The client and issues:

BW Enterprises Ltd is a small capital sized company incorporated in Melbourne on 3 February 2000. The directors of the company are:

Brian the CEO,

Gurinder the IT director

Voon-Ling the marketing director

Jose is the CFO and finance director

Swee-Lim is the purchasing director

All are executive directors of the company

All the executive directors own their respective shares in the company via their family trusts. Together they own 65% of the shares equally.

Chiew is a non-executive director who was nominated by the Halliwell Ltd which owns 15% of the shares in BW Enterprises Ltd. Halliwell Ltd owns 15% and the public owns the remaining 20%.

The company has been involved in the manufacture, distribution and installation of solar panels and batteries throughout Australia and New Zealand.

It has developed new technology in relation to the production of solar panels but needs more funding to get it into a commercial stage.

The financial results for the year ended 30 June 2021 show that the company has been profitable since 2015. However it has no income tax liability because of the prior year losses. The CFO Jose anticipates that the losses will be used up by 2022 and that the company will have an income tax liability. The interim financial statements as at 30 April 2022 show the following:

Total assets: $37m

Liabilities: $28m

Net shareholder funds: $9m

The net shareholder funds is made up of:

the issued share capital $12m

accumulated losses: ($3m)

Operating revenue $15m

Operating expenses $12.5m

Due to the issues of COVID during the last 2 years and the current conflict in Ukraine, it has placed stress on the company's financial position and the ability to develop the new technology. Many of the software developers and engineers involved were based in the Ukraine and this has slowed down the development of the new technology.

Brian and Voon-Ling have requested a meeting to discuss several issues that have arisen and would like your advice on the matters plus any other recommendations you as experts may have considered.

Issues:

The Board of directors is mindful since COVID of relying on one country being the sole supplier of parts and believe it would be wiser to spread the manufacturers between other countries as well as developing a local manufacturing base in Melbourne.

Swee Lim as the purchasing director has been asked to look at other countries as well as Australia to develop alternative suppliers of parts so the supply chain issues caused by COVID do not arise in the future.

Her god father has contacts in several countries in Asia and South America that could supply the parts cheaper than any other suppliers. She was authorised under her employment contract to order parts up to $2m (AUD). Any contract above that amount needed the approval of the Board of directors.

She called a meeting of the Board of directors but only she Voon-Ling and Brian turned up at the meeting.

Under the constitution of the company the quorum for Board meetings is three but one must include the non-executive director Chiew.

Swee Lim on behalf of the company signed the contract for $5m.

Swee Lim's god father also bought her a diamond necklace and gave her a "red packet" containing $50,000.

Swee Lim did not consider or undertake a review of the advantages of manufacturing in Australia on the basis that "Australia is not a manufacturing country". She advised the board of the directors that it was better to have suppliers throughout Asia and South America and not in Australia.

Questions:

1. identify the legal issues
2. explain the relevant law both the legislation and case law
3. apply the law to the facts and come to a conclusion