Notes Proceedings Consequent TO Bankruptcy Order PDF

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PROCEEDINGS CONSEQUENT TO BANKRUPTCY ORDER [1] FILING STATEMENT OF AFFAIRS BY BANKRUPT ◍A bankrupt is under duty to disclose his affairs (rights & liabilities) to the DGI by way of a statement of affairs. ◍S8(3): within 24 hours, the bankrupt shall file an affidavit in the DGI; statement of the names & residences of all the partners; Principal assets & liabilities ◍S16: detailed statement of affairs. • Duration – S16(2); Creditor’s petition: 21 days from the date of the order. Debtor’s petition: 7 days from the date of the order. ◍Failure is a contempt of court – s 16(3) ◍Rule 164: on how to prepare the statements – Form 37 (Statement of Affairs) ◍rule 165 - extension of time for filing. ◍Rule 219 – SOA in cases of partnership [2] PROOF OF DEBTS BY CREDITORS ▲This involves filing a statutory form which is made under oath. ▲It must be supported by documentary evidence establishing the evidence of a tangible debt (eg: judgment or bills). ▲S40, s 42 – rules under Schedule C. ▲Procedure & essentials: r 167 – 176 ▲Form 79 – proof of debt ▲Form 80 – proof of debt of workmen ▲When filed - At least 24 hours before creditors meeting – [4] CREDITORS MEETING - S15 ☘Upon statement of affairs acquired by the DGI, he has duty to call for a Creditors Meeting. ☘Purpose: • to disclose to the creditors the situations of the bankrupt ie his assets & liabilities • To ask creditors if they have any information against the debtor which may assist in the investigation. ☘S18 - At the meeting, the debtor may come forward to propose a composition of scheme of arrangement [6] COMPOSITION OR SCHEME OF ARRANGEMENT (CSA)

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It is a plan offered by the bankrupt as a means to settle debt – after the adjudication of bankruptcy. Purpose: to enable the debtor to settle his debt & escape of bankruptcy. Composition: Offer of a certain percentage of his debts to be paid as a means of settlements. Scheme of arrangement: a plan whereby the debtor is to settle his debt within a period of time.

[3] SECURED CREDITORS – S8(2) ◭The BO does not affect his rights to the security ◭However he will not be entitled to interest of his debt after the making of the BO if he does not realise his security within 12 months – S8(2A). ◭However he has 4 options to exercise; • He may surrender his security to the OA & prove for the full amount (where property is not sufficient to settle debt) • He may stand on his security & not come into the bankruptcy proceeding at all (where property is worth more than debt) • He may realise the securities & prove for the balance with the OA. • He will estimate the value of the security. If less, prove for the balance with the OA. If more, return the remainder to OA. [5] PUBLIC EXAMINATION S17 ☔Purpose - discovery of assets of the debtor. ☔Public examination of a debtor is held in court. ☔He will be examined as to his conduct, dealings, relationships, past & present actions, liabilities, causes of bankruptcy & also his antecedent transactions. ☔The DGI can probe as far as 5 years backwards to what the bankrupt has done. ☔The public examination in court will be attended by the debtor & his solicitors. ☔If the debtor refuses to attend without reasonable ground, the court may issue a warrant of arrest. ☔Procedure: S17, S31 r 143 – 149, Form 28 – 32. ☔Discovery of assets may also be made against other persons, such as wife or others related – S31.

PROCEEDINGS CONSEQUENT TO BANKRUPTCY ORDER

[7] PROCEDURE ON CSA 1) The bankrupt makes PROPOSAL in writing to the DGI. 2) The DGI convenes a MEETING OF CREDITORS – the proposal must be accepted by a simple majority. 3) The DGI calls for a SECOND MEETING where the proposal has to be confirmed by a special resolution. 4) The DGI (or the debtor) informs the COURT that the bankrupt has made CSA & that it has been accepted by the creditors. 5) The COURT is to approve or rescind the CSA. The Court shall refuse to approve if the terms of the CSA are not reasonable or beneficial to the creditors. [9] DISQUALIFICATION & DISABILITIES OF BANKRUPT

