## (a) Controlling Act

**Corporations Act 2001 (Cth).**

## (b) Directors’ duties provisions engaged

- **s 180(1) — care and diligence**  
  A director must act with the care and diligence of a reasonable director. Ignoring insolvency warnings and continuing to incur credit debts engages this duty.

- **s 181(1) — good faith, best interests, proper purpose**  
  A director must act in good faith in the company’s best interests and for proper purposes. When insolvency is present or looming, the company’s interests require proper regard to creditors. Diverting a profitable contract away from the company also engages this duty.

- **s 182(1) — improper use of position**  
  A director must not improperly use their position to gain an advantage for themselves or another person, or cause detriment to the company. Diverting the contract to the director’s own separate company is the key example.

- **s 183(1) — improper use of information**  
  A director must not improperly use information obtained through their position to gain an advantage or cause detriment. This is engaged if the customer/contract opportunity was learned through the directorship.

- **s 184 — criminal counterpart**  
  If the misuse of position/information or failure to act in good faith is dishonest or reckless, criminal liability may also arise.

## (c) Insolvent trading provision engaged

- **s 588G — director’s duty to prevent insolvent trading**  
  A director contravenes this where the company incurs debts while insolvent, or becomes insolvent by incurring them, and there are reasonable grounds to suspect insolvency which the director knew or a reasonable director would know. Insolvency is inability to pay debts as and when they fall due: **s 95A**.

The facts engage **civil insolvent trading liability under s 588G(2)** for debts incurred by ordering stock on credit after insolvency was apparent. The director may face compensation liability, including under **s 588M**, plus civil penalties/disqualification. If dishonesty is proved, **s 588G(3)** creates a criminal offence.