Graham was the successful owner of a hardware store. He had great ambitions to expand his store into a nationwide franchise. Graham sold his business to Handyware (Pty) Ltd, a company that he incorporated. As purchase price for the store he received 10,000 preference shares and secured debentures issued by the company. Graham was appointed managing director of the company and he was also the only shareholder. Due to the economic downturn Handyware (Pty) Ltd was liquidated two years later. There are insuffi cient assets to pay both Graham’s secured debentures and the ordinary creditors. Handyware (Pty) Ltd also owes money to various other creditors. One of the creditors alleges that Graham ordered supplies from him while he knew the company was insolvent.Required:Advise the liquidators of Handyware (Pty) Ltd on the validity of the debentures and the possibility of holding Graham personally liable for the company’s debts. (10 marks)
