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factors such as past conduct in relation to other companies, as well as those subsequent to liquidation. 334 The same Act provides for a criminal penalty to be imposed on any person who fails to observe the disqualification period and such person will be liable on conviction to imprisonment of not more than two years or fine or both. 335 In addition, any person who acts as a director during the disqualification period without leave of the court is personally liable for all relevant debts of the company. 336 In Australia, a person who contravenes section 206A by managing corporations may be subjected to a fine of up to $5,500 or imprisonment for one year or both. 337 New Zealand imposes a penalty of imprisonment not exceeding five years or a fine not exceeding $200,000 on a person who has been convicted of an offence under section 385(9) which relates to acting as a director of a company or taking part in the management of the company while prohibited by the Registrar. 338 In Malaysia, for the same offence the penalty is imprisonment for three years or ten thousand ringgit or both. 339 (a) where the application is for leave to promote or form a company, it is any court with jurisdiction to wind up companies, and (b) where the application is for leave to be a liquidator, administrator or director of, or otherwise to take part in the management of a company, or to be a receiver or manager of a company's property, it is any court having jurisdiction to wind up that company." For Australia, see section 206G of the Australian Corporations Act 2001; see section 385(7) of the New Zealand Companies Act 1993 and section 130A(1) of the Malaysian Companies Act 1965. 334 Secretary of State for Trade and Industry v Gray [1995] 1 BCLC 276; Re Bath Glass Ltd [1988] BCLC 329; Re Barings plc (No 5), Secretary of State and Industry v Baker [1999] 1 BCLC 433. Re Living Images Ltd [1996] 1 BCLC 348. 335 See section 13(1) of the UK Company Directors Disqualification Act 1986. 336 Section 15 of the UK Company Directors Disqualification Act 1986. 337 Austin and Ramsay above n22 at [7.191] 338 See section 373(4) of the New Zealand Companies Act 1993. 339 See section 130A(6) of the Malaysian Companies Act 1965. 392
11.5 Other Remedies 11.5.1 Mareva Injunction 340 A Mareva injunction can be a powerful tool in protecting a creditor. 341 It is a temporary measure which allows a court to restrain the company from removing its assets from the company pending the final disposal of a case. This pre-emptive remedy can be adapted in a situation where a company is insolvent prior to winding- up. This is illustrated in the case of Fawziah Holdings Sdn Bhd v Metramac Corp Sdn Bhd 342 where the Court of Appeal rejected an application by the plaintiff creditor for an order compelling the company to set aside monies to satisfy the plaintiff‘s claim in the event of a successful appeal, and instead ordered a Mareva injunction restraining the defendant from disposing of and dissipating assets up to the sums asked by the defendant. 343 The court rejected the application to order the defendant to earmark a certain sum, because it would have the effect of creating a special fund in the plaintiff‘s favour to meet his unsecured debt. This order would then be ineffective in the event of winding up, since such fund will be void for undue preference. 344 Another example of a Mareva injunction being used in favour of a creditor is illustrated in Aspatra Sdn Bhd v Bank Bumiputra Malaysia Bhd . 345 In this case, the defendant bank sued its director Lorraine for secret profits allegedly made while he 340 The term Mareva injunction is derived from the case of Mareva Compania Naviera S.A v International Bulkcarriers S.A [1980] 1 All ER 231. 341 Mareva injunction has been described as one of the ‗nuclear weapons of law‘ per Donaldson L.J in Bank Mellat v Mohammad Ebrahim Nikpour [182] Com.L.R. 158 at 159. 342 [2006] 1 MLJ 435. 343 [2006] 1 MLJ 435 at 444. 344 [2006] 1 MLJ 435 at 443, The Court of Appeal distinguished the facts of the case from that in Polly Peck International Plc v Nadir (No 2) [1992] 2 Lloyd‘s Rep 238 because, in the instant case, the relationship between the plaintiff and the defendant was between a debtor and an unsecured creditor compared to fiduciary and a beneficiary. 345 [1988] 1 MLJ 97. 393
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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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ecover the proceeds of sale or to p
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order. 83 If the value of the asset
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Without this class action, the unse
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the power to apply for a compensati
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defraud, which implies their culpab
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also be enforced by the company. 11
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The court has the power if it think
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contravention or pecuniary penalty
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Page 413 and 414: Marketing Consortium (No 2) 147 cle
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Page 421 and 422: ecause the court considered that it
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Page 425 and 426: 11.3.7.2.3 Duration The court also
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Page 429 and 430: This is similar to the case of frau
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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 and 446: Disqualification on the grounds of
Page 447 and 448: As a result of the recommendations
Page 449 and 450: exercised by the Registrar or the O
Page 451 and 452: actions which are committed with a
Page 453 and 454: The court has to deduce evidence of
Page 455 and 456: 11.4.2.1 Standard of Proof Disquali
Page 457 and 458: 11.4.2.2 Court’s Order Section 6
Page 459 and 460: of disqualification. 322 However, t
Page 461: mitigating factors considered by th
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
Page 509 and 510: Page 220-it is asserted that direct
Page 511 and 512: What are the criteria for determini
Page 513 and 514:
addition it provides incentive for
Page 515 and 516:
See also Secretary of State for Tra
Page 517 and 518:
Most jurisdictions in Australia hav
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