Eric, Mary and Mei Ling are the only shareholders and directors of AcmePty Ltd, a trading company that supplies food products to cafés aroundBrisbane. In recent times, Acme’s cash flows have been pressured becauseseveral large customers, including CafeNow (a large franchise coffee shopwith hundreds of outlets), have been late in paying their invoices. This hasmeant that on several occasions Acme has not had sufficient funds to payits bills, particularly rent. The owner of its warehouse (Leaseco Ltd) haswritten several letters warning that if Acme is late in paying its rent, it willbe evicted from the premises.
At the same time as the company’s cash flow troubles, the employees takeindustrial action in an attempt to receive a pay increase. This strike stopsdeliveries from the warehouse for two days, with several customerscancelling their supply contracts with Acme. The cash flow problems areincreased, when the company’s bank, Eastbank Ltd, threatens to appoint areceiver over the company, if it does not pay its monthly interest within twoweeks.Eric, Mary and Mei Ling convene a board meeting to consider their options.
Eric and Mei Ling would like to negotiate with their creditors to restructurethe company’s debts. Mary, however, would like to sell out and changeindustries.
Advise Eric, Mary and Mei Ling as to their options under the externaladministration procedures under the Corporations Act, including theadvantages and disadvantages of such procedures.
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