Pink Pty Ltd ('Pink') is a wholesale fruit vendor. It has experienced fierce competition over the last year and now has a severe cash-flow crisis. The bank has warned the company that it may cancel the overdraft if it is exceeded again by the company. The two directors (who are also the shareholders) are financially well-off and have accumulated significant personal assets over the years.

The directors believe that a new outlet at the markets will be the saviour of the company's fortunes. Accordingly, the directors on behalf of the company enter into a two-year lease with the market landlord (the rent is $5,000 per month), have local shopfitters set up a stall (at a cost of $40,000 which is payable in 30 days), and purchase stock for the shop (at a cost $100,000, on 30-day terms).

The new venture is not successful, and Pink is placed into receivership by the bank. None of the above debts are paid.

Required

As Pink is a limited liability company, the two directors believe that they are safe from personal liability for the debts of Pink. Please advise the directors if they are correct. You must refer to relevant legislation and case law to support your answer.