External Administrator And Fundraising Essay

Questions:

1.Advise Bob, Brad and Mary as to their options under the external administration procedures under the Corporations Act.

2.Advise United Industries Ltd on the legal issues arising out of these facts, citing ful l authority for your answer.

Answers:

1.External Administration

1.The provision of the External Administration is an important term in the Corporation Act. Sometimes it has been observed that the company has failed to pay the money to the shareholders or unable to meet the debts. This position can be described as the financial difficulties. This situation will lead the company towards insolvency or liquidation. External administrators are appointed to assess the assets of the company. The Corporation Act 2001 regulates the provision of the external administration. External administration can be divided into three parts- administration, receivership and liquidation. Creditors are getting involved in case of external administration.

There are two types of external administration such as the voluntary administration and the involuntary administration. Voluntary administration takes place when the director of the company by himself opted for appointed administrator. When the other authority appoints administrator, it will be treated as involuntary administrators. External administrators are appointed when a company become insolvent or failed to pay the debt to its shareholders. The main objective of this mechanism is to trade the company out of the trouble. However, if the administrators could not remove the trouble, the administrator regarding the immediate liquidation will make an attempt.


In the present case, it has been observed that the company named Coco Pty Ltd had failed to repay all the debts and it has been observed that the company had failed to pay the bills also. The cash flows of the company have also compelled to increase due to the non-payment of the money. Another problem regarding the company has been cropped up when the employees of the company has been started agitation for the hike of payment. It has also been observed that East bank Ltd had threatened to appoint receiver to tackle the problem if the company continues to non-repayment of debts and the monthly interest of the bank. According to section 435A of the Corporation Act, the process of external administration helps the company to pay the debts without winding up the company. however, if there is no other choice except liquidation, following process will follow the provision of section 461 (1) (k) of the Corporation Act 2001.

Considering the facts of the case, it can be stated that the managing directors of the company can opted for the appointment of voluntary administrators in this case. The main reason of the same is that the financial condition of the company is not good. It has been observed that the company has failed to meet the minimum economic requirements and the employees of the company are not getting their remuneration in time. The cash flows of the company have also been increased as the company had regularly failed to pay the debts in time. The administrator will assess the debts requirement of the company and then sell or liquidate the debts and pay the debts. The aftermath effect of the liquidation is the wind up. However, it can be stated that deregistration is not the only solution in this case. The company can improve its condition if negotiation can be developed in between the directors and the creditors.

2.Fundraising:

In this case, it has been observed that the United Industries Corporation Ltd has issued certain shares for the development of their hotel business and it has been observed that they had made certain promises to the shareholders and obtained money from Bob Broke. On the subsequent event, it has been observed that the accountant of the hotel company has given inaccurate information and overstated the assets of the company. it has also been found that the Liquor licence of the hotel is also pending before the State Licensing Board. Therefore, they had unable to serve liquor to the customer and failed to gain profit. In this way, many investors had lost their money. Certain legal issues are cropped up in this case. Chapter 6D of the Corporation Act deals with the securities chapter and includes shares and debentures. The promise made by the company to the investors is not complete in nature. Much information have been hidden and false declaration has been given to the investors. This act attracts the provision of section 267 of the Bankruptcy Act 1966 (Cth). It has been observed that the managing director of the company had offered to buy the share of his company to Bob under section 700 (2) and Bob had accepted the offer. Therefore, it can be said that contract has been made in between the them. Therefore, if any of the statement of the contract held false, the other party has full right to cancel or terminate the terms of the contract. Besides that, the defective documents of the Hotel Company had attracted the provision of section 728 of the Corporation Act. Bob can make complaint before the Australian Security and Investments Commission. He may ask for disclosing the document and make an application under section 718 of the Corporation Act 2001.

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