Question One

What is a company's gearing ratio and what effect does it have on investors?

Question Two

What are the differences between a CSF Offer Document and a small scale offering?

Question Three

What is a debenture, who issues it, who holds it and how is it secured?

Question Four

Slackbank lends Shady Corporation Limited ('the company') $30,000 secured by a charge over various items of personal property owned by the company ('the collateral'). Subsequently, the company grants another charge over the collateral in favor of Westbank. Both charges, each of which was granted by the company signing a security agreement, were registered under the Personal Property Securities Act 2009 (Cth) but Slackbank's charge was not registered until after that of Westbank, which was unaware of its existence at the time the charge in its favor was created.

a) Advise Slackbank whether its charge will take priority over that of Westbank. Give reasons for your answer.

b) Would your answer be different if neither charge had in fact been registered?

Question Five

What is a corporate governance and why is it so important?

Question Six

Answer the following about directors' duties:

a)What does it mean to act with care and diligence

b)What does good faith mean?

c)What does "acting in best interests" mean?

Question Seven

For each of the situations below, separately describe the directors' duties that are relevant to each set of facts and any breaches that may have occurred. As authorities to support your answers, include references to sections of the Corporations Act.

(a)Construction Ltd builds houses. The directors of Construction Ltd have registered their own home building company and have been diverting Construction Ltd customers over to their own company. What if the company was Construction Pty Ltd?

(b)Expansion Ltd required additional capital and the company had decided to borrow funds from its bank instead of issuing shares. However, an opportunity arose whereby the required capital could be raised by issuing shares to an investor who agreed not to sell the shares should a takeover bid ever be made for the company. The directors considered that even though the shares would be issued at a discount it was a better arrangement than borrowing funds.

(c) Fred, an investment expert, has a horse running in the Melbourne Cup which has taken up all of his attention. Due to this distraction, Fred fails as a director of Hi-risk Ltd to properly read his directors' documents. As a result, an investment is made which results in a significant loss to Hi-risk Ltd.