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## Response

### (a) Controlling Act
**Corporations Act 2001 (Cth)** – the primary Commonwealth statute governing companies and directors’ duties in Australia as at FY2025–26.

### (b) Directors’ duties provisions engaged
- **Section 181(1) – Duty to act in good faith and for a proper purpose**  
  *Key concept:* A director must exercise their powers and discharge their duties in good faith, in what they believe to be the best interests of the corporation, and for a proper purpose. Diverting a profitable contract to a separate entity and continuing to trade while insolvent both breach this duty as they are not in the company’s best interests and are likely for an improper purpose (e.g. personal gain).

- **Section 182(1) – Duty not to improperly use position**  
  *Key concept:* A director must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation. Diverting a corporate opportunity (the customer contract) to a company the director owns constitutes an improper use of position to obtain an advantage.

- **Section 183(1) – Duty not to improperly use information**  
  *Key concept:* A director must not improperly use information obtained by virtue of their position to gain an advantage for themselves or someone else, or to cause detriment to the corporation. If the director relied on company‑specific knowledge about the profitable contract or its customer, this provision is also engaged.

*Note:* Section 180(1) (duty of care and diligence) may additionally be engaged by the decision to continue trading while insolvent, but the core duties engaged by the diversion of the contract are ss 181–183.

### (c) Insolvent trading provision engaged
- **Section 588G – Director’s duty to prevent insolvent trading**  
  *Key concept:* A director has a duty to prevent the company from incurring a debt if, at the time the debt is incurred, the company is insolvent or becomes insolvent by incurring that debt, and there are reasonable grounds for suspecting insolvency. The director here continued to order stock on credit despite unpaid debts, no realistic funding prospects, and explicit warnings of likely insolvency. Breach of this duty exposes the director to personal liability for the debts incurred (civil penalty under s 588G(2)) and potentially to criminal liability if dishonesty is proved (s 588G(3)).