Purpose: The Group Assignment aims to provide students with an opportunity to work in a collaborative environment in reporting on a recent Australian Corporations Law case relating to Directors Duties...

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Answered Same DayMay 02, 2021HA3021

Answer To: Purpose: The Group Assignment aims to provide students with an opportunity to work in a...

Preeta answered on May 07 2021
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ASIC v Plymin [2003] 175 FLR 124 (affirmed on appeal in Elliott v ASIC [2004] 10 VR 369)
ASIC v Plymin [2003] 175 FLR 124 (affirmed on appeal in Elliott v ASIC [2004] 10 VR 369)
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Case Introduction:
The case revolves around two companies Water Wheel Holdings Ltd and Water Wheels Mills Pty Ltd. But the case was mainly against Plymin, who was MD of the companies; Elliott, who was the non executive director of the companies and Harrison who was the chairman of the company.
In 2000, the board of the companies opted for voluntary administration. But before the date of voluntary administration, Australian Securities and Investment Commission (ASIC) took actions against those officials and the company for insolvent trading (Jade, 2017).
Case facts:
Throughout the period of 1999 and 2000, the companies incurred constant losses; the liquidity ratio of the companies was below 1; the taxes were overdue; the relation with the bank were getting sour to the level that the company was not allowed any further debts; the company did not have any access to any alternate source of finance and was left with no choice but to raise capital by further issue of share capital; the suppliers were demanding special payments before delivering any goods further since a lot of creditors were unpaid and the cheques were being dishonored; the company was entering into special arrangements with selected creditors; the company was insured against any lawyer’s letters and court summons; creditors were paid in rounded some for which even proper invoices were not raised; financial information was not made timely and accurately, even the forecasts were not made properly so that financial position and the trading performances of the companies can be understood. All these facts were the indicators that there was an insolvency situation and so the directors started insolvent trading to improve the condition of the company. The company even...
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