View/Open - Research Commons - The University of Waikato

concerns the incurring of debts when there is no reasonable ground to believe the
debt will be repaid. It illustrates the recognition of the company‟s illiquidity as
common among businesses and liability should not be imposed solely on the
reason of illiquidity. A company is allowed to continue to trade with the purpose
to turn around the company‟s fortune and there is no duty on directors to take
positive steps to minimize loss.
This allows directors precious time to plan the company‟s future without rushing
to put the company into liquidation or other formal insolvency proceedings
without the possibility of personal liability breathing on their necks. 292 In
contrast, the UK wrongful trading requires directors to take positive steps to
minimize the loss to the company which often puts pressure on directors to stop
trading or subject it to formal insolvency proceedings as a means to avoid
liability. The advantage manifest from the Singaporean and Malaysian provisions
is consistent with the recommendation by the Cork Committee to allow directors
to be able to apply for anticipatory relief should their decision to continue to trade
prove to be wrong. 293
In Kawin Industrial Sdn Bhd (in liquidation) v Tay Tiong Soong 294 , the court
explained that finding an intention to defraud creditors means an intention to
deprive creditors of an economic advantage or inflict upon them some economic
loss. The decision in the case is consistent with the decision in R v Grantham 295
which stated “fraudulent trading can be made out even if it is not possible to
establish that anyone has suffered a loss.”
292 Joyce Lee Suet Lin “Fraudulent and Insolvent Trading in Singapore” (2000) 9 Int Insolv. Rev
121 at 124. Discussion in the article is on the Singaporean provisions of fraudulent and
insolvent trading but also equally applicable to Malaysia due to the exact wording of the
section.
293 Cork Report above n5 at [1798]. The objective of this recommendation was to allow directors
to continue to trade within a specific period of time without fear of personal liability. This
recommendation, however, was not taken up by the legislature.
294 [2009] 1 MLJ 723 at 732-733.
295 [1984] QB 675 at 683-684.
300