LFS - Some Past Year Question

Commercial Law - Past year papers

Individual Bankruptcy & Company Insolvency


Individual Bankruptcy

see www.ipto.gov.sg

• 1. What is bankruptcy?
  Bankruptcy is a process by which a borrower of money is declared by the High Court to be unable to repay the loan and recovery of the loan is conducted in an orderly manner. The High Court usually appoints the Official Assignee to administer the bankruptcy estate which includes the selling of assets, registration of creditors' claims and paying dividends to a bankrupt’s creditors.
• 2. Who is the Official Assignee?
  The Official Assignee is a public servant and an officer of the Court. In the vast majority of cases, the High Court will appoint the Official Assignee as the trustee and receiver of the estate once a Bankruptcy Order is made. The Official Assignee will administer all your affairs in bankruptcy. Alternatively, the Court may appoint a private trustee in place of the Official Assignee if your creditors so request.
• 3. What is the Official Assignee's role?
  The Official Assignee's role is two-fold; to realise as much assets as possible for distribution to creditors and to assist you in obtaining a discharge from bankruptcy. As an administrator of the bankruptcy estate, the Official Assignee also has the duty to investigate your conduct while you remain in bankruptcy. The duties of the Official Assignee include resolving creditors' claims through a legal process, payment of dividends and applying to the High Court for your discharge from bankruptcy. In situations where there are disputes between you and your creditors regarding the amount of a debt or the amount of payment of the debt, the Official Assignee will act as mediator to assist in reaching a mutually acceptable proposal.
• 4. Why should I avoid bankruptcy?
  You should avoid bankruptcy for these reasons:
  
  

  • Social stigma on being declared a bankrupt;
  • Your assets become vested in the Official Assignee and divisible among your creditors;
  • A statutory requirement to file your Statements of Affairs and Income and Expenditure statements, and thorough investigations by the Official Assignee into your financial affairs;
  • Monthly payments to your bankruptcy estate for the benefit of the creditors;
  • Disclosure of bankruptcy if you intend to obtain credit of more than S$500 from others;
  • Restriction on overseas travel; and
  • Inability to manage a business or act as director of companies without approval of the Court or the Official Assignee.
• 5. How do I become a bankrupt?
  You can become a bankrupt on the actions of your creditor. If you are unable to pay your debts of at least S$10,000, the Court may declare you a bankrupt upon the petition of a creditor. Before filing a bankruptcy petition, a creditor would issue a notice known as a Statutory Demand, demanding payment from you. If the payment is not met within the time stated in the Statutory Demand, the creditor will file a petition in the Court and a hearing date will be given. If payment is not made by the hearing date, the Court may proceed to make a Bankruptcy Order and declare you bankrupt.
  
  Do not ignore your creditors' letters of demand and Statutory Demands, or Writs of Summons from the Court. This will only compel your creditors to commence bankruptcy proceedings against you. You can be made a bankrupt even if you refuse to respond to your creditors or accept legal documents presented upon you.
• 6. What alternatives are there to bankruptcy?
  The Official Assignee is a public servant and an officer of the Court.
  
  

  • Private Arrangement
  • Voluntary Arrangement
  • Court Dispute Resolution
  • Debt Repayment Scheme

Company Winding Up

• What is liquidation or winding-up?
  Overview
  Liquidation or winding-up is a process where the assets of a company are seized and realised, the resulting proceeds are applied in discharging all its debts and liabilities, and any balance is then distributed among the members of the company according to their rights and interests, or otherwise dealt with as the constitution of the company directs.
  
  The general purpose of winding-up a company can be one or both of the following:
  
  

  • to ensure a just distribution of the company's assets among creditors and contributories
  • to terminate the company's existence by its eventual dissolution.

  
  
  Just distribution of assets

  ---

  The company's assets and affairs pass into the hands of an independent liquidator whose powers, duties and functions are regulated by the Companies Act. The liquidator will investigate into the company's affairs and the conduct of the company's officers, and make the appropriate recovery from them. All business is ceased.
  
  The rights of unsecured creditors against the company's assets are virtually "frozen" upon the commencement of the winding-up. Thus, a further deterioration of the company's financial position and proliferation of its liabilities is averted;
  
  Unsecured creditors are paid on a pari passu basis, i.e. they are paid out of the company's assets equally. Any balance is then distributed among the contributories of the company.
  
