IRAC Method

I = Issue: Decide from the facts what the major issues are. It will help to break the facts down by identifying the main parties, then asking what their relationships are, what transactions have been entered into, and what events have occurred. R = Rule of law: With your knowledge of the Corporations Act, case law containing company rules and other sources of company law, you need to make a decision about which legal rule or rules are relevant to the facts before you. Having identified the right rule or legal principle,you need to state it clearly and say where it comes from. A = Application to the facts: You will then need to 'apply the law to the facts' C = Conclusion: You should come to a conclusion based on your argument.

Question

George and Matt are the directors of The Great Aussie Barbecue Pty Ltd (GAB), a businessthat supplies barbecues and accessories to both small business owners and to homebarbecue enthusiasts. George and Matt each own 500 shares in the company. George is thepublic face of the company. He was a finalist on MasterChef Australia in 2017 and is wellknown for his barbecue recipes. Each barbecue sold included one of George's recipe books. Matt has a business and accounting degree and looked after the company records. Matt realised that the company was in dire financial difficulties in October 2021. At thebeginning of the pandemic, many people bought barbecues so they could enjoy delicious meals cooked in their own backyards, however, eventually the number of new customers dwindled. Matt told George over coffee one morning that cash flow was a bit tight, but did notfurther elaborate. Matt seemed confident that this was a temporary issue as the governmenthad indicated that by December 2021, the economy would fully re-open and he was surebusiness would pick up. By March 2022, customer numbers did not pick up. George noticed a pile of "final demand" notices from suppliers on Matt's desk and asked to see the actual accounts rather thancontinuing to rely on Matt's assurances. It was only then that George realised that the company was insolvent. The company wentinto liquidation in June 2022, owing large sums of money to its creditors.

Assume that in June 2022 the company goes into liquidation. Follow the IRAC method to explain whether Matt and George have breached s. 588G of the Corporations Act 2001 (Cth). Set out the consequences of such a breach, in particular consider personal liability of the directors for debts of the company.