QUESTION FOUR- Chapter 13

Help Ltd has three directors and no constitution. The three directors are Harry the

managing director, Egbert the non-executive Chairperson and Laurel, a non-executive

director.

At the next directors' meeting the board is to consider the renting of a factory from

Harry's wife Harriet and the purchase of a new forklift from Industrial Pty Ltd, a

company in which the sole member and director is Larry, brother of Laurel.

REQUIRED:

(a) If Help Ltd is to enter into each of the two transactions above, it and its directors,

must comply with specific requirements as prescribed by the Corporations Act.

Describe in detail what these requirements are and apply them to each transaction:

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(i) the rental of the factory;(7 marks)

(ii) the purchase of the forklift. (3 marks.

Part b)-

The forklift purchased from Industrial Pty Ltd is found to be unsuitable as it cannot

carry the weight required. The directors failed to consider this important feature when

purchasing the forklift which has now had to be sold at a loss. Referring to the

Corporations Act and case law, describe the duty that the directors may have failed to

observe when undertaking the forklift purchase. Include in your answer any defences

available to each of the directors.