2106AFE COMPANY LAW

SHORT ANSWER QUESTIONS

You only need to include the Law and Application in your answer.

Question 16

On 1 September 2014 Vicki was appointed liquidator of Revitup Pty Ltd in a creditors’ voluntary winding up. Revitup Pty Ltd is a company which sells imported motorcycles. The sole director of Revitup Pty Ltd is Max. Vicki has discovered that on 3 February 2014, the company had entered into a transaction with Bad Bike Hire Pty Ltd (BBH) under which Revitup sold 20 motorcycles to BBH which then leased them out on three year terms to customers. The motorcycles were sold to BBH at 40% of their retail value.

Vicki discovers that all of the shares in BBH were owned by Max’s wife Cheryl, who is also a director of BBH. When asked about the transactions, both Max and Cheryl explain that they were sold cheaply because the market was very slow at the time and there should be a discount for buying 20 motorcycles. Vicki’s investigation reveals that this explanation is not true. There have been no proper accounting records kept for Revitup Pty Ltd since December 2013. The company’s bank also advised in January 2014 in writing that it was not prepared to lend any further funds until significant amounts of the debt owed to the bank was repaid.

Advise Vicki as to whether she can make a claim against BBH (DO NOT discuss defences or remedies in your answer)

Question 17

Groves Pty Ltd is a company formed to run the family business of Percy and Sigrid Groover and for family members to be employed in the business. The family business involves operating a caravan park on the Sunshine Coast. The business has been very successful over a number of years and remains profitable. Percy and Sigrid each own 40% of the shares in Groves Pty Ltd and are the only directors. The other 20% of the shares in the company are owned by their adult son, Jet.

Jet has graduated with a degree in business and is anxious to make his fortune. He has for several years been concerned at the way the company is being run. He has had several arguments with them and now has stopped talking to them. He has pleaded with Percy and Sigrid to sell the land on which the caravan park is operated which is now valuable and is sought after by developers. Jet has complained that the company is not paying dividends as it has been company policy to re-invest the profits in the company.

Advise Jet as to his prospects of obtaining a remedy based on an action under section 232.