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Statutes have attempted to address the issue by imposing liability on directors in
circumstances where the company‟s financial position is doubtful. Most literature on this
is written on the law in the UK, Australia and New Zealand. Likewise, any comparisons
made between these statutes are in relation to these three countries. The imposition of
personal liability on directors by statute and common law has been criticized as an
erosion of the principle of limited liability. 57 Further, the use of the concept of interests of
a company as a basis to build protection for the interests of the creditors has put the
principle under a considerable degree of strain. 58
Due to different wording of the statute, the extent of directors‟ liability varies in each
jurisdiction. 59 The provisions are regarded to be overly protective of creditors and are
inherently impracticable because instead of improving directors‟ skill or catching errant
directors, they would discourage good managers from joining the company. 60 In addition,
the availability of remedies to creditors also depends on the construction of the wording
of the statute. In regard to the law in Malaysia, not much has been written on this issue
and this thesis attempts to address that.
On the issue of remedies, the relevant provisions in the Act and interpretations of the
provisions by the court are being scrutinised. It was found that courts sometimes provided
inconsistent interpretations of the Acts and therefore it is essential that the Law
Commission should be clear on the meanings of these provisions. 61 For example, the
57 Daniel Prentice “Creditor‟s Interests and Director‟s Duties” (1990) 10 OJLS 265.
58 Ibid.
59 Fidelis Oditah “Wrongful Trading” [1990] LMCLQ 205; Andrew Keay and Michael Murray “Making
Companies Directors Liable: A Comparative Analysis of Wrongful Trading in the United Kingdom
and Insolvent Trading in Australia” [2005] 14 Int. Insolv. Rev 55; Justin Dabner “Trading Whilst
Insolvent” (1994) 17 UNSW LJ 546.
60 Dale Oesterle “Corporate Directors‟ Personal Liability for Insolvent, Reckless and Wrongful Trading: A
Recipe for Timid Directors, Hamstrung Controlling Shareholders and Skittish Lenders” (2001) 7 NZBLQ
20.
61 Chris Noonan and Susan Watson “Rethinking the Misunderstood and Much Maligned Remedies for
Reckless and Insolvent Trading” (2004) 21 NZULR 26; Mike Ross “Assessing Damages for Reckless
Trading” (2002) NZLJ 178; Richard Schulte “Enforcing Wrongful Trading as Standard of Conduct for
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