Question 1 (worth 20 marks)

Configura Ltd (Configura) is an Australian registered company that retails (sells) gym equipment. Configura's directors are Connie (managing director), Cordelia and Conrad. Due to COVID-19 restrictions in many parts of Australia, there has been a sharp decline in demand for gym equipment nationwide since early/mid 2020. The directors were worried about Configura's ability to financially survive this downturn, and they therefore decided that Configura should diversify and also sell (on-road) bicycles.

The July 2021 board meeting of Configura included the following agenda items for the directors' consideration:

1: That Configura should purchase 500 racing bicycles from wholesaler Speedster Pty Ltd (Speedster). Speedster's only directors and shareholders are Angus and Abbie, Cordelia's parents-in law. Angus and Abbie have indicated to Cordelia that Speedster will sell the bicycles to Configura at a very low price.

2: That Configura should purchase 200 e-bikes from Power-4-U. Power-4-U is a sole trader business owned and operated by Peter Peddler. Peter is a long-term friend of Conrad's, and the two have been playing golf together for the past 20 years.

At the July 2021 board meeting, Configura's directors voted in favour of both proposals and the contracts with Speedster and Power-4-U were signed in early August. The bicycles were delivered to Configura in late August, but when payment was due in early September, Configura was unable to pay the suppliers and a liquidator was appointed in early October.

With reference to the above set of facts, and using the four-steps-process, discuss both parts (part a and part b) below. Ensure that you discuss and apply relevant sections of the Corporations Act 2001(Cth) and cases in detail and in your own words.

1. Discuss the key duty (one duty only) the directors of Configura are likely to have breached when entering into the contracts with Speedster and Power-4-U. (10 marks)

1. Discuss the procedures (if any) to be followed by Configura's directors when considering the contracts for the purchase of bicycles from Speedster and Power-4-U. (10 marks)