LOBO PREWRITE

Hello! I hope that in sharing my notes, I can help others who come after me in law school. If these notes do help you, please pay it forward and actively help
those who come after you as well. Law school is tough, but it can be a little better if everyone helps one another.
Now, moving more specifically to the prewrite, do note that it is not perfect, and there might be mistakes in it. But I believe that the main purpose of making a
prewrite is not have a source to copy paste from during exam, but instead, to gain a much better understanding of the big picture and see how the laws all come
together. And needless to say, this comes from making your own prewrites and not just copy pasting a senior’s one. So, please try to make your own prewrites!
I am sure it will benefit you greatly.
Cheers!

Table of Contents
1 Types of Companies .....................................................................................................................................................................................................6
1.1 Private Companies .................................................................................................................................................................................................................. 6
1.1.1 Exempt private companies ................................................................................................................................................................................................................................................ 7

1.2 Public Companies .................................................................................................................................................................................................................... 8

1.3 Small Company ....................................................................................................................................................................................................................... 8

1.3.1 Solo .................................................................................................................................................................................................................................................................................... 8
1.3.2 Group ................................................................................................................................................................................................................................................................................. 8

1.4 Subsidiary ............................................................................................................................................................................................................................. 10

1.4.1 Related Companies ..........................................................................................................................................................................................................................................................10

2 Features of the Company ...........................................................................................................................................................................................11

2.1 Separate Legal Personality ..................................................................................................................................................................................................... 11
2.1.1 Incurring Liabilities ..........................................................................................................................................................................................................................................................11
2.1.2 Contractual Capacity .......................................................................................................................................................................................................................................................11
2.1.3 Ownership of Assets ........................................................................................................................................................................................................................................................12
 2.1.4 To Sue and be Sued .........................................................................................................................................................................................................................................................12
2.1.5 Perpetual Succession .......................................................................................................................................................................................................................................................12
2.1.6 Limited Liability................................................................................................................................................................................................................................................................12

3 Piercing the Corporate Veil OR To that Effect ..............................................................................................................................................................13

3.1 Conventional Methods (NOT PIERCING) ................................................................................................................................................................................. 14
3.1.1 Guarantee ........................................................................................................................................................................................................................................................................14
3.1.2 Agency .............................................................................................................................................................................................................................................................................14
3.1.3 Tort ..................................................................................................................................................................................................................................................................................15
3.1.4 Trust .................................................................................................................................................................................................................................................................................15

3.2 Piercing the Corporate Veil .................................................................................................................................................................................................... 15

3.2.1 [-] Single Economic Entity ................................................................................................................................................................................................................................................16
3.2.2 [-] Justice of the Case .......................................................................................................................................................................................................................................................16
3.2.3 Fraud ................................................................................................................................................................................................................................................................................17
3.2.4 Evasion of Pre-existing Legal Obligation .........................................................................................................................................................................................................................17
3.2.5 “Sham or Façade” & Alter Ego .........................................................................................................................................................................................................................................18

3.3 Statutory Provisions for PCV .................................................................................................................................................................................................. 20

4 Promoters..................................................................................................................................................................................................................22

5 Company’s Constitution – ALTERATION ......................................................................................................................................................................23

5.1 Entrenching Provision............................................................................................................................................................................................................ 23

5.2 Special Resolution ................................................................................................................................................................................................................. 24

5.2.1 Bona Fide Test .................................................................................................................................................................................................................................................................25

6 Company’s Constitution – Enforcing Articles ...............................................................................................................................................................28

6.1 Enforcement by Member ....................................................................................................................................................................................................... 28

6.2 Enforcement by Non-member ............................................................................................................................................................................................... 28

7 Qua-member rule.......................................................................................................................................................................................................28
7.1 Extrinsic Contracts ................................................................................................................................................................................................................. 29
7.1.1 Constitution Incorporated into a Separate Contract ......................................................................................................................................................................................................29
 7.1.2 Effect of Constitutional Change on Extrinsic Contract ....................................................................................................................................................................................................30

8 Shareholder’s Agreements .........................................................................................................................................................................................31

