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Secured Creditors and Liquidation

Discuss about the Corporation Law for Business Purpose.

In the above-mentioned case, we can see that Indri owned a business of soil testing and later decides to form a company with the running business. It is also seen that he was the only shareholder as well as director. Later he lends $90,000 in order to meet the cost of purchase, which was at an inflated price. However, due to some reason his business afloat and his company was forced into liquidation (Bayraktar & Ludkovski, 2014).

As per the Australian Corporations Law, secured creditors are regarded are those persons who are a creditor within the security benefit interest over some or over all of the assets of the debtors. In the bankruptcy of the debtor, the secured creditors to obtain the security can enforce it over the assets of the debtors and for avoiding competition of distribution based on liquidation with the unsecured creditors. As the company in this case was forced into liquidation we can state that the job of the liquidator is to get the best result for both the creditors as well as shareholders and partially it can be collected by selling and valuing of the assets. The liquidators will be appointed for the priorities of creditors with the first claim made against the company and the charges are on the group of assets or specific assets, which includes mortgage issued by bank, unsecured creditors, shareholders etc. As Indri is a secured creditor according to the law secured creditors has the right to get back $90,000 but the total assets sold was at $95,000 but the total claim of creditors was $210,000 (Li, 2013).

1. As Indri’s business was going through a major slump from the end of 2012, thus, he became desperate and started working hard and while working hard at late night she injured her hand and went under microsurgery. There are rules regarding the workers safety in Australia, which consists of three annual publications, which helps, in providing key information regarding the compensation of workers especially in Australia and New Zealand (Reinhart & Sbrancia, 2015). Which can be stated as follows:

  • Comparison of compensation to workers- It states about the compensation, which is to be provided to the stakeholders in order to assist them with information based on compensation arrangements in Australia and New Zealand (Guéant et al., 2012).
  • Monitoring report on comparative performance-, this deals with the safety and work health of the workers compensation process operating in Australia and New Zealand. This part of the act explains about the compensation, regarding safety authorities including work-related injuries and diseases.
  • Statistics of Australian workers compensation- It provides details of compensation of the workers, which includes over time trend, statistical loss based on work and compensation paid. It is presented on various values that cover occupation, sex, age group and industry. It also covers circumstances including work-related industry and diseases (Waldrip et al., 2015)

Indri’s claims can be justified because he sold his business to a company and he was only a shareholder then so he can claim workers compensation as he was working for other company following the above rules (Valenzuela & Hoffmann, 2015).

Workers' Compensation

2. In this problem it is stated that Mr. Shifty, Ms. Avoider, Mr. Marginal had made an appointment with firm, Fees Ruthless, solicitors. They want to establish their new company named (No-Tax Agents Pty Ltd). The advice given to them is not to bother about their constitution instead of that relying on the replaceable rules as per the Corporation Act under Sec 135(1). However, this rule is not at all applicable to that of the proprietary company, in case if the same person is both sole director as well as the sole shareholder (Nyberg et al., 2013). These rules include:

  • In each of the company which are registered after 1st July 1998;
  • Any company which repeals its constitution after 1st July 1998;
  • The powers and appointments of the directors;
  • The regulation of meeting of directors;
  • The regulation of meeting of members;
  • Any special classes of shares which includes special rights;
  • The share transfers;


Based on the case study, it can be stated that the appointment of directors should depend rules. However, there are certain obligations in choosing the directors of the company as it is seen that Mr. Shifty is not interested in becoming the director or the secretary as his family company is appointed as a director and it does not have a company secretary. Secondly, it is stated that Ms Avoider is not available for the meeting as she is serving last five months of the conviction for false implication on accounts (Bachoo et al., 2013). Lastly, Mr. Marginal who is 72 years old suffering from Alzheimer and his estate are administered by trust deed. Thus taking into consideration all the points the powers of the directors can be stated that the directors must act in good faith and not to act contradictorily in the company’s interest, not to use the powers in a improper manner, must avoid the conflicts of interest, duty must be in order to retain discretion (Haffner et al., 2015). As Ms Avoider is convicted of fraud, she cannot be appointed a director on the grounds of fraud, Mr. Marginal was suffering from Alzheimer, and his property is administered by trust deed so there is no question of making him the director. Thus, the advice is in favor of Mr. Shifty and he is the most suitable of all to be appointed as a director.(Brits et al., 2015).

