The Consequences of Bankruptcy and the Conviction of Naden

Question 1

a) The consequences of bankruptcy and the conviction of Naden

According to the section 198(1)(a) of Companies Act 2016, it mentioned that undischarged bankrupt, such as a person who has been arbitrated a bankrupt and he has not been release from his bankruptcy, then he cannot execute office as a director or involved in the management of the company,^[1]unless his get the approval of Official Receiver or the court if he want to continue be the director of company. ^[2] Furthermore, for a person as a director who has been convicted of an offence such as fraud, dishonestly, or cheating will be also prohibited to hold his directorship or handle management of the company which stated in section 198(1). ^[3] However, a person who has been convicted wishes to re-appoint or hold office as a director can get an approval of court which ruled in section 198(4).^[4] But, under section 198(6), a person shall not get an approval from court to be re-appointed as a director if only five years after he has been convicted or if he is sentenced to imprisonment, start from the date of his release.^[5] So, it mean that Naden cannot hold his directorship in the company since he has been made a bankrupt and also convicted in the performance of management in the deals of business.

b) Whether there is a contract between Naden and the third party

According to section 64, a company contact may made by a company, in writing under its common seal, on behalf of a company, orally or not, under its authority, express or implied. So the principle of agency law falls into companies, an agent represent of a company to contract with an outsider in the way of created actual or obvious authority.^[6] Furthermore, refer to section 39, there does not apply of doctrine of constructive notice, this purpose is to protect the third party who deal with a company, it said that no people shall have a knowledge or content of the company’s constitution which relating to the document. ^[7]So, back to the question, the parties that dealt with Naden may can enforce the contracts against Primaacare Sdn Bhd.

c)Removal of director in public company

For a public company, a director may be removed under the section 206. So, it is depending on what is given in a public company’s constitution or any agreement between the company and the director, refer to section 206(2), it stated that the company may remove a director by passing an ordinary resolution before the expiry date of his tenure of office. ^[8] Section 206 provides an opportunity to members in public company to remove a director if they are unsatisfied with his performance in company. Furthermore, it need to pass an ordinary resolution to remove a director, it will be passed if the vote cast is more than the half in resolution. Also, a public company cannot put a high level of exempt a position of director, and there is no effect if any action try to entrench the position of a director by having a higher percentage of votes to help the director to keep in company. In the case of Tuan Haji Ishak bin Ismail v Leong Hup Holdings Bhd ^[9] , the court held that a public company has an unrestrained right to remove a director, the court will not interfere with the decision of remove a director of shareholder in a company.