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Alice Smith (Alice) was the sole director of a clothing manufacturing company, Miss Stylz Pty Ltd (the Company) from its incorporation in January 2000. On 20 October 2018, the Company received a statutory demand from the Australian Taxation Office (ATO) for unpaid income taxes for the 2017/18 financial year totaling $1.5million. The statutory demand expired on 9 November 2018, after which the ATO could file a winding up application. On 31 October 2018, Alice was diagnosed with a form of cancer and requested her daughter, Libby Smith (Libby), to take on an appointment as director of the Company whilst she was undergoing extensive medical treatment. Alice did not resign as a director and Libby accepted an appointment as a director on 1 November 2018. Libby has had no prior experience in managing a business, other than some casual work for the Company from time to time. Alice advised Libby of the notice received by the ATO and requested she ‘deal with it’ whilst she was absent. Upon her appointment as director, the financial controller of the Company, Peggy Plonks (Peggy), briefed Libby on the financial situation of the Company. Peggy was a qualified accountant who had been employed by the Company for the last 3 years. Peggy was not appointed to the board but did advise Libby on all financial matters concerning the Company. During the briefing, Peggy advised Libby of the following: • The Company had been incurring losses from March 2018 onwards due to the loss of a key customer in February 2018. Peggy advised that the sale team was working hard to source new contracts. • A summary financial position of the Company as at 31 October 2018 was presented as follows: Document Preview:

Alice Smith (Alice) was the sole director of a clothing manufacturing company, Miss Stylz Pty Ltd (the Company) from its incorporation in January 2000. On 20 October 2018, the Company received a statutory demand from the Australian Taxation Office (ATO) for unpaid income taxes for the 2017/18 financial year totaling $1.5million. The statutory demand expired on 9 November 2018, after which the ATO could file a winding up application. On 31 October 2018, Alice was diagnosed with a form of cancer and requested her daughter, Libby Smith (Libby), to take on an appointment as director of the Company whilst she was undergoing extensive medical treatment. Alice did not resign as a director and Libby accepted an appointment as a director on 1 November 2018. Libby has had no prior experience in managing a business, other than some casual work for the Company from time to time. Alice advised Libby of the notice received by the ATO and requested she ‘deal with it’ whilst she was absent. Upon her appointment as director, the financial controller of the Company, Peggy Plonks (Peggy), briefed Libby on the financial situation of the Company. Peggy was a qualified accountant who had been employed by the Company for the last 3 years. Peggy was not appointed to the board but did advise Libby on all financial matters concerning the Company. During the briefing, Peggy advised Libby of the following: The Company had been incurring losses from March 2018 onwards due to the loss of a key customer in February 2018. Peggy advised that the sale team was working hard to source new contracts. A summary financial position of the Company as at 31 October 2018 was presented as follows: Current AssetsAmountAccounts Receivable500,000Cash at BankNilNon-Current Assets Plant and Equipment1,500,000Current LiabilitiesAmountATO1,500,000Trade Creditors500,000Loan account to Alice500,000CBA overdraft (unsecured)1,000,000 The Company’s overdraft facility…

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Company-Law-a….docx