Roderick Adder is a non-executive directorofBell Re-Insurers Ltd a company specialising in the re-insurance industry. The company suffered losses following claims by insurance companies following flooding in central Europe in 2003. The share price of Bell Re-Insurers Ltd has gradually fallen since 2003. Late in 2003 the company decided to act as a re-insurer for the oil industry.

Unfortunately for Bell Re-Insurers Ltd following recent wild storms on the North Sea in Europe a number of oil rigs were damaged and the potential for large claims being made on the reserves of Bell Re-Insurers Ltd meant the share price would probably fall even further.

Roderick approached Charles the managing director of Bell Re-Insurers Ltd and suggested that Bell Re-Insurers Ltd lend $25M to Blue Adder Pty Ltd a company wholly owed by Roderick's own company Adder Enterprises Ltd. Roderick would use the $25M to channel through the company and buy shares inBellRe-Insurers Ltd thus helping to stabilise the share price and ensure that the market did not lose faith in the company

Without consulting the Board or the shareholders of Bell Re-Insurers Ltd Charles arranged for the $25M to be to be given to Adder Enterprises Ltd. who then channelled $10M to Blue Adder Pty Ltd and both companies used the funds to buy shares in Bell Re-Insurers Ltd.

Despite the possible losses following the damage tothe oilrigs in the North Sea the share priceofBell Re-Insurers Ltdwasstabilised.

You are an investigations officer with ASIC. Bill a shareholder in Bell Re-Insurers Ltd rang you to complain about the affairs of the company. During the conversation Bill mentioned rumours about the lending of money to Roderick and his companies,

Advise about the legality of the above transaction and the consequences, if any, should the transaction be contrary to the Corporations Act 2001.