9 Shares........................................................................................................................................................................................................................32
9.1 Share Issue............................................................................................................................................................................................................................ 32
9.1.1 Issuance of Ordinary Shares ............................................................................................................................................................................................................................................32
9.1.2 Issuance of Difference Class of Shares – Public Company ..............................................................................................................................................................................................33
9.1.3 Issuance of Difference Class of Shares – Private Company ............................................................................................................................................................................................33
9.1.4 Consideration for Share ...................................................................................................................................................................................................................................................34
9.1.5 Share Certificates & Share Register .................................................................................................................................................................................................................................34

9.2 Share Transfer ....................................................................................................................................................................................................................... 35

9.2.1 Unlisted Companies .........................................................................................................................................................................................................................................................35
9.2.2 Listed Companies .............................................................................................................................................................................................................................................................35
9.2.3 Other Mechanics .............................................................................................................................................................................................................................................................36
9.2.4 Restrictions on Transfer ..................................................................................................................................................................................................................................................37

9.3 Ownership of Shares ............................................................................................................................................................................................................. 38

9.3.1 Legal Owner .....................................................................................................................................................................................................................................................................38
9.3.2 Equitable Owner ..............................................................................................................................................................................................................................................................38
9.3.3 Deemed Interest ..............................................................................................................................................................................................................................................................38

9.4 Variation of Class Rights ........................................................................................................................................................................................................ 40

9.4.1 STEP 1: Identification of Class Right ................................................................................................................................................................................................................................40
9.4.2 STEP 2: Variation of Class Right .......................................................................................................................................................................................................................................40
9.4.3 STEP 3: Does the Variation Pass ......................................................................................................................................................................................................................................41
9.4.4 STEP 4: Remedies – s 74(1) ..............................................................................................................................................................................................................................................44

10 Company Management and Meetings ....................................................................................................................................................................45

10.1 Directors ............................................................................................................................................................................................................................... 45
10.1.1 Types of Directors .......................................................................................................................................................................................................................................................45
10.1.2 Eligibility ......................................................................................................................................................................................................................................................................47
10.1.3 Appointment & Removal ............................................................................................................................................................................................................................................49
10.1.4 Financial Dealings with Company ...............................................................................................................................................................................................................................51
 10.2 Procedures for Making Decisions ........................................................................................................................................................................................... 58
10.2.1 Shareholder Decisions .................................................................................................................................................................................................................................................58

11 Written Resolutions ................................................................................................................................................................................................63

11.1 Informal Decisions................................................................................................................................................................................................................. 64

11.2 Board Decisions..................................................................................................................................................................................................................... 65

11.3 Procedural Irregularities ........................................................................................................................................................................................................ 66

11.4 Division of Powers Between Board & GM............................................................................................................................................................................... 67

11.4.1 s 157A ..........................................................................................................................................................................................................................................................................67
11.4.2 Reserve Powers of GM ................................................................................................................................................................................................................................................68

12 Directors’ Duties .....................................................................................................................................................................................................69

12.1 Non-Directors* ...................................................................................................................................................................................................................... 69

12.2 Duty to Act in Good Faith (Bona Fide in the company’s interest) ............................................................................................................................................. 69

12.3 Duty to Act for Proper Purposes ............................................................................................................................................................................................ 72

12.4 Duty of Loyalty ...................................................................................................................................................................................................................... 72

12.4.1 No-Conflict Rule ..........................................................................................................................................................................................................................................................73
12.4.2 No-Profit Rule ..............................................................................................................................................................................................................................................................78
12.4.3 Director’s Own Misconduct ........................................................................................................................................................................................................................................79
12.4.4 Overlap with s 157(1) ..................................................................................................................................................................................................................................................79

12.5 Duty of Care, Skill and Diligence............................................................................................................................................................................................. 79

12.5.1 General ........................................................................................................................................................................................................................................................................79
12.5.2 Reliance on Information & Advice ..............................................................................................................................................................................................................................80
12.5.3 Delegation of Duties ....................................................................................................................................................................................................................................................80
12.5.4 S 157(1) .......................................................................................................................................................................................................................................................................81

12.6 Duty: EXTRA .......................................................................................................................................................................................................................... 81

12.7 Avoiding the Liability ............................................................................................................................................................................................................. 81

12.7.1 Ratification ..................................................................................................................................................................................................................................................................81
12.7.2 Indemnity ....................................................................................................................................................................................................................................................................82
 12.7.3 Judicial Relief ...............................................................................................................................................................................................................................................................83

