(a) **Controlling Act:** *Corporations Act 2001* (Cth)

(b) **Directors' duties provisions engaged:**

| Provision | Key Concept |
|-----------|-------------|
| **s 180(1)** — Duty of care and diligence | Directors must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise in the circumstances; includes duty to inform oneself about the company's financial position and to prevent insolvent trading |
| **s 181(1)** — Duty to act in good faith | Directors must exercise their powers and discharge their duties in good faith in the best interests of the company and for a proper purpose; diverting a profitable customer contract to a related entity breaches this duty by preferring the director's personal interests over the company's |
| **s 182(1)** — Duty not to misuse position | Directors must not improperly use their position to gain an advantage for themselves or someone else, or to cause detriment to the company; the diversion of the contract constitutes improper use of the director's position for personal gain |

(c) **Insolvent trading provision engaged:**

| Provision | Key Concept |
|-----------|-------------|
| **s 588G** — Duty to prevent insolvent trading | A director has a duty to prevent the company from incurring a debt if: (i) the company is insolvent at the time, or becomes insolvent by incurring that debt; and (ii) there are reasonable grounds for suspecting insolvency; the director's knowledge of stopped payments, lack of funding, and the bookkeeper's warning establish reasonable grounds for suspecting insolvency, yet the director continued to order stock on credit, thereby causing debts to be incurred while insolvent |