  
  Reasons for termination of company's existence

  ---

  
  

  • Company has ceased business activities
  • Management deadlock
  • Oppression - shareholders dispute under Section 216 of the Companies Act (Cap 50)
  • Corporate or financial restructuring of the group to which the company belongs
  • Minimise tax liabilities or maximise tax advantages for the group to which the company belongs
  • Breach of statutory provisions, including offences committed
  • Company acting outside its scope of activities
• 2. What are the various types of winding-up?
  Members' voluntary winding-up
  The members of the company may pass a resolution that the company be wound up and that a liquidator be appointed. This mode of winding-up is adopted where the company is able to pay its debts in full within 12 months after the announcement of winding-up. Winding-up n commences at the time of passing of the resolution.
  
  Creditors' voluntary winding-up
  If the company is not able to meet its liabilities, the company can convene a meeting of its creditors to consider its proposal for a voluntary winding-up of the company. If a resolution is passed in favour of the winding-up, the company will appoint a liquidator, subject to any preference the creditors may have as to the choice of liquidators.
  
  Compulsory winding-up
  Under Section 253 of the Companies Act (Cap 50), the company itself, creditors, contributories, liquidator, judicial manager or the Minister may present a petition to the High Court for the winding-up of the company.
  
  Circumstances where a company may be wound up by the Court include:
  
  

  • when the company is unable to pay its debts
    The company is deemed unable to pay its debts under Section 254(2)(a) of the Companies Act if a company's creditor, who is owed more than S$10,000, has served a demand for the sum owing at the registered office of the company, and the company has not paid this sum for three weeks thereafter.
  • when the Court is of the opinion that it is just and equitable that the company be wound up Section 254(1) of the Companies Act states all the grounds under which the Court may liquidate a company:

  
  The petitioner has to pay a deposit for the winding-up application to the Official Receiver, and the Court may appoint the Official Receiver or an approved company auditor to act as the liquidator of the company. The winding-up commences at the date of the presentation of the winding-up petition.

Investment Law - Structures for Investements

Investments Structures


Thus topic requires students to appreciate the various structures for holding their investments and the reasons ie. the advantages and disadvantages of the various structures. With this, students will understand that there are more than one way to hold an investment and the investor will be able to choose from these structures to one that best suites his objective.

Some of the structures are :-

Personal Name
Sole Proprietorship
Partnership
Limited Liability Partnership (LLP)
Company
Foreign Offshore Companies
(http://en.wikipedia.org/wiki/Offshore_company)
Trust


Some of the factors to consider in each of the structure:-

Cost of Registration
Image
Tax
Registration process
Confidentiality
Liability
Succession
Raising Capital.


Some of the following website offer a good comparison:-

Private Limited Company

The technical term for a private limited liability company in Singapore is Private Company Limited by Shares. Most of us just call it private limited company. Most of the small to mid-size companies in Singapore are incorporated as private limited companies. A private limited company's name in Singapore normally ends with Private Limited or Pte Ltd.

A private limited company is the most advanced, flexible, and scalable type of business incorporation in Singapore. It's also the most preferred type of Singapore business entity for serious entrepreneurs (as opposed to sole proprietorship or limited liability partnership). Detailed information about setting up a private limited company can be found in Singapore Company Registration guide.

Advantages

1. Separate Legal Entity : A private limited company has its own legal identity, separate from its shareholders and its directors. It can acquire assets, go into debt, enter into contracts, sue or be sued in its own name.
2. Limited Liability: The liability of the members to contribute to the debts of the company is limited to the amount that they each agreed to contribute as capital to the company.
3. Perpetual Succession: The company's existence does not depend on the continued membership of any of its members. Ease of transfer of shares or changes in shareholders, ensures that company continues to exist even in the event of death, resignation or insolvency of shareholders or directors.
4. Ease of raising capital: You can raise capital for expansion or other purposes, by bringing in new shareholders or issuing more shares to existing shareholders. Investors are more likely to purchase shares in a company where there usually is a separation between personal and business assets. Also, most banks prefer to lend money to limited companies.
5. Credible Image: As an incorporated business entity, it commands a better image than a sole proprietorship or a partnership firm, and investors will be more willing to become part of the company as it demonstrates a vision to grow and expand. As a Pte Ltd company, your business will be taken more seriously by your potential clients, suppliers, bankers, and other professionals you will be dealing with.
6. Easier transfer of Ownership: Ownership of a company may be transferred, either wholly or partially, without disrupting operations or the need for complex legal documentation. This can be done through the selling of all or part of its total shares, or through the issue of new shares to additional investors.
7. Tax Benefits and Incentives: The effective Singapore income tax rate for companies for profits up to SGD 300,000 is below 9% and capped at 18% for profits above SGD 300,000. Furthermore, there is no capital gains tax. Singapore follows a single-tier tax policy which means once the income has been taxed at the corporate level, dividends can be distributed to shareholders tax free.