12.8 Civil Remedies ....................................................................................................................................................................................................................... 84

12.8.1 Against Directors .........................................................................................................................................................................................................................................................84
12.8.2 Against 3P ....................................................................................................................................................................................................................................................................86

12.9 Statutory Remedies ............................................................................................................................................................................................................... 87

13 Corporate Liability ..................................................................................................................................................................................................88

13.1 Liability for CONTRACT .......................................................................................................................................................................................................... 91
13.1.1 PRIMARY RULE ............................................................................................................................................................................................................................................................91
13.1.2 GENERAL RULE: Agency...............................................................................................................................................................................................................................................91

13.2 Liability for TORT ................................................................................................................................................................................................................. 101

13.2.1 Company’s Liability ...................................................................................................................................................................................................................................................101
13.2.2 Director’s Liability .....................................................................................................................................................................................................................................................103

13.3 Liability for CRIME ............................................................................................................................................................................................................... 106

14 Partnership .......................................................................................................................................................................................................... 107

14.1 Establishing a Partnership.................................................................................................................................................................................................... 107

14.2 Firm’s Liability in Contract, Tort and Statutory Liability ......................................................................................................................................................... 109
14.2.1 Liability for CONTRACT ..............................................................................................................................................................................................................................................109
14.2.2 Liability for TORT & STATUTE ....................................................................................................................................................................................................................................111

14.3 Liability of Individual Directors ............................................................................................................................................................................................ 113

14.3.1 Nature .......................................................................................................................................................................................................................................................................113
14.3.2 Incidence & Duration ................................................................................................................................................................................................................................................113
14.3.3 Salaried Partners .......................................................................................................................................................................................................................................................115
14.3.4 Held out as Partner ...................................................................................................................................................................................................................................................115

14.4 Partner’s Duties .................................................................................................................................................................................................................. 116

14.4.1 Duty to Disclose – s 28 PA .........................................................................................................................................................................................................................................117
14.4.2 Duty to Account for Private Profits ...........................................................................................................................................................................................................................118
14.4.3 Duty to Not Compete ................................................................................................................................................................................................................................................119
14.4.4 Duty of Care ..............................................................................................................................................................................................................................................................120
 14.4.5 Consequences of Breach ...........................................................................................................................................................................................................................................120

14.5 Rules Governing Partnership ............................................................................................................................................................................................... 120

14.5.1 S 24(1) – CAPITAL, PROFITS & LOSSES ......................................................................................................................................................................................................................121
14.5.2 S 24(2) – INDEMNITY FOR LIABILITIES.......................................................................................................................................................................................................................121
14.5.3 S 24(5) – PARTICIPATION IN FIRM’S MANAGEMENT ................................................................................................................................................................................................121
14.5.4 S 24(8) – SETTLING DIFFERENCES..............................................................................................................................................................................................................................121
14.5.5 S 24(9) – ACCESS TO FIRM’S BOOKS..........................................................................................................................................................................................................................122
14.5.6 Entry & Exit of Partners .............................................................................................................................................................................................................................................122

14.6 Dissolution – Grounds ......................................................................................................................................................................................................... 123

14.6.1 Dissolution by Expiration or Notice ..........................................................................................................................................................................................................................123
14.6.2 Dissolution by Supervening Illegality – s 34 PA.........................................................................................................................................................................................................124
14.6.3 Dissolution by Bankruptcy, Death or Charge – s 33 PA ............................................................................................................................................................................................124
14.6.4 Dissolution by Court Order .......................................................................................................................................................................................................................................124
14.6.5 Dissolution Where Partnership Agreement is Vitiated .............................................................................................................................................................................................125
14.6.6 Dissolution by Mutual Consent or Under Express Terms of the Partnership Agreement ........................................................................................................................................125

14.7 Dissolution – Effects ............................................................................................................................................................................................................ 126

14.8 Dissolution – Partner’s Rights & Duties ................................................................................................................................................................................ 126

15 QUESTIONS .......................................................................................................................................................................................................... 128

1 Types of Companies

1.1 Private Companies

EXEPRESSLY STATED NOT EXPRESSLY STATED
Here, pursuant to s 27(8) of the Companies Act, [Company] is likely a private Here, despite not being explicitly described as such, [Company] is likely a
company. private company.