Based on the given case study, it is stated that Shifty’s family business suddenly goes into liquidation and the secured debtors receives all payments but unsecured debtors receives only $ 20. However, a complicated situation with other companies exists in which Mr. Shifty was associated with. The qualifications required for a director of the company is that they must have consent in writing of the other directors that they approve the appointment of the director. There must a consent and notification and appointment made by ASIC. A person can become the director in case boar appoints them. Therefore, in this case, Shifty cannot be granted the position of a director because the other companies where he was a director had a record of accomplishment of being liquidated. So considering all the pros and cons of the matter no one in this case is fit for being the director (Rajapakse, 2015).

Directors' Obligations

3. In the given case study, it is seen that Alan and Bill are shareholders and directors of Sailaway Pty Ltd which deals in yachting clothing and equipments. Alan is also a majority shareholder as well as chairperson of Broadacres Pty Ltd, Broadacers needed a loan of $1.5 million in order find its latest purchase. Alan organized a loan of $1.5 million from ABC Finance Ltd based on mortgage of waterfront land guaranteed by Sailaway.  He forged Bill’s signature on the document. Tom was the manger of ABC finance who knew that Sailaway never used to deal with property but the time of transaction Tom was not there and was completed by another manager. Now while the time of paying the amount of mortgage ABC finance is seeking rights from Sailaway because the mortgage has certain rights, which are:

  • Consideration- It states that the performance in the Contract gives rise to pecuniary liabilities. It also deals with the amount of money, which are to be advanced or to be advanced in the way of loans or existing, future debts.
  • Property should be specific and immovable- The mortgage property must be specific and distinctive.
  • Parties- The person who transfer the property is the mortgagor and to whom it is transferred is the mortgagee. Both the parties should have contractual capabilities and the mortgagor and mortgagee and should not be a minor.
  • Transfer of the interest- This means the transfer of the immovable property to secure the purpose of the money. The words transfer of the interest; means passing of the mortgage to the mortgagor and in return take the benefit.


According to this case study, we can say that Saliaway Pty Ltd was the guarantor of the loan provided to Broadacers but though it was done by the means of fraud through one of its director named Alan so the rule will be applicable to the company for being fraud. As according to Australian law, we can state that single or more than one participant who includes the borrower as well as the loan officers can perpetrate fraud in mortgage. This case sates that Alan has foraged the sign of his partner name Bill so it will be granted in the criminal law. As mortgage, fraud is a crime so Alan can be charged against the offence in criminal law. Mortgage fraud should not be confused with predatory mortgage lending as it occurs when the customer is mislead or deceived by the agent of the lender. In the federal court, United States prosecutes mortgage fraud as the wire fraud, mail fraud, laundering of money, bank fraud etc. this is partially applicable to Allen in this case. As per these crimes, penalties are also available in matters of mortgage fraud (Butler et al., 2013).

4. In the given case study, we can see that Andy, Bob and Chris were friends since school days. Later Bob and Chris used to run a surf shop. As they were facing financial difficulties in their business, they asked Andy to help them financially with $100,000. Andy promised to pay them $100,000, if they pay him in return he gets $10,000 per year in the term of the loan it was also provided that if they provide that if Bob and Chris enter into any further contract about business then Andy should be informed (Giles-Corti et al., 2014). Therefore, there was a partnership made between three of them so the rules of partnership, which will be applicable here, are as follows:

  • There must be valid agreements made between the parties.
  • There must be a specific and definite trade, occupation, profession and business that are needed to be carried on.
  • In the agreement, there must be a proper specification about the common meaning of mutuality of right, obligation and interest.
  • There must be a proper viewpoint recognized about of the agreement thus charitable organization are never recognized as partnership.
  • In the partnership agreement there must be a properly mentioned about the sharing of profit and losses about the business. As it is mentioned according to the law, the profit and losses are settled accordingly as it is made and further it is equally divided.

