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In New Zealand, the law on disqualification is contained in section 385 of the Companies Act 1993. Section 385 empowers a Registrar to prohibit a person from managing the company in relation to a company which is in insolvent liquidation: a) has ceased carrying on business due to its inability to pay its debts when they become due; b) has execution return unsatisfied in whole or in part; c) is in receivership; or d) has entered into arrangement or compromise with creditors. The conditions that must be satisfied before a Registrar can exercise a disqualification order are provided in section 385(4) Companies Act 1993. The Registrar can invoke the section if within five years prior to the notice of disqualification, the person is a director or took part in the management of the company and is satisfied that the person is wholly or partly responsible for the company being in a state referred to in section 385(1) above. 264 Alternatively, a Registrar can issue a notice of disqualification if he or she is satisfied that within five years before the notice given, the director is a person who took part in the management of two or more companies to which the section applies. 265 The director or the person responsible for the management of the company has a defence under the section if he or she can satisfy the Registrar that the mismanagement did not cause the failure 266 or that it would not be just and equitable to exercise the disqualification order. 267 (i) the manner in which the corporation was managed was wholly or partly responsible for the corporation failing; and (ii) the disqualification is justified." 264 Section 385(4)(a) of the New Zealand Companies Act 1993. 265 Section 385(4)(b) of the New Zealand Companies Act 1993. 266 Section 385(4)(a)(i) of the New Zealand Companies Act 1993. 267 Section 385(4)(a)(ii) of the New Zealand Companies Act 1993. 376
As a result of the recommendations by the Corporate Law Reform Committee (CLRC) 268 amendments have been made to section 130A. The current section states that the person must be a director of a company that went into insolvent liquidation 269 and is also a director of other companies which went into insolvent liquidation within five years of the first-mentioned company doing so. 270 Further, it must be shown that the director‘s conduct in the company makes him unfit to be concerned with its management. 271 This section is similar to section 300 of the UK Companies Act 1985 and, to a certain extent, to section 206D(1)(a) of the Australian Corporations Act 2001. 272 Generally the disqualification provisions in all jurisdictions aim to prevent a director who is responsible for the company insolvency from acting in the same capacity in another company. As a result of this order, the public interest element has also been addressed since the public as well as the creditors are being protected from unscrupulous directors. Although the sections have the same intention and in most parts of enforcment are the same, there are some differences which it is essential to look into. Section 6 of the UK CDDA 1986, deals with a person who is a director of an insolvent company who is deemed to be unfit for the management of the company. In the context of the section, insolvency relates to the liquidation of a company when 268 Malaysian Corporate Law Reform Committee ―A Consultative Document on Review of Criminal, Civil and Administrative Sanctions in the Companies Act 1965‖ (2007) at [5.9-5.10] [CLRC ―Sanction‖] 269 See section 130A(1) (a)(i) of the Malaysian Companies Act 1965. 270 See section 130A(1) (a)(ii) of the Malaysian Companies Act 1965. 271 See section 130A(1) (b) of the Malaysian Companies Act 1965. 272 Similarity in respect of the court‘s authority to make a disqualification order against a person who was involved within the last seven (7) years in two (2) or more companies that have failed financially.- see section 206D(1) (a) of the Australian Corporations Act 2001. 377
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http://researchcommons.waikato.ac.n
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ABSTRACT This study examines the le
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TABLE OF CONTENTS ABSTRACT i ACNOWL
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CHAPTER 5 THEORY OF THE CORPORATION
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7.3.3.3 Distribute its Capital to M
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10.2.5.1 Meaning of Insolvency 10.2
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10.6.2.2 Carrying on of any Busines
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CHAPTER 12 CONCLUSION AND RECOMMEND
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CLC Australian Company Law Cases CL
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Stanford LR Stanford Law Review Ste
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Facia Footwear Ltd (in administrati
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Re Avon Chambers Ltd [1978] 2 NZLR
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Re Produce Marketing Consortium Ltd
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Ultraframe (UK) v Fielding & Ors [2
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Mountford v Tasman Pacific Airlines
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Australia 3M Australia Pty Ltd v Ke
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Linton v Telnet Pty Ltd (1999) 30 A
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Malaysia Abdul Aziz bin Atan v Lada
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Perman Sdn Bhd & Ors v European Com
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Other Jurisdictions Singapore Rahj
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Companies Act 2006 Section 60(3)(c)
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Section 993 Section 993(2) Section
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Insolvency Act 1985 37, 70 Insolven
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Section 251 255 Part II Schedule 6
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Section 52(1) Section 52(2) Section
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Section 272(2) Section 272(2)(a) Se
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Section 385(4)(b) Section 385(4)(b)
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AUSTRALIA Absent Debtors Act (NSW)
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Section 206D(1)(b)(b)(ii) 374 secti
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Section 588FE(2)(a) Section 588FE(2
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section 588H (5) 241 Section 588H(6
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Section 598(3)(b) Section 598(3)(c)
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Bankruptcy Act 1967 MALAYSIA Sectio
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Section 130A(6) 391 Section 131 221
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Companies Regulation 1966 Regulatio
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CHAPTER 1 THE STRUCTURE OF THE THES
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A discussion of directors’ duties
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The far-reaching implication of cor
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2.2.1 The United Kingdom The common
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2.2.3 Australia Australia has been
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CHAPTER 3 LITERATURE SURVEY - AN OV
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shareholders, had failed to mitigat
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was mainly responsible for the chal
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3.3 Interests in the Company-Shareh
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contributed by the shareholders and
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Statutes have attempted to address
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how the matter should be dealt with
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4.2 Development of Corporate and In
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colonies. 14 The emergence of compa
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originally incorporated in order to
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usiness fraud. 42 In 1825, the Bubb
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Companies Act also reveals providin
