[meteor_slideshow slideshow=”arp1″]
Question
Dart Limited (“company”) is a listed company on the ASX. It had a splendid radiance in the commercial life of Australia during the 1990s and early 2000s. It had aspirations to international prominence. It was a favourite of the stock market and had accumulated (at least on paper) a relative fortune.
However, by mid 2007, the company was not doing so well and had incurred a substantial debt to various banks. To reduce the debt, the company began selling assets.
From early 2008, the expenses of the company exceeded the available recurrent income. The monthly interest payable to the banks was running at about $1 million, or $12 million per year, and corporate overheads (such as rent) totalled about $500,000 per year. Predicted cash receipts from the company’s only ongoing business operations were about $10 million.
Around this time, Alan Baxter, who was employed by the company as its chief financial officer, gave the company’s bookkeeper the task of preparing lists of creditors with notes “on the level of urgency” and, on occasion, notes “about the creditors’ attempts to press for payment”. Decisions on who did and did not get paid were made by Baxter. A policy of managing creditors according to the old adage “the squeakiest door gets oiled” was applied so that the creditors who pressed most for payment were paid in full or in part before other creditors.
Daniel Abbott, a director of the company, realised around early 2008 that the company’s ordinary business activities could be continued by the sale of assets alone for a limited period only. He believed that the company’s “non-core” assets which could be sold gave the company about 12 months to turn things around. In a note dated 20 January 2008, Abbott wrote: “If we retain all proceeds from asset sales, we will have enough cash to last until 31/12/08”.
Also, in around early 2008, Patrick Mann, who had recently resigned as a director of the company but who remained involved in its management as a “consultant”, realised that the critical times for the company’s cash flow were the due dates for bank interest payments. While he had not personally reviewed accounting information of the company, he did have a general knowledge of where the company was at in terms of its income and its obligations over the next few months. He also realised that it was not possible to carry on indefinitely using asset sales to cover interest shortfalls.
In November 2008, the company moved from its existing premises into new leased premises where the rent was cheaper. During that month, it also sought to borrow further funds from its existing banks, but without success. However, the company was able to borrow some further funds for a limited time from a finance company. In early 2009, the company was placed in liquidation.
Required:
Advise whether Baxter, Abbott and Mann may be liable for failing to prevent insolvent trading by the company.
Place your order of custom research paper With us NOW. The assignment will be written from scratch by our qualified and experienced writers.
[meteor_slideshow slideshow=”arp2″]
A-Research-Paper.com is committed to deliver a custom paper/essay which is 100% original and deliver it within the deadline. Place your custom order with us and experience the different; You are guaranteed; value for your money and a premium paper which meets your expectations, 24/7 customer support and communication with your writer. Order Now
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]