This is since it is described as ‘___ private limited’. Pursuant to s 18(1) of the Companies Act, a company may be incorporated as a
private company if its constitution (a) restricts the right to transfer
shares ; and (b) limits its number of members to not more than 50.
 Here, [Company]’s constitution limits the right to transfer shares to ___.
Additionally, the constitution also restricts the number of members to ___.
Accordingly, it is likely to be a private company.

1.1.1 Exempt private companies

*LIKELY LINK TO RESTRICTED TRANSACTIONS*

Here, pursuant to s 4(1) of the Companies Act, [Company] is an exempt private company.

Per s 4(1) of the CA, a company is an exempt private company if it has (a) no corporate member; and (b) no more than 20 members.

An exempt private company is exempt from (a) needing to file financial statements with ACRA; and (b) the ban on providing loans or other financial assistance to
directors and director-related companies under s 162 and 163 of the CA.
 1.2 Public Companies
Here, pursuant to s 4(1) of the Companies Act, [Company] is likely a public company.

s 4(1) defines a public company as one which is not a private company. s 27(8) of the CA requires that a private company has ‘___ Private Limited’ in its name.
Here, the company is described as ___ Ltd. Thus, it is a public company.

1.3 Small Company

1.3.1 Solo
Here, ___ is/is not a small company. It is thus exempt/not exempt from audit requirements under s 205C(1) of the Companies Act.

Pursuant to s 205C(1) of the CA, a small company in respect of a financial year is exempt from audit requirements, The 13th schedule of the CA defines a small
company as a private company throughout a financial year, and it satisfies any 2 out of the 3 following criteria for each of the 2 consecutive financial years
immediately preceding the financial year:

a. The revenue for the financial year does not exceed $10 million.
b. The total value of the company’s assets does not exceed $10 million.
c. The company has not more than 50 employees

Here, ___.

1.3.2 Group
Here, [Company] is likely/likely not in breach of the CA by failing to appoint a qualified auditor for the Financial year ___. While it is a subsidiary/parent company
of _____, it satisfies the requirements in s205C(4)/s 205C(3).

Pursuant to s 205C(4)/s 205(3) of the CA, a subsidiary/parent company is exempt from audit requirements if (a) it is a small company and (b) it is part of a
small group. Here, both requirements are/are not satisfied.

STEP 1: The 13th schedule of the CA defines a small company as a private company throughout a financial year, and it satisfies any 2 out of the 3 following
ESTABLISH criteria for each of the 2 consecutive financial years immediately preceding the financial year:
SMALL
COMPANY a. The revenue for the financial year does not exceed $10 million.
b. The total value of the company’s assets does not exceed $10 million.
c. The company has not more than 50 employees
 Applying the criteria above, [Company] was/was not a small company.

First, it remained/did not remain a private company throughout the financial year. [Discussion].

Second, [Company]’s revenue was ____, and it had ___ employees. Its total assets were ___. The company thus satisfies/does not satisfy the
requirements of a “small company” under the 13th Schedule of the CA.
STEP 2: Next, [Company] is/is not part of a small group.
ESTABLISH
SMALL The 13th Schedule if the CA defines a small group as one which satisfies 2 out of the 3 following criteria for each of the 2 consecutive financial years
GROUP immediately preceding the financial year:

a. The consolidate revenue of that group for the Financial Year does not exceed $10 million
b. The value of the consolidated assets for the Financial year does not exceed $10 million
c. The group has not more than 50 employees at the end of the year.

Here, [Group]’s revenue was ____, and it had ___ employees. Its total assets were ___. The company thus satisfies/does not satisfy the requirements
of a “small group” under the 13th Schedule of the CA.
 1.4 Subsidiary
Here, [Company] is a subsidiary of [Another Company]

Per s 5(1) of the Companies Act, one company (A) is a subsidiary of another company (B) if:

a. B controls the composition of the board of directors of A;

b. B controls more than half of the voting of A; or
c. A is a subsidiary of another company (C), which is a subsidiary of B.

BOARD CONTROL Per s 5(2), a company is deemed to have control over the composition of another company’s board of directors if a majority of the directors
cannot be appointed without the concurrence of the former company.

