GULU UIVERSITY

NAME: AMOLA ARTHUR ISAAC

REG No: 18/U/1802/GBL/PS

COURSE UNIT: INSOLVENCY & COMMERCIAL SECURITIES

LECTURER: Mr. WATMON BRIAN

Question

“The bankruptcy Order over the debtor has the effect of altering the legal status of
the debtor and deprives the debtor of ownership and rights to his/ her property.
This status carries numerous consequences which cut across various legislations in
terms of the capacities and personal freedom of the bankrupt, present and future.”
As per Ezekiel a Partner as Gulu University Law Firm.

Required.

With close reference to the relevant legislations and decided cases, write a legal
brief critically discussing the above statement.
Bankruptcy Order is stipulated as per Section 27 of the Insolvency Act that vests
the bankrupt’s estate in the care of an official receiver sighted in Section 198 of the
Insolvency Act or in the trustee without conveyance, assignment or even transfer.

Section 27 (1) of the Insolvency Act sights the trustee’s written consent or with
permission from court as a prerogative of transferring bankrupt’s estate. This is
evident as per The Official Receiver v Chande & Ors 1 where court denotes a
trustee’s written consent as valuable consideration before transfer of bankrupt’s
estate.

The effect of bankruptcy order is clearly sighted under various legislations

in terms of capacities and personal freedom of the bankrupt in present or
future as follows;

Section 188 of the Companies Act disqualifies the debtor from acting as a director
whilst taking part in management decisions. This is sighted in R v Hartley2 where
court accords credit whilst exempting any director from participating in
management decisions. This is also contrasted by Justice Madrama as per
Nahurira v Baguma & 2 ors3 where he restricts any debtor served with a
bankruptcy from taking part in management decisions.

Section 11 (a) of the Advocates Act also prohibits an undischarged bankrupt to

practice law in the courts of Uganda. This is seen by Justice Adonyo as per In the
matter of Kakyo (A debtor) 4 where he stipulates that once a debtor is unable to
pay his debt, he is exempted the opportunity to practice law in the courts of
Uganda.

1
[1960] EA 581
2
[1972] 1 All ER 517
3
Civil Suit 2014/392
4
Bankruptcy Cause 2014
Furthermore, termination of agency by a principal is adjudicated on grounds of
insolvency as per Section 135 (f) of the Contracts Act. This is revealed by Lord
Sumption in Bailey v Angove’s PTY Ltd5 where an authority of an agent may be
revoked on grounds of insolvency. According to Uganda’s jurisdiction, Justice
Madrama agrees with the above dictum as per Full Line Distributors Ltd v
Crown Beverages Ltd6 denoting that agency of an undischarged bankrupt is
terminated on ground of insolvency.

Partnership may also be dissolved where a partner is also unable to fulfill payment
of his debt as per Section 35 (2) of Partnership Act. This is portrayed in Walakira v
Walusimbi7 where court granted the dissolution of a partnership of ground of
failing to fulfill payment of debt by one partner.

Section 3 3(b) of the NSSF act empowers the Minister to revoke any appointments
of directors who are declared bankrupt thus revamping the opportunity to
acquiring such positions in prominent work place.

Disclosure of status of bankruptcy as per Section 54 of Insolvency Act by the

undischarged bankrupt is mandated before obtaining credit. This is evident as per
R v Hayat J8 where court accords due diligence from the undischarged bankrupt
to disclose his legal status before obtaining any credit.

To sum up my endorsed research, it should be noted that a bankruptcy order

denotes the debtor’s consent of vesting his estate to a trustee thus there are
various avenues that stipulate bankruptcy order in legislations.

5
[2016] UKSC 47
6
Civil Suit 2012
7
Civil Suit 2014
8
[1976] Crim LR 508