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Companies Ordinance 1953 of Sabah a
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In 1977, the Cork Committee was app
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the Committee foresaw difficulty du
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operation and termination of a comp
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enforceability of security interest
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procedure, and dispensed with the o
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The creditors‟ protection princip
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shareholders and on personal bankru
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directors as trustees. 162 Members
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4.3.3 Development of Insolvency Leg
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In Australia, the government respon
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appointment of an administrative re
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the current statutes were not effic
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insist on protection to directors i
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and judgment to run the company. 21
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due to the difficulty in obtaining
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The Australian Law Commission in 19
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instead, enacted section 135 253 in
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4.5 Conclusion Malaysia, New Zealan
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CHAPTER 5: THE THEORY OF THE CORPOR
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needs someone to run it on its beha
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The implication of the decision is
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English decisions as guidance and t
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Shareholders who have to incur high
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interests of shareholders by maximi
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situation, directors have a duty to
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concluded purchasing goods from thi
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stipulates directors “may conside
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subsidiary and may continue to pros
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A holding company may use a subsidi
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section 187 of the Australian Corpo
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its holding company), act in a mann
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is just and equitable, to make an o
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Syndicates (NZ) Limited (in liq) 13
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a) Extent to which the Related Comp
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That the management did not differe
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equirement of insolvency and it doe
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The House of Lords in Woolfson v St
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subsidiary. Abdul Malik J held that
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defendant company. During a meeting
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Uniphoenix Corporation Bhd v Raymon
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justice alone is not sufficient; th
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lenders, employees, suppliers and c
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company and as the residual claiman
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The claim that shareholders‟ righ
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particularly lack of effective mana
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management of the companies. Credit
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players‟ interests intertwine wit
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important for directors to build lo
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Despite having included favourable
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at the intersection of a number of
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Directors must weigh any particular
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Directors will also enlist the serv
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Contractarians regard employees in
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terms to their liking, they either
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to boycott the company. 134 The com
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On the other hand, the duty owed to
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and experiences in order to dischar
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CHAPTER 7: A CONCEPTUAL ANALYSIS OF
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Economists divided real capital whi
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the transformation of shares as rea
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the company‟s ability to pay its
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purchase or will not become insolve
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available where special resolution
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The idea that maintaining share cap
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must be satisfied by the company in
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7.4 Conclusion The doctrine of capi
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and once a resolution is passed, to
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The term 'insolvency' has also long
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equivalent to medical negligence ca
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meaning of inability to pay debts.
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It is important to distinguish as t
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long as the accounts give true and
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current assets must be taken stock
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cases the presumption of insolvency
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It is interesting to note in reachi
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CHAPTER 9 THE COMMON LAW DUTIES OF
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Voluntary creditors can be divided
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are not personally liable for any l
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confidence, a trustee who has been
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interests of various parties in the
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overriding duty is to the sharehold
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to look at the directors‟ purpose
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9.3.3 Duty not to Fetter Discretion
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The decisions of the Federal Court
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case, directors should disclose the
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misconception that the case law and
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other reference as to the developme
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Australia and Malaysia have express
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out “ ...the judgment is in the b
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the prospect of success as well as
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judge adopted the principle of iden
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individual trading through a compan
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liability can be imposed on them wh
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liquidators when it is insolvent. C
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CHAPTER 10 DIRECTORS’ DUTY TO PRE
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Malaysia did not make any changes o
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interpretation of these provisions.
