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Assignment Topic: Andrew, Brian, Colin, Diana and Elizabeth were the directors of Gemsales Pty Ltd, a company engaged in the business of importing and supplying jewellery as wholesalers to the local...

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Assignment Topic:
Andrew, Brian, Colin, Diana and Elizabeth were the directors of Gemsales Pty Ltd, a company engaged in the business of importing and supplying jewellery as wholesalers to the local market.
The company decided that as the market was becoming more competitive it needed to expand its business as it felt with increased volumes of sales it would be able to lower its prices and be more competitive. In order to do so it obtained a $4 million dollar loan from the Friendly Bank Ltd. $3 million was used to buy more stock and $1 million was used to buy a large new warehouse and showrooms from Traders Pty Ltd.
Colin was not at the meeting that had made these decisions as he was in hospital recovering from a serious accident. Elizabeth, as was her usual custom, had not attended the meeting but signed the requisite documentation agreeing to the expansion of the business and the getting of the loan. Diana who attended, said she did not know if she agreed and abstained from voting. Andrew and Brian both voted to go ahead with the expansion and the getting of the loan.
At about this time Brian has established contact with Victor, who was setting up a new business as a retailer of jewellery. Victor was looking for reliable suppliers, but said he would not deal with Gemsales Pty Ltd as he did not like Andrew, the Managing Director. Not wishing to miss out on such a lucrative business opportunity, Brian arranged to set up his own business as a jewellery wholesaler and a contract was entered into between Victor and Brian for the supply of jewellery.
Six months later, Brian resigned as a director. At the same time it was clear the company had over-extended itself and was insolvent and could not pay the interest on its loans.
It also became clear that Brian was a major shareholder in Traders Pty Ltd and the other directors were unaware of this at the time of the purchase of the warehouse and showrooms. Furthermore, Brian had been approaching other established customers of Gemsales Pty Ltd and had secured orders for his own business.
Advise as to the liability of ALL the parties both under common law and the Corporations Law. In your answer you should address all the issues relating to each of the directors and their duties to the corporation.
Answered Same DayDec 29, 2021


Robert answered on Dec 29 2021
40 Votes
Gemsales Pvt Ltd
In this case we see five people who are involve in a business of importing and supplying of jewellery as a wholesaler to retailers within the city market. The company in which the five people naming Andrew, Brian, Colin, Diana and Elizabeth are directors is named as Gemsales Pty Ltd. We shall consider this case and discussion in accordance to Australian laws as it mentions to be in Harvard referencing style.
The case:
The case is about a business which five people start and work upon, the business being at a competitive stage hence the directors plan to expand the business to increase sales and give good competition in the market. For the expansion of the business the directors decided to apply a loan and obtained loan of $4 million dollar from Friendly bank Ltd. Of this money the company utilized $3 million dollars for increase in stocks and the rest amount was invested in buying warehouse and showrooms. These were purchased from a company called Traders Pty Ltd.
It is so said in the case that Colin one of the director did not attend the meeting in which these decisions were taken as he was hospitalised due to a severe accident, another member Elizabeth did not attend the meeting like always she use to do but had signed the agreements and papers of the decisions that were taken in the meeting which stated about the expansion and the loan for the business. Diana abstained i.e. she denied with the terms and was not very sure about herself in this decision so did not vote for the same. Andrew and Brian voted for the plan and executed the same and bought the warehouse and showroom and had taken the loan also.
Now we shall see what the liabilities of each director, the company are and who is at fault in accordance to the law and shall be liable to pay for the losses and claims if any.
In the case we also see that Brian had developed a personal contact with a person named Victor and got personally involved in business with him and then later after 6 months resigned from Gemsales Ltd as a director.
Australia Private Limited Company
A proprietary company is a limited company in Australia is written as “pty”. Registration of the company under the Australian Securities & Investment commission (ASIC), the companies are provided with a nine digit Australian company number (CAN).
In Australia for a private limited company there shall be no minimum share capital required or any particular amount of paid-up share Capital. A Pty mush have at least one director, necessarily an ordinary resident of Australia. Board of directors or supervisory council shall not be compulsory in Australia ltd company.
Any company who shall not fulfil the following points shall be considered as a limited company:
· If the revenue of the company should not be less than AUD25;
· The overall assets which are owned by the company should not be less than l AUD12.5m; and
· The company along with its subsidiaries should not have less that 50 employees at the end of the cu
ent year.
Required Documents which are to be filed under ASIC during registration include:
· an application form with the amount of registration means the fees,
· the name of the company as decided;
· Company’s class and what type of company it is;
· Details of the offices of the companies;
· Details of the directors of the company with address and phone numbers; and
· The details of the members of the share and the structure of the share.
Duties and responsibilities of a director:
The people who are responsible to govern the company on behalf of the...

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