Question One

Jonathan has just started his career in accounting after graduating from University. His is positioned in the audit team of his employer and he is looking at the financials of a client, Jupiter Ltd. Jonathan notices that last month Jupiter Ltd defaulted on a loan payment to a major creditor APB Bank Ltd.Jupiter Ltd owes APB Bank $17,500. Jonathon also notices that Jupiter Ltd's liabilities exceeds it assets and its bank account is in the red.

Advise Jonathan of the following:

a)Is Jupiter Ltd insolvent?

b)Can APB Bank Ltd issue a statutory demand for payment of the debt owed by Jupiter Ltd?

c)If the bank correctly serves a statutory demand on Jupiter Ltd, what are the two options available for Jupiter in dealing with the statutory demand?

Question Two

a)What is the aim of voluntary administration (VA)?

b)What effect does VA have on the company and its creditors?

c)Do the directors of a company in VA still have powers and duties?

d)What is a DOCA and what does it try to achieve?

Question Three

a)What is "liquidation" in the winding- up process?

b)What are the different types of winding up?

c)Ben is a director of Float-a-way Pty Ltd, a company which specialises in holidays on yachts to exotic Pacific islands. Unfortunately, due to a tidal wave many facilities have been destroyed and the Pacific tourist industry has suffered a significant downturn.

Two months ago, Float-a-way Pty Ltd sold one of its luxury yachts to Mary, a director of Float-a-way Pty Ltd for $2,000.

Float-a-way Pty Ltd owed $10,000 to South Pacific Supplies Ltd for provisions supplied to its yachts. This amount was outstanding for many months. Percy, a director of South Pacific Supplies Ltd has been a friend of Ben for some years and Ben had kept Percy informed about Float-a-way Pty Ltd's financial position. One month ago, Ben arranged for the total amount owing to South Pacific Supplies Ltd to be paid by Float-a-way Pty Ltd.

REQUIRED:

If the assets of Float-a-way Pty Ltd are insufficient to meet its debts, are any of the transactions described above voidable under the provisions of the Corporations Act?

Question Four

Johan and Marsha are the directors of JM Building Pty Ltd. Johan is the MD and controls all aspects of the business, whilst his wife Marsha does not concern herself with the company at all. Marsha is aware however that the company has severe financial problems. Last month, Johan purchased $100, 000 worth of building supplies on 30-day credit terms in the company's name from Honest Hardware Ltd. Despite numerous demands for the money to be repaid on terms, the debt has not been paid. Honest Hardware Ltd has successfully applied to the court to have JM Building Pty Ltd wound up.

Discuss whether the liquidator of JM Building Pty Ltd can make both Johan and Marsha personally liable for all of the company's unpaid debts. Do Johan and Marsha have any defences?