In the first lecture you were told that "a company is an artificial legal person". Snide has a business as a shoe maker and conducts it in his own name. Then he registers with ASIC a company called Snide Pty Ltd in which he has 20,000 shares and his wife and son have 10 shares each. He is the sole director and makes all the decisions for the company. The Company buys the shoe shop and business from Snide for $600,000. That money is borrowed by Snide Pty Ltd from Snide who takes a mortgage over the shop for the same amount to ensure he gets his money back. 

Unfortunately, due to COVID, the town is put into quarantine and the company can't sell any shoes and becomes insolvent. It owes $200,000 to unsecured creditors. Its only remaining asset is the shop. Required: Advise whether Snide is entitled to sell the shop and take all the proceeds of sale for himself or should the proceeds from the shop be first distributed to the unsecured creditors and only the balance that is left be given to Snide? 

Use the IRAC template and refer to decided cases that you have studied.

Answer rating: 100% (QA)

Issue The issue in this case is whether Snide is entitled to sell the shop and take all the proceeds of sale for himself or whether the proceeds from ... View the full answer