7. Indri runs a soil testing business. He decides to form a company to take over...

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Finance

7. Indri runs a soil testing business. He decides to form acompany to take over the business. He is the sole shareholder andsole director. Indri sells his business to the company at aninflated price and lends the company $90,000 to help meet the costof purchase. As security for the loan, Indri arranges a mortgageover a vacant block of land, which he transferred to the company aspart of the business sale. In the first year of operation, thebusiness makes a small profit (after paying both Indri and hisdaughterâ€™s wages), but by the end of 2012 it is clear that thebuilding industry is going through a major slump. Indri becomesdesperate and works even harder. While working late into the night,Indri badly injures his hand and needs surgery. He is away from thebusiness for 2 weeks. His efforts to keep the business afloat arein vain and the company is forced into liquidation. On realizationof the assets, it is found that the company has approximately$95,000 to go towards meeting creditorsâ€™ claims of $210,000:
(i) If Indri is the only secured creditor, will he get his$90,000 back?
(ii)Can Indri claim workersâ€™ compensation for the injuries tohis hand and his time off work?

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3.8 Ratings (460 Votes)

i Yes if Indri is the only secured creditor he will get his 90000 back It was established in the landmark case of Solomon V Solomon Co that once a company has been incorporated it is a See Answer

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