LW/OCT2010/LAW585

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UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

INSOLVENCY II

COURSE CODE

LAW585

EXAMINATION

OCTOBER 2010

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES
This question paper consists of three (3) parts :

PART A (5 Questions)
PART B (3 Questions)
PART C (1 Question)

2.

Answer ALL questions in PART A and PART C and any TWO (2) questions in PART B in
the Answer Booklet. Start each answer on a new page.

3.

Candidates are allowed to bring in the following materials (unannotated):

(i)
Bankruptcy Act 1967
(ii)
Bankruptcy Rules 1969
(iii)
Companies Act 1965
(iv)
Companies (Winding-up) Rules 1972

4.

Do not bring any material into the examination room unless permission is given by the
invigilator.

5.

Please check to make sure that this examination pack consists of:
(i)
the Question Paper
(ii)
an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 4 printed pages
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LW/OCT 2010/LAW585

PART A
QUESTION 1
Explain the test of inability to pay debts under Section 218(1)(e) of the Companies Act 1965.
(6 marks)
QUESTION 2
Distinguish between a secured creditor and a preferential creditor.
(6 marks)
QUESTION 3
State the purpose and the effect of disclaimer of property under section 296 of the
Companies Act 1965.
(6 marks)

QUESTION 4
Explain the distinction between a 'receiver' and a 'receiver and manager'.
(6 marks)

QUESTION 5
State three reasons for which a company becomes insolvent.
(6 marks)

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LW/OCT2010/LAW585

PARTB
QUESTION 1
Taylor is the managing director of Taylor Construction Bhd, a construction company. The
company had entered into various contracts with Swift Bhd, which supplies building
materials. In 2009, Taylor was hit by financial difficulties. Despite advice from the company's
accountant, Taylor continued to trade with intention to bring the company to solvency. In July
2009, Swift Bhd filed a winding up petition against Taylor Construction Bhd and the court
granted a winding up order. Consequently, a liquidator was appointed and upon
investigation, he discovered that Taylor Construction Bhd had taken delivery of some
construction materials under contracts with Swift Bhd. The said goods had been supplied
under the contracts with retention of title clauses.
Answer the following separate and independent questions:
a)

Advise the liquidator as to whether there is a possibility that Taylor can be made to
contribute towards the Swift's assets.

b)

Advise the liquidator as to whether he can recover the goods supplied under the
contracts with Swift Bhd.
(20 marks)

QUESTION 2
With reference to decided cases and relevant statutory provisions, discuss the duties of a
liquidator and the effects of liquidation on receivership.
(20 marks)
QUESTION 3
Papa Sdn Bhd ("Papa") issued two secured debentures in favour of Kaya Bank Bhd ("Kaya")
in consideration of overdraft facilities amounting to RM200,000.00 granted to Papa by Kaya.
The security was made over all the undertakings and assets of Papa. The debentures were
lodged and registered with the Registry of Companies in 2005
Papa later made an order of computers and other electronic equipments from Compserve
Sdn Bhd which cost RM70,000.00. In order to secure the payment of the money, Papa
created a charge in favour of Comperve Sdn Bhd over its stock-in-trade in 2006. The charge
was duly registered under the Registry of Companies.
Papa subsequently obtained a loan from Maju Finance amounting to RM200,000.00 and
charged its shop house as security in 2009. The charge was duly registered under the
National Land Code and with Registry of Companies.
Due to financial difficulties, the employees of Papa were not paid their salaries for three
consecutive months.
By July 2010, a petition to wind up the company was presented to the court to compulsorily
wind up the company. Determine the ranking of all the creditors involved.
(20 marks)
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LW/OCT 2010/LAW585

PART C
QUESTION 1
Ceti Bank Berhad (the bank) obtained a judgment against Muflis Berhad (the company) on
1 st April 2009 for a sum of RM500,000.00 In January 2010, the bank issued a statutory
notice of demand which reads as follows:
"Take note that you are required to pay Ceti Bank Berhad, the following:
i)

the principal sum of RM400.000,

ii)

interest at 8% per annum on the principal sum of RM400.000.00 from 1 Nov 2007 till
full and final settlement, and

iii)

costs of RM2000;

Being the outstanding amount due under the judgment in default of appearance, failing
which you shall be deemed unable to pay your debt and appropriate action will be taken for
the winding up of Muflis Berhad".
The said notice was served on the company on 30 January 2010. Muflis Bhd ignored the
notice and on 25 February 2010, the bank issued a winding up petition, which was filed at
the High Court. Five days later, the bank filed an affidavit verifying the petition. The said
petition was served on Jamal, the solicitor for Muflis Bhd at his legal firm.
At the hearing, Muflis Bhd argued that the company's assets, if realised, are enough to pay
off the debt and thus it is not insolvent. At the same time, the company also argued that no
advertisement of the petition was ever placed in the newspapers.
Advise Muflis Bhd whether it has any grounds to oppose the statutory notice of demand and
the winding up petition.
(30 marks)

END OF QUESTION PAPER

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