The answers to this question must be formatted into a formal written report. Marks will be awarded for professional communication.

Song and Bao run a running shoe business named Runnerz Pty Ltd. Song and Bao are the only directors and have invested years of time and energy in building up the company, delivering great returns for the company's numerous shareholders. More importantly for Song and Bao, they feel that their employees have become their close friends and the directors and employees all spend time together outside of work.

In the past 6 months both Song and Bao have realised that due to the competitive market and high costs of leasing retail premises, the business is not sustainable. The company is not making a profit and this morning in the weekly 9am meeting with the company accountant, it was confirmed for the first time that the company cannot pay its debts as they fall due and if the company continues to trade it will trade whilst the company is insolvent. Song is devastated as she recently took out a personal guarantee with a bank to pay for a new type of beach running shoe which unfortunately was very unpopular and only a couple of pairs were sold. Song has no personal funds to pay back the debt under the guarantee should she be required to do so. The company also owes money to two major secured creditors and has fallen behind in payments.

Bao, always the optimist, wants to keep the company trading and asks Song to ignore the accountant's solvency statement indicating the company is unable to pay its debts. In addition, Bao suggests the following actions:

• Runnerz Pty Ltd to pay $2000 to each employee as a bonus for working hard during COVID-19
• Runnerz Pty Ltd to lend Bao's wife's company $8,000 as a gesture of goodwill
• Runnerz Pty Ltd to pay any debts owed to the unsecured creditors immediately as Bao feels they are small businesses which need the money the most.

Song agrees with each of Bao's suggestions as this seems the "right" thing to do but would like to know what the legal position is for Song and Bao. Song asks you to advise her on the following:

What is the risk for Song and Bao if they continue to trade?

What is the best course of action Song can take to protect herself in the short term from the personal guarantee and why?

If Song and Bao approve the transactions suggested by Bao and Runnerz Ltd enters liquidation in the weeks following, advise Song if the transactions are potentially voidable and describe the powers of the liquidator regarding voidable transactions.