000,000. (d) Repayment Date: 6 months, subject to the right of the Lender to demand immediate repayment on demand. (e) Interest Rate: 12% per annum. (f) Security: (1) debenture incorporating a fixed charge over the book debts of HKEL and a specific charge over the Designated Account. (2) joint and several guarantee by Mr. John Wong, Mrs. Jill Chan and RSHL in the bank's standard form. (g) Special Provisions: HKEL is required to deposit the proceeds of collected book debts into a specially designated account maintained with Big Bank ("Designated Account"); HKEL may not sell, factor, discount or otherwise charge or assign any such book debt of the Designated Account in favour of any other person without the consent of Big Bank. Until an Event of Default occurs or Big Bank otherwise directs, HKEL may withdraw and use the proceeds of the collected book debts from the Designated Account in the ordinary course of its business. The security package for this loan shall, in addition, extend to cover and secure all indebtedness from time to time owing and/or payable by HKEL to Big Bank