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10.6.2 Responsibility for Fraudulent Trading under Section
Section 304(1) of the Act provides:
304 Companies Act 1965 273
If in the course of the winding up of a company or in any proceedings
against a company it appears that any business of the company has been
carried on with intent to defraud creditors of the company or creditors of
any other person or for any fraudulent purpose, the Court on the
application of the liquidator or any creditor or contributory of the
company, may, if it thinks proper so to do, declare that any person who
knowingly was a party to the carrying on of the business in that manner
shall be personally responsible, without any limitation of liability, for all
or any of the debts or other liabilities of the company as the Court directs.
The section imposes personal responsibility on "any person who knowingly
carrying on the business of the company with the intent to defraud creditors …or
for any fraudulent purpose." The same section also applies to criminal liability
and this was asserted in section 304(5) of Companies Act 1965. Section 304(5)
states:
Where any business of a company is carried on with the intent or for the
purpose mentioned in subsection (1) every person who was knowingly a
party to the carrying on of the business with that intent or purpose shall be
guilty of an offence against this Act.
Penalty: Imprisonment for three years or ten thousand ringgit.
The inclusion of both civil and criminal liability in one section has resulted in a
call for a strict interpretation of the law; a higher standard of proof. 274 The Court
of Appeal in Siow Yoon Keong v H Rosen Engineering BV 275 decided that the
273 See section 340 of the Singaporean Companies Act 1967.
274 Counsel for the appellant director submitted strict interpretation is required since the section
also contained criminal liability - see Siow Yoon Keong v H Rosen Engineering BV [2003] 4
MLJ 569 at 579.
275 [2003] 4 MLJ 569 at 582.
295