Here, ___.
VOTING POWER Here, [Other Company] owns up to __% of [Company]’s shares. Accordingly, it controls more than half of [Company]’s voting power.
[Company] is thus a subsidiary of [Other Company].

1.4.1 Related Companies

s 6 of the Companies Act further provides that one company (X) is related to another company (Y) if:

a) X is the holding company of Y;

b) X is a subsidiary of Y; or
c) X is a subsidiary of another company (Z), which is the holding company of Y
 2 Features of the Company

2.1 Separate Legal Personality

INTRO

Pursuant to s 19(5) of the Companies Act (“CA”), and as held in Salomon v A Salomon & Co Ltd, a company has a separate legal personality from its members.

This results in other consequences.

[MOVE ON TO BELOW]

2.1.1 Incurring Liabilities

Following Salomon v A Salomon & Co Ltd, a company can incur liabilities in its own rights, and the members of the company are not
personally liable for the companies liabilities.

Here, [Company] is a distinct entity from [MEMBER]. Hence, [MEMBER] cannot be held liable by ____ for the debts incurred by [COMPANY].

2.1.2 Contractual Capacity

*LIKELY LINK THIS TO AGENCY, FOLLOWED BY PCV (as a side point)
General
Per Lee v Lee’s Air Farming Ltd, a company is fully capable of contracting for its own account.

Here, ___.

Contract with Shareholders

Per Lee v Lee’s Air Farming Ltd, a company is fully capable of contracting for its own account. A shareholder is also capable of acting in dual
capabilities – both as the company’s decision-making organ and a counter party.

Here, ____.
2.1.3 Ownership of Assets
Property
Per Macaura v Northern Assurance, a company’s property is that of its own. A company’s shareholders have neither legal no beneficial
interests in the company’s property.

Here, ___.

Business
Per Woolfson v Strathclyde Regional Council, a company’s business is that of its own.

Here, ___.

2.1.4 To Sue and be Sued

Per Foss v Harbottle, if a wrong is done against the Company, only the Company is the proper plaintiff to bring the lawsuit against the
wrongdoer.

2.1.5 Perpetual Succession

By virtue of s 19(5) of the CA, companies enjoy perpetual succession. Therefore, following Re Noel Tedman Holdings Pty Ltd, the company’s
existence is not affected by changes to its membership, even if all of its members have died.

For this reason, companies are sometimes used to hold family assets for inheritance purposes.

[ALL MEMBERS DIE]

If all the members of a company die, the state will usually take over based on the
principle bona vanctia, although this will only occur if the company has no owner
for at least 7 years. In the meantime, the company’s assets will be trapped inside
the company and nothing can be done.

2.1.6 Limited Liability

Here, [COMPANY] is a company which is limited by its shares. Pursuant to s 121(1)(d) of the IRDA, upon its liquidation, members are only
liable for the amount of unpaid shares which they hold.

Here, since [PARTY]’s shares are/are not fully paid up, [PARTY] is/is not liable for _____.
 3 Piercing the Corporate Veil OR To that Effect

TRANSITION
Here, [CLIENT] would attempt to hold [PARTY] liable for the liabilities incurred by [COMPANY]. This is because [COMPANY
NO MONEY, ETC].

Here, [CLIENT] can rely on (a) conventional principles; or (b) piercing the corporate veil.

It is suggested that [CLIENT] should look to rely on the conventional methods first, for he is more likely to succeed under
these principles.
 3.1 Conventional Methods (NOT PIERCING)
*LIKELY LINK THIS TO AGENCY → PCV (AS A SMALL POINT JUST TO FAIL IT

3.1.1 Guarantee
*USE THIS AS A SIDE POINT COS I THINK BULL LOVES IT
[CLIENT] can look to see if the shareholder had guaranteed for the repayment of [WHATEVER LIABILITIES]. Should he have made such a guarantee, he can be
personally liable for a company’s [LIABILITIES].

3.1.2 Agency
*BELOW IS JUST THE BABY POINTS → REFER TO THE PART BELOW FOR MORE INDEPTH AUTHORITY
Here, [CLIENT] may argue that the company was acting as an agent of its shareholder/controller.

