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Question:
Polyester is a director of Style Pty. Limited involved in making women's clothing. Has she breached any duties under the Corporation Act in the following situations?
Situation 1. She arranges with the company's 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 finalise 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?
It has to be according to Australian Corporations Law.
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