Mortgage Fraud


As per the agreement made in the case study among Andy Bob and Chris was Bob and Chris will pay $10,00 per year in return to $100,000 which he paid to them in order to make prosperity of their business. As per the rules of partnership rules, we can say that partnership is an agreement where parties are known as partners who agree to cooperate in order to advance their mutual interest. The partners who are involved in the agreement of partnership is an individual, organization, schools, business, interest based organization etc. The partnership includes parties with the negotiable complexity and the challenges, which are navigated to an agreement (White et al., 2016). Once the agreement has been reached, the partnership is then enforced by typical civil law if it is documented well. Partners who wishes to makes their agreement the explicit affirmation and makes it enforceable must be done through the method of Articles of Partnership. As it is stated in the problem that Andy decided to pay the amount to Chris and Bob only if they provide $10,000 per year out of profit. If this method is followed then there will no problem regarding partnership as there was an agreement made between three of them and they all agreed to it (Fooks & Gilmore, 2013).

Reference list:

Bachoo, K., Tan, R., & Wilson, M. (2013). Firm value and the quality of sustainability reporting in Australia. Australian Accounting Review, 23(1), 67-87.

Bayraktar, E., & Ludkovski, M. (2014). Liquidation in limit order books with controlled intensity. Mathematical Finance, 24(4), 627-650.

Brits, R., & Van der Walt, A. J. (2014). Application of the housing clause during mortgage foreclosure: a subsidiarity approach to the role of the National Credit Act (part 1). Tydskrif vir die Suid-Afrikaanse Reg, (2), 288-305.

Butler, J., Foot, C., Bomb, M., Hiom, S., Coleman, M., Bryant, H., ... & ICBP Working Group. (2013). The international cancer benchmarking partnership: an international collaboration to inform cancer policy in Australia, Canada, Denmark, Norway, Sweden and the United Kingdom. Health Policy, 112(1), 148-155.

Fooks, G., & Gilmore, A. B. (2013). International trade law, plain packaging and tobacco industry political activity: the Trans-Pacific Partnership. Tobacco control, tobaccocontrol-2012.

Giles-Corti, B., Badland, H. M., Mavoa, S., Turrell, G., Bull, F., Boruff, B., ... & Astell-Burt, T. (2014). Reconnecting urban planning with health: a protocol for the development and validation of national liveability indicators associated with noncommunicable disease risk behaviours and health outcomes.

Guéant, O., Lehalle, C. A., & Fernandez-Tapia, J. (2012). Optimal portfolio liquidation with limit orders. SIAM Journal on Financial Mathematics, 3(1), 740-764.

Haffner, M. E., Ong, R., & Wood, G. A. (2015). Mortgage equity withdrawal in Australia: Recent trends, institutional settings and perspectives.

Li, J. (2013). Accounting conservatism and debt contracts: Efficient liquidation and covenant renegotiation. Contemporary Accounting Research, 30(3), 1082-1098.

Nyberg, D., Spicer, A., & Wright, C. (2013). Incorporating citizens: corporate political engagement with climate change in Australia. Organization, 20(3), 433-453.

Rajapakse, P. (2015). Unfair Dealing and Consumer Protection in Asset-Based Lending in Australia (No. 2604571). International Institute of Social and Economic Sciences.

Reinhart, C. M., & Sbrancia, M. B. (2015). The liquidation of government debt. Economic Policy, 30(82), 291-333.

Richards, C., Kjærnes, U., & Vik, J. (2016). Food security in welfare capitalism: Comparing social entitlements to food in Australia and Norway. Journal of Rural Studies, 43, 61-70.

Valenzuela, I., & Hoffmann, A. A. (2015). Effects of aphid feeding and associated virus injury on grain crops in Australia. Austral Entomology, 54(3), 292-305.

Waldrip, S. H., Niven, R. K., Abel, M., Schlegel, M., & Noack, B. R. (2015, January). MaxEnt analysis of a water distribution network in Canberra, ACT, Australia. in bayesian inference and maximum entropy methods in science and engineering (maxent 2014) (Vol. 1641, pp. 479-486). AIP Publishing.

White, B., White, J., Giglia, R., & Tawia, S. (2016). Feed Safe: a multidisciplinary partnership approach results in a successful mobile application for breastfeeding mothers. Health Promotion Journal of Australia.

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