Disadvantages

1. More complex to incorporate and maintain than sole proprietorship or LLP.
2. Private limited companies must follow certain ongoing compliance requirements.
3. Closing a company is more complex than other forms of business
   

Singapore Incorporation: Sole Proprietorship

Sole proprietorship is the simplest but the riskiest type of business form in Singapore. From a legal perspective, sole proprietorship is not a separate incorporated entity and therefore the owner and the business are one and the same. The owner personally owns all assets and liabilities of the business. There is no protection of personal assets from business risks and liabilities. As the sole proprietor of a business, you have unlimited liability, meaning that if your business can't pay all its liabilities, the creditors to whom your business owes money can come after your personal assets. Many entrepreneurs are usually unaware of this enormous financial risk. If the business is sued or can't pay its bills, the owner is personally responsible for the business's liabilities. We consider this a serious drawback and hence do not recommend sole proprietorship to inspiring entrepreneurs.

A sole proprietorship can only be owned by one person, usually the individual who has day-to-day responsibility for running the business. All profits of this business structure in Singapore are taxed at the personal income level.

Registering a sole proprietorship business in Singapore takes little effort and details can be found at Sole Proprietorship Registration guide.

Sole Proprietorship Advantages

1. Ease of setting up: It is the easiest and least expensive business structure to set up.
2. Owner Control: As a sole proprietor you are in complete control of all the business affairs including decision making.
3. No profit sharing: You accrue all income generated by the business.
4. Ease of termination: Terminating a sole proprietorship is easier, less time consuming and less expensive than other business entities.
5. Least compliance requirements: You are free of the obligation of filing returns annually and only need to renew your membership every year.

Sole Proprietorship Disadvantages

1. No separate legal entity: You are inseparable from your business. This makes you financially and legally responsible for all debts and legal actions against the business.
2. Unlimited liability: Creditors may sue you for debts incurred and can also obtain a court order to claim against your personal assets, including your property.
3. No corporate tax benefits or incentives: Taxes are determined at your personal income tax rate and you do not enjoy special tax benefits that are available to a private limited company.
4. Limited capital: Capital is limited to your personal finances and the profits generated by the business. Thus, business expansion is limited and difficult.
5. No perpetual succession: The business lives and dies with you as you and the business are one and the same thing.
6. Low public perception: This entity is the least preferred for serious businesses as nobody would be willing to lend you large sums of money. It is also difficult to attract high-caliber employees, or senior level executives who usually look for a more advanced form of business structure such as a private limited company.
7. Sale/transfer of all or part of the business: You can transfer the business only by the sale of business assets.
   

Limited Liability Partnership (LLP)

Among the three types of partnership business entities, LLP is the most recent and most advanced business incorporation structure. It combines the features of partnerships and companies. LLP was introduced in Singapore in 2005 through enactment of Limited Liability Partnership Act. Registering an LLP gives owners the flexibility of operating as a partnership while enjoying many of the benefits that come with a corporate body like a private limited company.

LLP is primarily meant for carrying a profession (accountants, law firms, architects, etc.) where two or more professionals would like to build a joint practice in a common field. The owners must enter into very detailed agreements about how the profits and management responsibilities are divided. It can get very complicated and generally requires the services of a lawyer to draw up the agreement. Partners in a limited liability partnership are usually responsible for cultivating their clients based on the partner's specific area of focus.

A LLP must have at least two partners at all times. An LLP is not suited for a business that carries a trade. For more details on LLP including how to incorporate, refer to Singapore LLP Registration Guide.

LLP Advantages

1. Separate Legal Identity: An LLP has a separate legal identity and can own property, enter into contracts, sue or be sued in its own name.
2. Limited personal liability: The partners of the LLP will not be held personally liable for any business debts incurred by the LLP or the wrongful acts of another partner. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission.
3. Perpetual succession: Any changes in the LLP (e.g. resignation or death of partners) do not affect its existence, rights or liabilities.
4. Ease of compliance: Compliance requirements are more complex than sole proprietorship but simpler than a private limited company.

