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since the company‘s paid up capital was higher than the amount claimed. It was a Court
of Appeal decision and to date it is still good law.
For certainty of the law and fairness to parties it is essential for the court to have use of
only one test to determine insolvency for the purpose of winding up. The current law is
uncertain in that the court could have used any of the tests. In New Zealand the case 5 held
that the cash flow test was the appropriate test to follow. This is due to the fact that it ties
in with the relevancy test, namely no cash flow or poor cash flow means that the
company could not pay its debts as they fall due. The law in Malaysia for a while looked
certain with cash flow for (a) and balance sheet for (c). The decision in Syarikat has two
implications:
1. The court may use a different test from the cash flow or balance sheet tests even
though it may no longer be used in other jurisdictions and considered as out dated;
2. The effect of this is that it creates uncertainty as to which test is applicable for
winding up and in doing so the court often does not take into consideration the
size of the business.
There is also difficulty in deciding the relationship between solvency, insolvency and
liquidity. The law at the moment is hard on small businesses which often have marginal
solvency and have liquidity problems. 6 The law should also to take into consideration the
size of the business. It would be ideal in the circumstances to have two separate company
law systems- one for small medium business and the other for public listed companies.
5
Commissioner of Inland Revenue v FB Duvall Limited HC AK CIV 2007-4-4-2708 [2008] NZHC 1748 at
[10].
6
See discussion in the thesis in chapter 8 at page 171-172.
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