Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Silk Road Ltd (SRL) owns a wellknown chain of clothing and gift shops on the East Coast of Australia. The company has traditionally purchased items

Silk Road Ltd (SRL) owns a well‐known chain of clothing and gift shops on the East Coast of Australia. The company has traditionally purchased items from East, South and Central Asia and sold them to retail customers in major shopping centers. However, since 2012, it has also conducted a successful online business through Silk Road Online Pty Ltd (SROPL). SROPL operates a website from which SRL’s products are sold to customers over the Internet. SROPL is 50% owned by SRL and 50% by Wicked Ideas Ltd (WIL), which is a Californian investment company. Leyla, SRL’s managing director, is also SROPL’s Chief Executive Officer. SROPL’s other director, Jed, is a nominee of WIL. Initially highly successful, on 1 January 2017, SROPL was affected by a dangerous form of computer malware (virus) that rendered its main website inoperable for several days. Immediately after the attack, Leyla hired a cyber security company to investigate the security breach and to create a ‘patch’ for SROPL’s IT systems. The hacking problem was thereby resolved. But, SROPL is now experiencing restricted cash flow and is having some trouble meeting its usual financial commitments due to a drop in online traffic. For example, SROPL paid its Internet service provider ten days late in March 2017 and has not paid its employees their superannuation entitlements since April 2017. To make matters worse, on 1 May 2017, the chief bookkeeper of SROPL quit unexpectedly, leaving Leyla to maintain the company’s financial records. She makes her best effort to collect receipts but forgets to keep the books of prime entry. On 1 June 2017, Leyla and Jed together decide as a board to ‘sponsor’ Marvin to write favorable reports about SROPL on his blog: Marvin is an ‘online influencer’ and is to be paid a $50,000 fee. Leyla raises some concerns about the size of the transaction given SROPL’s cash position but is assured by Jed that ‘WIL will pitch in with more cash if necessary’. SROPL is wound‐up in insolvency on 1 October 2017. Advise the liquidator on any breaches of the duty(ies) to avoid insolvent trading in the Corporations Act 2001 (Cth), her/his potential remedies, and any amounts that the she/he could recover.

Step by Step Solution

3.47 Rating (150 Votes )

There are 3 Steps involved in it

Step: 1

The liquid ator can claim that the directors of Silk Roa... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial and Managerial Accounting

Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac

12th edition

978-1133952428, 1285078578, 1133952429, 978-1285078571

More Books

Students also viewed these Accounting questions

Question

Write a program to check an input year is leap or not.

Answered: 1 week ago

Question

Write short notes on departmentation.

Answered: 1 week ago

Question

What are the factors affecting organisation structure?

Answered: 1 week ago

Question

What are the features of Management?

Answered: 1 week ago

Question

Briefly explain the advantages of 'Management by Objectives'

Answered: 1 week ago