1. Law
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  3. 5 b jenny whilst a director of just cosmetics ltd...

Question: 5 b jenny whilst a director of just cosmetics ltd...

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5 b) Jenny, whilst a director of Just Cosmetics Ltd, was approached by its competitor, New Creations Ltd, to provide the latter with Just Cosmetic’s list of clients together with information on a range of new products about to be launched by Just Cosmetics Ltd on the market. 


Jenny agreed to this approach in exchange for the offer to become Managing Director of New Creations Ltd. and in cash payment of $100,000.


The other directors of Just Cosmetics Ltd have now discovered that Jenny since Jenny left the company to join New Creations Ltd, the latter had brought out a range of products almost identical to the ones to be launched by Just Cosmetics Ltd. 


The new products have proved to be popular and New Creations Ltd has made a large profit. Consequently, when Just Cosmetics Ltd launched their product, they suffered a huge loss as their clients had already bought the product from New Creations Ltd. 


Jenny has now come to see you for advice.


iv.             Jenny responds to your advice by claiming that from her knowledge of business and corporations’ law, she is entitled to use the “Business Judgement Rule” to defend these allegations. 


In defining this expression with reference to relevant statutory provisions, advise Jenny whether she is correct.



6b) Graham Nelson is one of two directors of Uptown Pty Ltd (“Uptown”) & is seeking your urgent advice. He also holds a large parcel of shares in Uptown which he estimated is worth over $100,000.00. 

He tells you that up until about 2 or 3 years ago, Uptown had been trading successfully as a men’s clothing wholesaler and retailer. However, since then, the market for traditional coats, jackets, shirts, suits, and ties had declined dramatically and that the impact of shopping online was also significant. As a result, the company finances had rapidly deteriorated. 

Over this period, Uptown had become more reliant on its bank, Which Bank Ltd (“Which Bank”), to provide financial support through firstly an unsecured overdraft of $50,000 and about 18 months ago, a Business Loan which is secured in the sum of a further $100,000 over all plant stock & equipment owned by Uptown.

During late 2019 as the company fell into arrears with its payments to Which Bank in relation to both loans, the directors of Uptown attempted to negotiate with for further funding. 

However, in March 2020, Which Bank formally advised that this would not be possible and that it would be seeking to recover all outstanding amounts on both loans. He has been told as part of this process it is likely that his company will be wound up. It was not long after this conversation that Graham contacts you for urgent advice.


iv)            Graham, who tells you that very recently, after being served with a Statutory Demand, Uptown Pty Ltd has also now just been served with an Application to Wind Up the company. 


He says he is naturally very upset at what has happened but recognises that there is probably no way out of these problems. He tells that he is terrified that the liquidators “will trash the company” when winding it up, suggesting to you that he has heard that “they can do what they like and are not accountable to anyone”. 


In briefly explaining to Graham that it is unlikely that the company will be “trashed” during this process, advise him how the actions of liquidators are supervised and, in doing so, provide two (2) examples of how the Corporations Act can also be used to regulate their behaviour. 

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