Yugi and Nina have been married for 20 years and are both the sole shareholders and directors of JPop Pty Ltd, a family company that acts as the Australian distributor of Taiwanese novelty toys for sale in retail outlets across Australia. Although Yugi and Nina are both directors, Yugi takes little involvement in the business and relies on Nina to run the company. Nina performs essentially all of the management functions of the business, including preparation of accounts and compliance with the companys tax obligations.

In recent times, JPop Pty Ltd has faced stiff competition in its core market, with the result that its margins have been squeezed considerably. JPop Pty Ltd is only able to maintain operations during this unusually tough period in the business cycle by using its monthly overdraft with GreenBank Ltd.

On 1 March 2023, GreenBank Ltd writes to JPop Pty Ltd and informs it that its terms of credit have changed and it will no longer provide a $200,000 monthly overdraft facility. The bank is now only willing to provide a $20,000 overdraft facility. This is a financial disaster for JPop Pty Ltd, which has been paying off its monthly bills out of the overdraft facility. To make matters worse, the Australian Taxation Office (ATO) claims that JPop Pty Ltd is overdue on its GST and PAYG tax obligations. The ATO Is claiming $50,000 in unpaid taxes.

On 8 September 2023, Nina goes to see Karl Kloss of Kapital Plus Pty Ltd for advice. Carlos advises Nina to sell the companys main asset (the exclusive distribution rights) to another company for $100,000. The purchase price is obtained by Nina taking out a loan with GreenBank Ltd secured over the remaining assets of JPop Pty Ltd with a rate of interest of 24% p.a. The purchase price is quite cheap for such an asset, but Nina agrees to go along with the plan.

By 8 October 2023, JPop Pty Ltds position has not improved. Unsecured creditors are complaining about late or even non-payment. Suppliers have stopped delivering on credit and now want cash on delivery. The companys sale staff are complaining they have not been paid for 2 weeks, and the owners of the companys offices has threatened eviction if the company does not pay its last 2 months rent. Nina has still not told Yugi about the companys financial troubles.

Question 2: Advise Yugi and Nina of their potential rights and liabilities with reference to the Corporations Act 2001 (Cth) and any relevant case law