LLP Disadvantages

1. Requires a minimum of 2 partners at all times.
2. Individual partners can commit the partnership to formal business agreements without the consent of the other partners.
3. LLPs lack the ease of ownership transfer and investment that a company structure provides.
4. No corporate tax benefits: Tax exemptions available to private limited companies are not available to LLPs. LLP is treated as tax transparent which means an LLP is not taxed as an entity. Instead each partner is taxed on their share of the

Source : http://www.guidemesingapore.com/company-setup/singapore-business-setup-entity-types.htm

Semester 2 - Commercial Law - Welcome

Hey PPL,

Sorry for the delay and I hope you all had a swell time preparing for the test. Remember that the test is only 20% and is a good simulation of the real 80% stuff you will get at the end. Keep practising.

We have now completed Formation of Contract which covered the following topics:-

Agreements
Consideration
Intention

The issues there help us determine if there was a valid contract. These are all covered in Chapters 3 - 4

I saw an interesting wikipedia outlook on Formation - particularly Consideration.

http://en.wikipedia.org/wiki/Contract

Consideration and estoppel


Consideration is known as 'the price of a promise' and is a requirement for contracts under common law. The idea behind consideration is that both parties to a contract must bring something to the bargain. A party seeking to enforce a contract must show that it conferred some benefit or suffered some detriment (though it might be trivial, see below) that is recognized by law. For example, money is often recognized as consideration, but in some cases money will not suffice as consideration (for example, when one party agrees to make partial payment of a debt in exchange for being released from the full amount).[17]

Some common-law and civil-law systems[18] do not require consideration, and some commentators consider it unnecessary—the requirement of intent by both parties to create legal relations by both parties performs the same function under contract. The reason that both exist in common law jurisdictions is thought by leading scholars to be the result of the combining by 19th century judges of two distinct threads: first the consideration requirement was at the heart of the action of assumpsit, which had grown up in the Middle Ages and remained the normal action for breach of a simple contract in England & Wales until 1884, when the old forms of action were abolished; secondly, the notion of agreement between two or more parties as being the essential legal and moral foundation of contract in all legal systems, promoted by the 18th century French writer Pothier in his Traite des Obligations, much read (especially after translation into English in 1805) by English judges and jurists. The latter chimed well with the fashionable will theories of the time, especially John Stuart Mill's influential ideas on free will, and got grafted on to the traditional common law requirement for consideration to ground an action in assumpsit.[19]

Although several rules govern consideration, the following are the principal rules.

