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It is submitted therefore in addition to the imposing liability on director or any
person managing the company for fraudulent and insolvent trading, the main shift of
the Act that should be made is in respect of the solvency requirement. The Act
should include the solvency test, namely whether at the time the act in question the
company is insolvent or insolvency would ensues from it in any action affecting
creditors. This solvency concept has been adopted in relation to company purchasing
its own shares during the financial crisis in 1998. It has been included in section 67A
of the Act that company is allowed to purchase its own shares provided the company
is solvent at the date of the purchase and will not become insolvent by incurring the
debts. 14 In other words directors should ensure that their action will not affect the
company’ solvency or that at the time the act was committed the company is solvent.
The global financial crisis has subjected companies to considerable stress and has
exposed the weakness of international financial regulation. At the same time it has
sharpened our awareness of the link between credit, liquidity and solvency. It is
important that Malaysia has in place laws which reflect these links and monitor
directors’ and executives’ conduct not only in the interests of shareholders and
creditors but also in the interest of the economy as a whole.
14 See section 67A(2)(a) of the Malaysian Companies Act 1965.
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