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Question: question 2c use irac format to answer the question if...

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QUESTION 2C

 

Use IRAC format to answer the question if you applicable.

 

  1. Issue: State the legal issue(s) to be discussed.
  2. Rule: State the relevant statutes and case law.
  3. Application: Apply the relevant rules to the facts that created the issue.
  4. Conclusion: State the most likely conclusions using the logic of the application section

You are a graduate analyst working for a Melbourne insolvency and debt-recovery firm and are provided with the following instructions from your client. Wang Fang (WF) read a prospectus in November 2017 and bought $500,000 worth of units in Love a Nut Pty Ltd (LNPL), a company acting as a trustee and registered entity of a registered Managed Investment Scheme that operates seven Tofu Nut plantations through Australia. WF is excited by this investment because she wants to invest in an Australian productive industry and get a steady income stream from fully franked dividends. At the time WF purchased the shares, the prospectus revealed that: 1. Big Bank lent ten million dollars to LNPL in April 2018, with 10% interest payable monthly and the balance due in ten years. This loan is secured by a registered security interest over the Tofu Nut Plantation, all shares in LNPL, and all other assets of the company. All this security is currently worth 15 million dollars; 2. Simon Chen, a director of LNPL, also provided his Portsea holiday house as security for the April 2018 Big Bank Loan, which is mortgaged to the bank for 3 million dollars; 3. Mohammed, one of the directors of LNPL, lent the company $200,000 in November 2017. He also holds $500,000 worth of units. He was one of the first unitholders and manages the Victorian Tofu Nut Plantation. Further, in November 2019 the board of directors of LNPL approve: a. A payment of $125,000 to a director Mei Ling for a Tesla car for business purposes; and b. A payment of $100,000 to repay Mohammed. He is promised a share of the next crop in September 2020 as payment for the rest of the loan. By November 2019 the value of investments in the Tofu Nut Plantation have doubled in value because LNPL has had the largest crop ever. Using the money lent by Big Bank, LNPL has established 10 more tofu nut plantations. There is a lot of media coverage and everyone wants to be part of it. However, by the last week of August 2020, a series of bad weather events affect 7 of the Tofu Nut Plantations. This includes a hurricane in Brisbane, a severe drought in New South Wales, floods in Victoria, and hailstorms in Tasmania. The expected crop falls by 70% and the company runs into financial difficulties. In September 2020 Mohammed resigned as a director of the company and issued a statutory demand in September 2020 for the company’s failure to repay the loan.

 

A voluntary administrator is appointed over LNPL on 16 October 2020. WF now seeks your advice.

 

REQUIRED Your manager has asked you to answer the following questions based on the legal issues raised by the allegations. If there are any further facts that you would need to complete the analysis, state what questions you would ask and why these are necessary.

 

c) Explain the role and purpose of voluntary administration.

 

You can refer to the Corporations ACT 2001 on the link below if need be.

http://www5.austlii.edu.au/au/legis/cth/consol_act/ca2001172/

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