Melanie is a non-executive director of Quick Snack Pty Ltd, a company that manufactures and distributes healthy snacks. The executive director of the company is Trevor, who owns 20,000 ordinary shares in the company. The remaining 80,000 ordinary shares are held by Melanie. Rocco, a friend of Melanie’s has lent $100,000 to the company and is also a non-executive director of the company. Rocco has not attended the last two directors' meetings of Quick Snacks Pty Ltd. On the first occasion he was playing golf with some of his friends from Holland who were visiting Australia, and on the second occasion he missed the meeting as Rocco was ill. At the first directors' meeting of Quick Snacks Pty Ltd that Rocco missed, the other directors considered the possibility of the company taking a bank loan to prepare ready meals. However, no decision was made at that meeting. 

At the next directors' meeting (with Rocco again being absent), the other directors decided that the company should borrow the money to prepare ready meals. However, the product ‘ready meal’ ultimately turned out not to be a success as customers found the ready meal too spicy and oily. Within two months of entering into the loan, Quick Snacks Pty Ltd was unable to make its interest payment to the bank and the company is now being wound up. Rocco does not believe that he has done anything wrong, and feels that the other directors have caused the company to become insolvent. 

REQUIRED:

 With reference to the provisions of the Corporations Act 2001 (Cth) and case law, discuss whether any or all of the directors of Quick Snack Pty Ltd have breached any duties with respect to the company being insolvent. Please also discuss possible defences any of the directors may have. 

Answer rating: 100% (QA)

The Corporations Act 2001 Cth imposes civic duties on the directors of a company Breach of these duties may lead to legal consequences for the directors The directors must exercise their powers and pe... View the full answer