Answered step by step
Verified Expert Solution
Question
00
1 Approved Answer
You are a senior analyst working for the Australian Securities and Investments Commission (ASIC). Part of your role involves investigating possible breaches of directors' duties,
You are a senior analyst working for the Australian Securities and Investments Commission (ASIC). Part of your role involves investigating possible breaches of directors' duties, and you have been made aware of Garden Enterprises Pty Ltd (Garden). Jiang and Linda are the shareholders and directors of Garden. Jiang is actively involved in the day-to-day running of the company. She spends most of her time marketing and growing the business. She relies on the company's employees to pay creditors on time. Linda is a non-executive director. Every quarter they meet to review the financial position of the company. A simple balance sheet is prepared by an employee, but they usually do not ask any questions. In May 2019, Jiang has started receiving angry calls from her suppliers that have not yet been paid. She instructs her staff to prioritise paying the suppliers that are critical to the business, and delay paying those that are not. In June 2019, Garden receives a notice from the Australian Taxation Office of unpaid taxes. However, there is no change to the expenditure - and Garden continues to operate until the end of June. The balance sheet prepared for the end of June 2015 shows that current liabilities exceed current assets. You discover that Linda is unaware of these events of May and June 2019 because he was diagnosed with cancer, and was undergoing treatment. REQUIRED: a) Referencing provisions of the Corporations Act and relevant case law, advise your manager about whether there are grounds for ASIC to bring civil or criminal action against the directors. b) If ASIC's prosecutions team decides to pursue action, what penalties could ASIC seek from the court
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started