Q1: Directors and senior officers have two obligations and duties at law to their principal. A breach of their obligations can give rise to two separate actions against them.

Required: Explain who are the two parties that can take action against them, how they arise and how they interact with each other.

Q2: You are the managing director of a fitness company. There are two other directors of the company. The company is slowly recovering from the impacts of COVID-19, but actual turnover is still behind projected sales. The chief financial officer has provided to the board of directors an updated set of financial statements that show the company as of today does not have sufficient funds to pay existing staff and suppliers. You believe that the best way forward is to continue to trade (buy more supplies on credit terms, pay suppliers on extended terms, and reduce staff hours) By doing this you believe that this will allow the company to survive for longer than three months and give it breathing space to raise fresh capital or a loan from a financial institution. The other two directors do not question your views and agree with what you propose. They only attended this board meeting because they happened to be in town. Otherwise, they do not bother to come to meetings they rely on the managing director to run the business.

Required: 1. The chief financial officer and the managing director wants to know if they will have breached s 588G of the Corporations Act 2001 (Cth).

2. If they have breached it, in your view do they have a defence?

3. If there is no defence who would be liable?