As per Garnac Grain Company Inc v H M Faure & Fairclough Ltd, in determining whether an agency relationship exists, there must have been consent given by
the parties to the agency relationship; this can be express or implied from words or conduct.

Expressed
Here, the parties have expressly stated that the company is acting as an agent for the shareholder. Therefore, [CLIENT] can make the [SHAREHOLDER] liable for
the [LIABILITIES].

Implied
Here, there was no express consent given by the parties on the agent relationship.

FINDING ANOTHER ENTITY AS AN AGENT

Smith, Stone & Knight Ltd v Birmingham Corporation laid out 5 factors to determine whether an entity may be deemed to be the agent of its
parent company or controller:

a. The parent company or controller had treated the entity’s profits as its own;
b. The parent company or controller had appointed the management of the entity and provided the expertise required for running
the business;
c. The parent company or controller has complete say over the management decisions of the entity;
d. The parent company or controller is ultimately in effectual and constant control over the entity; and
e. The parent company or controller is, at all material times, the party carrying out the business via the conduit of the entity, and did
not transfer any legal rights over the business to the entity, such that the entity’s carrying on of the business could not subsist
without the parent’s activities.
 Here, _____.

*NOTE that what is more pertinent is evidence that points to the company’s lack of beneficial or commercial
interests in the business or asset in question.

3.1.3 Tort
Conspires to Injure
A shareholder is jointly liable with the company if he conspires with the company to injure another.

Authorises, directs or procures

A shareholder commits a tort if he authorises, directs or procures a company to commit a tort.

Agent of the Company

If the shareholder commits a tort whilst acting as the company’s agent, he is not exempt from personal liability even if the company is liable as principal for the same
tort.

3.1.4 Trust
A company may hold property on trust for its controller. However, generally, companies’ properties are their own and a shareholder has no direct or beneficial
interests in the property. As per Prest v Petrodel Resources Limited, the elements of a trust, i.e. intention and certainty, must be established.

3.2 Piercing the Corporate Veil

Exam Technique

1. Talk about Beyonics and their concept of ‘abuse of the corporate form’ as a starting point and perhaps explain the uncertainty involved.
2. Try to fit the facts of the hypo into one of the categories (fraud, evasion, sham and alter ego) by analogising to cases with similar facts.
3. If the facts of the hypo seem to fit into more than one category, discuss and talk about it. This is because it is common for some categories to have overlaps.
This is even better for your argument as it makes your case stronger.
4. If the facts of the hypo clearly do not fit into any categories, then don’t waste time discussing about it and giving a negative conclusion.
5. In any case, Beyonics’s conception of a general category is reconcilable with the other traditional categories as you can argue that the traditional categories
are examples of ‘abuse of corporate form’ (at least the first three categories other than alter ego).
 6. The advantage of using the evasion ground to pierce the corporate veil is that there seem to be no dispute between the UK position based on Prest and the
SG position as affirmed in Sound Electric.
7. Avoid just establishing the fact that someone is a controller and attaching liability solely based on this fact because there are many case like Solomon and
Alwie that show that control is not sufficient for liability.

TRANSITION
Should the conventional methods not succeed, [CLIENT] can look to rely on piercing the corporate veil.

It should be noted that Singapore’s law in this area is still uncertain.

The SGCA in Goh Chan Peng v Beyonics Technology Ltd held that generally, piercing the corporate veil is justified by abuse of the
corporate form. However, it has to be noted that there is no substantive authority which specifies what constitutes an “abuse of
corporate form”.

Hence, it is apposite to look at the other traditional established categories. This is especially so since Beyonics’ conception of a general
category is reconcilable with the other traditional form excluding “’alter ego’”. This is because the categories of “fraud, evasion and
‘sham or façade’” are arguable examples of ‘abuse of corporate form’.

3.2.1 [-] Single Economic Entity

The separate corporate personality will not generally be disregarded merely because the parent company exercised overall supervision and control over the
operations and finances of the subsidiaries: Adams v Cape Industries plc, or that it operated as a single economic entity: Manuchar Steel Hong Kong Limited v
Star Pacific Line Pte Ltd except where such a relationship falls within broadly-worded statutory provisions referring to a company and its related entities: DHN
Food Distributors v Tower Hamlets London Borough Council.

