Silk Road Ltd (SRL) owns a well‐known chain of clothing and gift shops on the East Coast of Australia. The company has traditionally purchased items from East, South and Central Asia and sold them to retail customers in major shopping centers. However, since 2012, it has also conducted a successful online business through Silk Road Online Pty Ltd (SROPL). SROPL operates a website from which SRL’s products are sold to customers over the Internet. SROPL is 50% owned by SRL and 50% by Wicked Ideas Ltd (WIL), which is a Californian investment company. Leyla, SRL’s managing director, is also SROPL’s Chief Executive Officer. SROPL’s other director, Jed, is a nominee of WIL. Initially highly successful, on 1 January 2017, SROPL was affected by a dangerous form of computer malware (virus) that rendered its main website inoperable for several days. Immediately after the attack, Leyla hired a cyber security company to investigate the security breach and to create a ‘patch’ for SROPL’s IT systems. The hacking problem was thereby resolved. But, SROPL is now experiencing restricted cash flow and is having some trouble meeting its usual financial commitments due to a drop in online traffic. For example, SROPL paid its Internet service provider ten days late in March 2017 and has not paid its employees their superannuation entitlements since April 2017. To make matters worse, on 1 May 2017, the chief bookkeeper of SROPL quit unexpectedly, leaving Leyla to maintain the company’s financial records. She makes her best effort to collect receipts but forgets to keep the books of prime entry. On 1 June 2017, Leyla and Jed together decide as a board to ‘sponsor’ Marvin to write favorable reports about SROPL on his blog: Marvin is an ‘online influencer’ and is to be paid a $50,000 fee. Leyla raises some concerns about the size of the transaction given SROPL’s cash position but is assured by Jed that ‘WIL will pitch in with more cash if necessary’. SROPL is wound‐up in insolvency on 1 October 2017. Advise the liquidator on any breaches of the duty(ies) to avoid insolvent trading in the Corporations Act 2001 (Cth), her/his potential remedies, and any amounts that the she/he could recover.

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The liquid ator can claim that the directors of Silk Roa... View the full answer