Tortoise Insurance Co is a leading insurance company in Australia. It is listed on the ASX and has a massive capital base, with more than 300 employees around Australia. The directors of the company are well known figures in Australia, and all have held important positions in companies before joining Tortoise as directors.

The company recently bought out some smaller insurance companies for considerable amounts; this was done in order to grow the business of the company. The directors were given considerable information on each of the insurance companies prior to their purchase. There was much discussion at the board level, and some serious investigation by financial experts before the purchase was made.

It now transpires that the company paid too much for the various companies they acquired; the purchase has resulted in a significant outflow of capital for what now appears to be poorly performing companies. The purchase of the companies was a bad decision now that the financials come to light. There is quite some discontent from the shareholders who have seen the value of their shares plummet.

Answer the following questions, with reference to specific sections of the Corporations Act 2001 (Cth) and case law:

1.What might be the liability of the directors for the purchase of the companies, a decision that now appears to have been not a good decision for the company?

2.What defences are available to the directors for what turns out to be not a good business decision?