3.2.2 [-] Justice of the Case

“Justice of the case” will not likely be the sole basis for veil-pierce: In Lim Chee Twang v Chan Shuk Kuen Helina, the court (Qentin Loh JC) held that the
proposition that the court be empowered to pierce the corporate veil where the “justice of the case” demands it should not be followed as it was “inherently vague
to be a concept of much guidance and provide[es] to neither courts nor those engaged in business any clear guidance as to when the normal company law rule
should be displaced”.
3.2.3 Fraud
Here, the court may pierce the corporate veil on grounds of fraud.

In Re Darby, the court held that the corporate veil could be pierced as the company was “no more than an “alias” or “name” under which Darby perpetrated the
fraud.

In that case, two undischarged bankrupts registered two companies. They transferred a quarry license from the first company to the second company at a
grossly overvalued price. They then invited the public to invest in the second company with an overvalued asset, without disclosing that they would
profit from the transaction. The second company failed and the court lifted the veil to hold both bankrupts liable for the secret profits they have made as a
promoter; finding that the companies were registered for the purpose of perpetrating a fraud.

Here, [ANALOGISE/DISTINGUISH].

3.2.4 Evasion of Pre-existing Legal Obligation

Here, the court may pierce the corporate veil as [COMPANY] is used to deliberately avoid or frustrate a liability of the controller that exists independently of the
company’s involvement (Prest).

In Jones v Lipman, the court held that the defendant’s act of transferring land, which was meant to be sold to the plaintiff, to a company under his control was
effected solely to defeat the plaintiffs right to specific performance. Hence, he was in the position specifically to perform his obligation to the plaintiffs by exercising
his powers over the company.

Here, ___.

In Gilford Motor Co Ltd v Horne, the defendant covenanted not to compete with the plaintiff or solicit its customers after the termination of his employment. In
breach of this covenant, he set up a competing business after leaving the plaintiff and subsequently transferred the business to a company in which his wife
and an employee were the only directors. The court held that the company was created in an attempt to evade his legal obligations and lifted the veil to restrain
the defendant and his company from breaching his obligations.

Here, ___.

Motive
It is necessary to consider the motive of the alleged perpetrator in deciding whether the corporate veil should be pierced
on this ground.
 In Prest, the court declined to pierce the veil as the court found that there was no evidence that the husband was
seeking to avoid any obligation when he formed the companies to hold the disputed property.

Here, ___.

EVALUATION
It is noted that the use of evasion ground to pierce the corporate veil is to be favoured as unlike the other categories.

The advantage of using the evasion ground to pierce the corporate veil is that there seem to be no dispute between the UK position based on Prest and the SG
position as affirmed in Sun Electric.

Since the law is consistent in both UK and Singapore, there is a greater amount of certainty in the applicability of this ground in the Singapore courts in the future.

3.2.5 “Sham or Façade” & Alter Ego

3.2.5.1 “Sham or Façade”

Here, the court may pierce the corporate veil on ground of the company being a mere “sham” or “façade”, OR on ground of “alter ego”

CONTROVERSY – SHAM&FAÇADE VS ALTER EGO

It is noted that the differences in the meaning between the terms “alter ego” and “sham or façade” are not obvious at first sight.

However, SGCA in Alwie v Tjong explicitly recognised the two as being distinct in this context. This distinction was elaborated in the SGHC judgment, and it
appears that the distinction is as follows:

a. Alter ego is founded on a factual indistinctness between controller and company

b. “Sham or façade” relates to the improper use of the company by the controller.

It is noted that both grounds can likely be applied in the same fact situation, such as the facts of the case on hand. However, it is argued that we should focus on
the argument for alter ego as the threshold for this is likely lower. There is no requisite for there to be an improper use of the company.

The focus on “alter ego” is also justified since the use of “sham or façade” lacks clarity, for it has not always been confined to the improper purpose category,
and the term has sometimes been used in situations which are closely akin to factual indistinctness without impropriety.
[IF DIE DIE ALSO WANT TO APPLY]
 As per Saudi Al Jabail, the corporate veil will be lifted if the court finds that the companies were but mere corporate names which the person had abused as
cover for his own trading activities.

