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In New Zealand, section 301 allows a liquidator, creditor or shareholder to bring an
action, although in most cases sections 135 and 136 are invoked at times when the
company is already wound up. The requirement that the company has to be in
liquidation before the sections can be invoked may result in creditors whose
companies are not wound up being left without compensation. Apart from taking
action under section 301, shareholders have the right to bring a derivative action
under section 165 in respect of a breach of sections 135 and 136. It is argued that if
the action against directors is brought under section 165, their liability will be higher
than if it is brought under section 301 because the courts do not have discretion to
reduce the amount, unlike section 301. 250 Due to the discrepancy in the sums
awarded, depending on which statutory provision is invoked, it has been suggested
that the relevant factors for the court to consider should be the knowledge and
conduct of creditors. 251
Creditors are reluctant to take proceedings because they would have to pay into the
company for distribution according to the insolvency rules. Hence, in most cases it is
the issue of costs exceeding benefits obtained. In addition, a company may also bring
an action for breach of section 135 against the director on the basis that he or she has
breached a duty owed to the company.
In Malaysia, an individual creditor has a cause of action under section 304(1) which
means that in order for all creditors to be compensated, multiple proceedings are
unavoidable. This also indicates that only creditors with adequate means will be able
to recover losses from directors since court proceedings are costly. In this situation, it
can be argued that the objective to protect unsecured creditors is not met and some
creditors may be precluded from receiving any compensation. In this regard, the
Australian provision which requires a creditor to obtain a written consent from the
liquidator before commencing a proceeding is preferable to prevent multiple actions.
250 Noonan and Watson above n117 at 42.
251 Ibid.
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