Dart Limited (“company”) is a listed company on the ASX. It had a splendid radiance in the...

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Dart Limited (“company”) is a listed company on the ASX. It had a splendid radiance in the commercial life of Australia during the 1990s and early 2000s. It had aspirations to international prominence. It was a favourite of the stock market and had accumulated (at least on paper) a relative fortune. However, by mid 2007, the company was not doing so well and had incurred a substantial debt to various banks. To reduce the debt, the company began selling assets. From early 2008, the expenses of the company exceeded the available recurrent income. The monthly interest payable to the banks was running at about $1 million, or $12 million per year, and corporate overheads (such as rent) totalled about $500,000 per year. Predicted cash receipts from the company’s only ongoing business operations were about $10 million. Around this time, Alan Baxter, who was employed by the company as its chief financial officer, gave the company’s bookkeeper the task of preparing lists of creditors with notes “on the level of urgency” and, on occasion, notes “about the creditors attempts to press for payment”. Decisions on who did and did not get paid were made by Baxter. A policy of managing creditors according to the old adage “the squeakiest door gets oiled” was applied so that the creditors who pressed most for payment were paid in full or in part before other creditors. Daniel Abbott, a director of the company, realised around early 2008 that the company’s ordinary business activities could be continued by the sale of assets alone for a limited period only
	
Document Preview: CORPORATIONS LAW ASSIGNMENTLength: Approximately 1500 words QuestionDart Limited (“company”) is a listed company on the ASX. It had a splendid radiance in the commercial life of Australia during the 1990s and early 2000s. It had aspirations to international prominence. It was a favourite of the stock market and had accumulated (at least on paper) a relative fortune. However, by mid 2007, the company was not doing so well and had incurred a substantial debt to various banks. To reduce the debt, the company began selling assets. From early 2008, the expenses of the company exceeded the available recurrent income. The monthly interest payable to the banks was running at about $1 million, or $12 million per year, and corporate overheads (such as rent) totalled about $500,000 per year. Predicted cash receipts from the company’s only ongoing business operations were about $10 million. Around this time, Alan Baxter, who was employed by the company as its chief financial officer, gave the company’s bookkeeper the task of preparing lists of creditors with notes “on the level of urgency” and, on occasion, notes “about the creditors' attempts to press for payment”. Decisions on who did and did not get paid were made by Baxter. A policy of managing creditors according to the old adage “the squeakiest door gets oiled” was applied so that the creditors who pressed most for payment were paid in full or in part before other creditors. Daniel Abbott, a director of the company, realised around early 2008 that the company’s ordinary business activities could be continued by the sale of assets alone for a limited period only. He believed that the company’s “non-core” assets which could be sold gave the company about 12 months to turn things around. In a note dated 20 January 2008, Abbott wrote: “If we retain all proceeds from asset sales, we will have enough cash to last until 31/12/08”. Also, in around early 2008, Patrick Mann, who had recently resigned as a director of...

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Corporation law assignment 
Corporation law assignment  
 
1
Name 
Corporation law assignment 
Institution 
Date
Corporation law assignment  
 
2 
Abstract 
According to Solomon v Solomon 1895 a company once incorporated becomes an 
independent entity free from its shareholder. A company can own property transact its own 
business and own property in its own name. Once established, company shareholders have 
limited liability to the extent of their shareholding. The responsibilities of a company are carried 
out by its board of directors. The board is mandated to carry out the transactions of the company 
while observing due care and diligence. In the event of insolvency, directors are required to take 
all the necessary steps towards protecting the assets of the company. At this juncture, they have a 
fiduciary responsibility to the creditors of the company. A director will be held personally liable 
in the event of fraudulent and wrongful trading by the directors. A director who has self interest 
or biased towards particular creditors may be liable for damages incase the company is wound 
up.      
Corporation law assignment  
 
3 
Introduction  
Facts and Issues from the Story 
Dart Limited (“company”) a company listed in the Australian security exchange was 
performing well till the y mid 2007, where it incurred a substantial debt to various banks. To 
reduce the debt, the company began selling assets. From early 2008, the expenses of the 
company exceeded the available recurrent income. The monthly interest payable to the banks 
was running at about $1 million, or $12 million per year, and corporate overheads (such as rent) 
totaled about $500,000 per year. Predicted cash receipts from the company’s only ongoing 
business operations were about $10 million. 
 Alan Baxter was employed by the company in the year 2008 to prepare a list of creditors 
whom he thought would have more preference over the others due to their constant demands. 
Daniel Abbott, a director of the company, realized around early 2008 that the company’s 
ordinary business activities could be continued through the sale of assets for a period of one year. 
Abbott also indicated that the proceeds would be adequate to last the company till the end of the 
year 2008. 
Early in 2008 Patrick Mann a recently resigned director, but still in the management of 
the company as a consultant realized that banks interest payments were due though he had not 
reviewed the books, he new the position of the company at that moment and new that the 
company could not continue relying on selling assets to meet its interest short falls. The company 
moved to a new premise in November 2008 where the rent payable was cheaper. It tried to 
borrow further funds in the same month from its existing banks but was not successful. A finance 
company gave the company some funds for a limited time but in early 2009 the company was 
placed in liquidation.      
Corporation law assignment  
 
4 
Baxter, Abbott and Mann are liable for failing to prevent insolvent trading by the 
company. The three should have been able to determine the solvency of the firm using the 14 
indicators of insolvency. According to ASIC v Plymin (2003) 46 ACSR 126 if a company 
displays any of the mentioned indicators, a directors of the company should seek for further 
advice on how the difficulties can be addressed. These indicators are; continuous loses throughout 
the period that started from the year 2007 according to the case. The liquidity ratio is below 1 
indicating that a firm cannot meet its debts when they fall due. Another indicator is overdue taxes 
due to non repayment.

Dart Limited (“company”) is a listed company on the ASX. It had a splendid radiance in the commercial life of Australia during the 1990s and early 2000s. It had aspirations to international...

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