Company Law: External Administration and Fundraising Issues Analysis

This report delves into two key areas of company law: external administration and fundraising. The first part examines the process of external administration, including voluntary and involuntary administration, receivership, and liquidation, as per the Corporations Act 2001. It analyzes a case study involving a company facing financial difficulties, employee unrest, and creditor threats, and discusses the potential application of external administration to resolve these issues. The second part focuses on fundraising, particularly the issuance of shares and the legal implications of misrepresentation and incomplete disclosures to investors. It addresses a scenario where a company's accountant provides inaccurate information, impacting investors' decisions and financial losses, and explores the relevant provisions of the Corporations Act and the Bankruptcy Act, including securities, shares, debentures, and potential remedies for investors like Bob Broke. The report highlights legal issues, potential remedies, and the importance of accurate financial information in fundraising.

Running head: COMPANY LAW
External Administrator and Fundraising
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1COMPANY LAW
Problem question: External Administration
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

2COMPANY LAW
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.
Problem question: 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

3COMPANY LAW
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.