148. Restriction on undischarged bankrupt Flashcards

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  1. Restriction on undischarged bankrupt
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General overview
[148.01] This section disqualifies a person from acting as a director or manager of a company when he is an undischarged bankrupt. It is obvious that an undischarged bankrupt should not be allowed to manage companies because of the concept of limited liability of the members and separate legal existence of the company from its members and directors. Such disqualification is automatic.

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2
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Undischarged bankrupts

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[148.02] An undischarged bankrupt shall not participate in the management of a corporation: PP v Lim Hua Tong Jasons [2005] SGDC 122, DC where Aedit Abdullah DJ imposed a $5,000 fine on the accused; cf PP v Lee Kee Fatt (MA 49/94/01) where a custodial sentence of three months’ imprisonment was imposed on the accused. Section 148 serves the important role of safeguarding the interests of the business’ existing creditors, as well as the interests of potential creditors of the business, who might be unaware of the financial status of persons in charge of such businesses. The prohibition also serves to protect the greater public interest by preventing the undischarged bankrupt from misusing the corporate structure for collateral purposes to the detriment of stakeholders such as the company’s shareholders, the business’ trading partners and suppliers, consumers, and the general public who depend on the services and/or products of such businesses or companies: Yap Guat Beng v PP [2011] 2 SLR 689; [2010] SGHC 354, HC. The predominant sentencing consideration was to evaluate the applicability of the deterrent principle with a view to protecting the interests of creditors and the public from harm caused by the bankrupt’s management of the business. Generally, in the absence of loss or harm to third parties, or dishonesty, a fine would be a sufficient sentence. A custodial sentence would be appropriate where there existed one or more aggravating circumstances. Although the lack of any aggravating circumstances might not necessarily preclude the imposition of a custodial sentence, the sentencing judge ought to give due consideration and justification whenever a custodial sentence was imposed in the absence of recognised aggravating factors: Yap Guat Beng v PP (above); distinguished PP v Choong Kian Haw [2002] 2 SLR(R) 997 that fines were, in general, not a suitable means of punishment of bankrupts.

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Foreign bankruptcies

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[148.03] The question whether a foreign court has jurisdiction in bankruptcy over a particular person is a question of conflict of laws, whether it had “territorial competence” over him: Ralli v Angullia (1917) 15 SSLR 33, CA. Indicia of “territorial competence” include residence or domicile ( Re Blithman (1866) LR 2 Eq 23 , Master of the Rolls’ Court; Sirdar Gurdyal Singh v Rajah of Faridkote [1894] AC 670, PC ) or if he was carrying on business in that country ( Wan Weng v Too Boon Chiar (1916) 1 FMSLR 279, CA ). An appearance in a foreign court to contest proceedings is not submission to jurisdiction: Re Maria Menado [1964] 1 MLJ 266, HC. Assets belonging to the debtor are not sufficient to found jurisdiction over the debtor pursuant to conflict rules

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4
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Leave of court or written permission of official assignee

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[148.04] It is well-settled law that the onus lies upon the applicant for the lifting of the disqualification to satisfy the court that he is possessed of the high degree of commercial integrity which those exercising influential managerial functions in limited liability companies should be endowed if the public is to be given adequate financial protection

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