The liquidator of Smollett Pty Ltd (Smollett) claims that Robert Earnst (RE) and a company he controls, Earnst Engineering Pty Ltd (EE), were acting as shadow directors of Smollett from July 1, 2017 to September 30, 2019 when the company was placed into liquidation. The liquidator further alleges that the company was trading whilst insolvent during this entire period.

1. Required: Explain the concept of a shadow director and how the liquidator would prove these claims against RE and EE. (4 marks)

Click or tap here to enter text.

2. Required: Explain the concept of trading whilst insolvent and how the liquidator would prove that the directors of the company had allowed the company to engage in this activity. (4 marks)

The liquidator of Smollett Pty Ltd (Smollett) claims that Robert Earnst (RE) and a company he controls, Earnst Engineering Pty Ltd (EE), were acting as shadow directors of Smollett from July 1, 2017 to September 30, 2019 when the company was placed into liquidation. The liquidator further alleges that the company was trading whilst insolvent during this entire period.

1. Required: Explain the concept of a shadow director and how the liquidator would prove these claims against RE and EE. (4 marks)

Click or tap here to enter text.

2. Required: Explain the concept of trading whilst insolvent and how the liquidator would prove that the directors of the company had allowed the company to engage in this activity. (4 marks)