Flexible Ltd (Flexible) is a public company that sells physiotherapy equipment. There are 50 shareholders (a mix of employee and non-employee shareholders) all with equal shareholdings in the company. Since its registration the 5 founding directors (all validly appointed and registered with ASIC) have continued to direct the company.
At a meeting on 2 May 2017 the 5 directors of Flexible decided that changes in the market have reduced the capacity of Flexible to operate long term. As there is no probability of selling the business as a going concern, the directors have determined to wind up the company and, with the unanimous approval of members at a 9 June 2017 meeting, have appointed Cassell to act as liquidator.
Cassell agreed to act as liquidator and commenced as liquidator on 10 June 2017.
You work for Cassell as a graduate accountant and you have been instructed to write a memorandum advising on the following:
- First whether each claim is a debt that Flexible is required to pay. You MUST explain your reasoning for each item by reference to the Corporations Act 2001 (Cth) and using the issue, rule application and conclusion approach. You must refer to the Corporations Act 2001 (Cth) and case law where relevant.
- Second, explain and apply the order of priorities in the Corporations Act 2001 (Cth) to determine how much each claimant will receive and how much will be returned to shareholders if anything.
You are advised by the liquidator that Flexible has the following assets:
- The Warren St building valued at $750,000;
- Stock in trade that could be sold for $100,000 (this is the actual value that could be realized by a liquidator rather than its potential value if it was sold during normal commercial operations);
- Cash and ASX listed shares in other companies valued at $500,000.