1) Disqualifications - S36 & 37 IA Other written laws, Eg: • Legal Profession Act 1976 – advocate & solicitor is disqualified from practising certificate. • Incompetent to be a trustee, company liquidator 2) Disabilities - S 38 S109 - punishment of fraudulent debtors [10] PROPERTY AVAILABLE FOR PAYMENT OF DEBTS

1) Property that does not pass to the DGI – S48(1)(a) ■ Property held on trust ■ Tool of trade, essentials 2) Property that passes to the DGI – S48(1)(b) ■ All other property: – Belongs to or vested in the bankrupt at the time of the AOB is committed. – Acquired by the bankrupt between the commencement of bankruptcy & the date of discharge – eg salary, pension. ■ Right & power over property which would accrue in favour of the bankrupt at the commencement of the bankruptcy or before discharge (Capacity to take proceedings) ■ Property under the reputed ownership. [13] CASE Re Khor Bak Kee [1936] ☔4 months before the debtor was adjudicated bankrupt, he sold his interest in a piece of land to his wife for for $100. ☔The wife sold it to a third party 2 months after the bankruptcy for $240. ☔The interest in the land was purchased by the bankruptcy 20 years before that for $420. ☔On the OA’s application, the court set aside the two conveyances declaring them to be fraudulent & void against the OA. ☔The bankruptcy was deemed to have related back to & commence at the time of the fraudulent conveyance of the land from the bankrupt to his wife. ☔As the first conveyance was void, the wife did not have any rightful title to give effect to the second conveyance.

[8] EFFECT OF COURT APPROVAL OF THE CSA

☁ S18(10A) - Upon approval of the CSA, the court may make an order annulling the BO & vesting the property of the bankrupt in the bankrupt or other persons ☁ S18(11) - The CSA will be binding on all the creditors who relates to the debts due & provable in bankruptcy ☁ S18(13) - The CSA may be enforced by any person interested ☁ S18(14) - Upon default in payment of the CSA by the debtor, the court may adjudge him bankruptcy & annul the CSA ☁The CSA has to be registered under the Rules of Registration of Deed of Arrangement (Schedule B of the Insolvency Act) – failing which is fatal & tantamount to an AOB – Re Kong Mun Cheong v OA, Malaysia [1975] 2 MLJ 131. [11] PROPERTY UNDER THE DOCTRINE OF REPUTED OWNERSHIP

☕These are goods being at the commencement of the bankruptcy are in the possession, order or disposition of the bankrupt by the consent & permission of the true owner ☕ie the goods should be in the possession or control of the bankrupt in the course of his trade or business, that they should be in his possession under such circumstances to show that the bankrupt is the reputed owner. ☕Example: property on hire purchaseSuch goods generally do not pass to the DGI until the last instalment is paid. ■ However there are 3 options: – DGI can return the goods & cease to pay further instalment – If the estate has sufficient money, the DGI can continue to pay the instalments & take the goods. – DGI can exercise the right of the bankrupt by assigning the interest to the third party. ■ Re Ong Boon Lam (1926): the typewriter under hire purchase formed part of the assets of the bankrupt & will pass to the OA. [12] RELATION BACK OF THE OA’S TITLE S47 - Doctrine of relation back ♦An integral part of the bankruptcy code, in that it has a farreaching effect & consequence on the bankruptcy dealings, property, his actions in the past & any availability of an act of bankruptcy (AOB). ♦The DGI’s title over the bankrupt ’s property commences from the date of the first AOB committed within 6 months before the presentation of the petition. ♦In determining whether a particular property of the bankrupt is available for distribution, the bankruptcy is deemed to have related back & commenced at the time of the commission of the AOB on which the BO is made against him. ♦If more than one AOB was committed, the bankruptcy will be deemed to commence at the time of the commission of the first AOB within 6 months from the presentation of the bankruptcy petition....