The directors of Happy Trails are keen to purchase a block of land. Rajiv is one of the director of Happy Trails, the company which has had two years of poor trading and is now unable to pay its debts when they fall due. Rajiv seeks your advice on the options available in the circumstances. He is concerned the company may be insolvent but is hopeful that 'the business could be profitable again if creditors allow a little time to make some changes'.

A. Explain the options available to Rajiv's company if the directors are concerned the company may be at risk of insolvent trading.

B. What sort of risk could Rajiv face if he borrows more money to help the company but then can't pay it back? Your answers must refer the relevant sections of the Corporations Act 2001 (Cth) and case law.

references