Consideration must be "sufficient" (i.e., recognizable by the law), but need not be "adequate" (i.e., the consideration need not be a fair and reasonable exchange for the benefit of the promise). For instance, agreeing to sell a car for a penny may constitute a binding contract.[20]
Consideration must not be from the past. For instance, in Eastwood v. Kenyon,[21] the guardian of a young girl obtained a loan to educate the girl and to improve her marriage prospects. After her marriage, her husband promised to pay off the loan. It was held that the guardian could not enforce the promise because taking out the loan to raise and educate the girl was past consideration—it was completed before the husband promised to repay it.
Consideration must move from the promisee. For instance, it is good consideration for person A to pay person C in return for services rendered by person B. If there are joint promisees, then consideration need only to move from one of the promisees.
The promise to do something one is already contractually obliged to do is not, traditionally, regarded as good consideration. The classic instance is Stilk v. Myrick[22], in which a captain's promise to divide the wages of two deserters among the remaining crew if they would sail home from the Baltic short-handed, was found unenforceable on the grounds that the crew were already contracted to sail the ship through all perils of the sea. (The case has been much criticized on grounds that the ship was in port at the time of the promise.) A very specific example is the "rule in Pinnel's Case"[23], brought into the modern law of consideration by the House of Lords in Foakes v. Beer[24]. This rule is to the effect that a smaller sum of money cannot be good consideration for the release of a larger debt, though if the smaller sum is accompanied by something non-monetary in addition, for instance "a horse, a hawk or a robe", or payment is to be made early or in some special place or way, then there will be good consideration for the promise to discharge the debt. This rule has suffered some inroads recently. In Williams v. Roffey Bros & Nicholls (Contractors) Ltd[25] the English Court of Appeal held that a promise by a joiner to complete the contracted work on time, where this was falling behind, was good consideration for the contractor's promise to pay extra money. The reasoning adopted was that the strict rule of Stilk v. Myrick was no longer necessary, as English law now recognized a doctrine of economic duress to vitiate promises obtained when the promisor was "over a barrel" for financial reasons. Therefore, where the promise to pay extra could be seen as conferring a practical benefit on the promisor, that could be good consideration for a variation of the terms. The rule in Pinnel's Case has also been effectively sidestepped in England by the Court of Appeal in the case of Collier v. P & MJ Wright (Holdings) Ltd[26] which held that a promise to accept less in discharge of a pure debt (as opposed to, say, accepting reduced rent, which has long been recognized) could give rise to a promissory estoppel.[27]
The promise must not be to do something one is already obliged by the general law to do - e.g., to give refrain from crime or to give evidence in court: Collins v. Godefroy.[28]
However, a promise from A to do something for B if B will perform a contractual obligation B owes to C, will be enforceable - B is suffering a legal detriment by making his performance of his contract with A effectively enforceable by C as well as by A.[29]
Civil law systems take the approach that an exchange of promises, or a concurrence of wills alone, rather than an exchange in valuable rights is the correct basis. So if you promised to give me a book, and I accepted your offer without giving anything in return, I would have a legal right to the book and you could not change your mind about giving me it as a gift. However, in common law systems the concept of culpa in contrahendo, a form of 'estoppel', is increasingly used to create obligations during pre-contractual negotiations.[30] Estoppel is an equitable doctrine that provides for the creation of legal obligations if a party has given another an assurance [disambiguation needed] and the other has relied on the assurance to his detriment. A number of commentators have suggested that consideration be abandoned, and estoppel be used to replace it as a basis for contracts.[31] However, legislation, rather than judicial development, has been touted as the only way to remove this entrenched common law doctrine. Lord Justice Denning famously stated that "The doctrine of consideration is too firmly fixed to be overthrown by a side-wind."[32]



The balance part of Contract are :-

Terms
Vitiating factors
Discharge
Remedies

Semester 2 Investment Laws - Welcome!!

Hi Everyone,

It was good to see all of you there last week and looking forward to this evening. The assignments ought to be up soon and I will certainly brief you on this.

I found some interesting sites on MIS:-

This is a very informative Australian site:

http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Managed%20investment%20schemes

http://www.fido.gov.au/fido/fido.nsf/byheadline/Investing+in+managed+investment+schemes?opendocument


And our every "dependable" wikipedia -
http://en.wikipedia.org/wiki/Collective_investment_scheme

Here is a cut and past from my Sem 1 posting in March 2010 -

In Lecture 5 - we introduced to you a kind of financial product known as Managed Investments Schemes. (MIS) In Singapore we refer to these schemes as the Collective Investment Schemes. These schemes allow a collective effort by groups of people to pool their resources to professional and trusted entities to managed their resources to achieve financial gains. An example would be Unit Trust. Unit Trust has been extremely robust in the Singapore Financial markets offering investors a huge array of products from Tech Stocks to Property Stocks to REITS.

MIS or CIS however has a potential risk in that it depends largely on the fundamental principle of "trust". In this sense the investor trusts their monies with a central entity to manage their monies for them. If this central entity (known as the Responsible Entity) is not trustworthy, the investors may be at risk. So rather than leaving it to market forces to determine this, the laws have taken to regulating this segment.

You will therefore be required to think about -

1) What is a trust and why and how has the common law dealt with this issues;

2) What is a MIS - how is it defined and why is it defined like this;

3) Who is the Responsible Entity - what qualities does her posses and why?

4) What are the registration requirements and why do you think these are required.

5) What is the MIS is not registered?


Its really about regulating MIS. MIS is important - we need it and at the same time we need to regulate it. Do you think however that our laws have done enough or too much in their regulating efforts?


All up to you now.

SK

ALL Students

Hey Guys & Gals,

I hope you are all having fun. Take it easy and enjoy the journey. Hopefully you do this only once in your lifetime - taking law exams:)


I have tried to answer as many of your queries as I can. You have this long weekend take stock of all you have done. They key is structuring your answers and having the law in the way of cases or legislation and discuss them before applying the same.

Stay calm and go give the exams your best shot.

I met one of you at Sunset Bar last Saturday - hope that is a sign of confidence :)

ALL the best!!!!

SK