Week 6 - Question 1 (10 marks)

Polyester is a director of Style Pty. Limited involved in in making women's clothing.

Situation 1. She arranges with the companies bank to transfer an amount of $65,000 from the company account into a personal bank account held by her in her own name. She uses the funds to finalize some outstanding personal debts.

Situation 2. As a director she receives information that the company is in a serious financial position. She arranges to transfer a larger amount of the assets of the company over a new proprietary company that she formed with the intention of caring on the same business.

Situation 3. Contrary to a resolution of the Board and notwithstanding established business practice that limits credit to $20,000 she allows a trade debtor (who has a history of bad debts) to exceed its credit limits by $25,000. The debtor fails to pay the outstanding amount of $45,000. Can she rely on the business judgment rule in this situation?

Required: Has she breached any duties under the Corporation Act in the three (3) situations listed above?