Sparks Limited sold car parts. This year it encountered financial difficulties due to an increase in the purchase of new cars as against second-hand cars and recently has failed to pay suppliers. The suppliers proceeded to file an application before the courts requesting that Sparks Limited be dissolved and wound up on the basis of the fact that it was unable to pay its debts. The court upheld the application and ordered that Sparks Limited be dissolved and wound up. It also appointed a liquidator. During the liquidation process the liquidator realised that Sparks Limited had been in a precarious financial situation for a long time and prior to the orders being placed with the suppliers. However, the directors of Sparks Limited never gave an indication that the company was in an insolvent state.Required:
(b) Explain the extent of the liability of the directors of Sparks Limited under the provisions of the Companies Act, 1995, relating to ‘Offences antecedent to dissolution or in course of winding up’. (7 marks)