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sum of money that is owed or due.
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Hence, action can be brought agains
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Directors in Australia can be held
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to the director to prove that he or
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expect that the company was solvent
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In the case of Secretary of State f
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trading at a deficit. 64 In other w
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maintained in section 213 of the In
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not „a party‟ if he knew that m
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econcile the two judgments with one
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carrying it on (whether because of
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10.3.1.3 For any other Fraudulent P
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company. In this aspect, section 21
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to Australia and New Zealand which
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even though it was evident from the
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the steps taken were with the aim o
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decisions. 150 Therefore, directors
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The Law Commission proposed that th
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to reform the law, namely to reduce
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A similar issue was raised in the E
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The decision was later upheld by th
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10.4.3 Duty in relation Obligation
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fraudulent purpose.” 201 Although
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from the carrying on of the busines
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The first civil version of the inso
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amounts. 223 In Hussein v Good, 224
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of law of contract. The court must
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defendant. 244 Therefore, a directo
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additional capital, as well as a re
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trading without any other action ta
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Another defect of the section is in
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argue that there are reasonable gro
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10.6.2 Responsibility for Fraudulen
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Siow Yoon Keong v H Rosen Engineeri
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The courts have acknowledged that t
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The defendant in the case relying o
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To date, there have been few cases
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ability of the company to pay off i
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can be disqualified from taking par
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power to do so is an archaic equita
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is for a short period of time. This
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ights against the company are froze
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involves a situation where the comp
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11.2.3 Winding-up Liquidation is a
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11.2.3.1 Effects of Successful Avoi
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transactions, 59 the provisions cle
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11.2.3.1.2 Recovery from Third Part
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Page 405 and 406: also be enforced by the company. 11
Page 407 and 408: The court has the power if it think
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Page 421 and 422: ecause the court considered that it
Page 423 and 424: It should be noted that Re Cyona Di
Page 425 and 426: 11.3.7.2.3 Duration The court also
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Page 433 and 434: Since section 304(1) originates fro
Page 435 and 436: 11.3.8.2 Problems of Enforcement/Pr
Page 437 and 438: However, extracting promise of inde
Page 439 and 440: In relation to an action against a
Page 441 and 442: Investments Commission is entitled
Page 443 and 444: The position in Australia has clear
Page 445: Disqualification on the grounds of
Page 449 and 450: exercised by the Registrar or the O
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Page 453 and 454: The court has to deduce evidence of
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Page 457 and 458: 11.4.2.2 Court’s Order Section 6
Page 459 and 460: of disqualification. 322 However, t
Page 461 and 462: mitigating factors considered by th
Page 463 and 464: 11.5 Other Remedies 11.5.1 Mareva I
Page 465 and 466: for under the Act. 348 The action p
Page 467 and 468: of trust or breach of duty in relat
Page 469 and 470: CHAPTER 12 CONCLUSION AND RECOMMEND
Page 471 and 472: The separate legal personality conc
Page 473 and 474: deemed to be an alien concept to Br
Page 475 and 476: positive action to minimize losses
Page 477 and 478: insolvent. In Malaysia, there is no
Page 479 and 480: BIBLIOGRAPHY BOOKS and ARTICLES AHM
Page 481 and 482: BENNETT, Howard, 'Late Floating Cha
Page 483 and 484: COBURN, Niall F, 'Insolvent Trading
Page 485 and 486: http://ssrn.com/abstract=988944 at
Page 487 and 488: FISHER, Gregory, LEE , Janet and JO
Page 489 and 490: GUNASEKARA, Gehan and TOY, Alan, 'L
Page 491 and 492: HOPT, Klaus J., 'Comparative Compan
Page 493 and 494: KEAY, Andrew and Murray, Michael, '
Page 495 and 496: McCHESNEY, Fred S., 'Economics, Law
Page 497 and 498:
OTTOLENGHI, S, 'From Peeping Behind
Page 499 and 500:
ROSS, Mike, Corporate Reconstructio
Page 501 and 502:
SCHWARTZ, Alan, ‗A Normative Theo
Page 503 and 504:
WALTERS, Adrian, 'Void Dispositions
Page 505 and 506:
WORTHINGTON, Sarah, 'Subrogation Cl
Page 507 and 508:
REPLIES TO EXAMINERS APPENDIX 1 Pag
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Page 220-it is asserted that direct
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What are the criteria for determini
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addition it provides incentive for
Page 515 and 516:
See also Secretary of State for Tra
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Most jurisdictions in Australia hav
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