There, Omega and Saudi did not exist and were mere corporate names which the defendant abused as a cover for his own trading and ship-owing activities. Hence,
the court pierced the veil and held that Orri was the beneficial owner of the vessel at the time the Writ was filed.

Here, ___.

3.2.5.2 Alter Ego

Hence, we look to establish whether the court would pierce the corporate veil on ground of “alter ego”.

[+] In Tjong Very Sunmito v Chan Sing En, the court held that the key question in determining whether the grounds of alter ego applies is whether the company
is carrying on the business of its controller.

There, the court found that the company in question was the alter ego of the controller. It noted that:

a. The controller had absolute control of the company;

b. Sums paid to the company were in fact beneficially received by the controller;
c. Controller had used sums standing to the company’s account for his personal purposes; and
d. The company, though a named defendant to the suit, had not filed an independent defence but had spoken entirely though the controller as its
mouthpiece.

Here, ____.

[-]
In Sun Electric Pte Ltd v Menrva Solutions Pte Ltd, the court noted that the corporate veil could be lifted on the ground of alter ego. However, there, the court
found that the company in question was not the director’s alter ego. While it was undisputed that the defendant in that case was the sole director and
shareholder, that was immaterial. It was also immaterial that the defendant incorporated the company for the sole purpose of concluding the
commercial agreement in question. The court noted that the controller’s desire to limit its liability for the defaults of the special purpose vehicle did not convert
the company’s business into the controller’s business. Further, the court noted that the defendant had separated the company’s funds and his own, and did
not treat the company as an extension of himself.

Here, ___.
 3.3 Statutory Provisions for PCV
COMPANIES ACT 2014 (CAP. 50)
Where company carries on business without resident director
S 145 (10) If a company carries on business without having at least one director who is ordinarily resident in Singapore for more than 6 months,
a person who, for the whole or any part of the period that it so carries on business after those 6 months –
(a) is a member of the company; and
(b) knows that it is carrying on business in that manner,
Shall be liable for the payment of all the debts of the company contracted during the period or, as the case may be, that part of it, and may be sued
therefor.

Estoppel against officers of company from denying that transaction entered into in personal capacity
S 144 (2) If an officer of a company or any person on its behalf –
(a) uses or authorises the use of any seal purporting to be a seal of the company whereon its name does not so appear;
(b) issues or authorises the issue of any business letter, statement of account, invoice or official notice or publication of the
company wherein its name is not so mentioned; or
(c) signs, issues or authorises to be signed or issued on behalf of the company any bill of exchange, promissory note, cheque or
other negotiable instrument or any indorsement, order, receipt or letter of credit where in its name is not so mentioned,

He shall be guilty of an offence, and where he has signed, issued or authorised to be signed or issued on behalf of the company any bill of exchange,
promissory note or other negotiable instrument or any indorsement thereon or order wherein that name is not so mentioned, he shall in addition be
liable to the holder of the instrument or order for the amount due thereon unless it is paid by the company.

Liability of officer for unwarranted contracting of debt in winding up

S 339 (3) If, in the course of the winding up of a company or in any proceedings against a company, it appears that an officer of the company
who was knowingly a party to the contracting of a debt had, at the time the debt was contracted, no reasonable or probable ground of expectation,
after taking into consideration the other liabilities, if any, of the company at the time of the company being able to pay the debt, the officer shall be
guilty of an offence and shall be liable on conviction to a fine not exceeding $2,000 or to imprisonment for a term not exceeding 3 months.

Responsibility for fraudulent trading

S 340 (1) If, in the course of the winding up of a company or in any proceedings against a company, it appears that any business of the company
has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the
application of the liquidator or any creditor or contributory of the company, may, if it thinks proper to do so, declare that any person who was
knowingly a party to the carrying on of the business in that manner shall be personally responsible, without any limitation of liability, for all or
any of the debts or other liabilities of the company as the Court directs.

Personal liability for distributing dividends out of assets of company

S 403 (1) No dividend shall be payable to the share-holders of any company except out of profits.
…
(2) Every director or chief executive officer of a company who wilfully pays or permits to be paid any dividend in contravention of this
section –
…
(b) shall also be liable to the creditors of the company for the amount of the debts due by the company to them respectively to
the extent by which the dividends so paid have exceeded the profits and such amount may be recovered by the creditors or the liquidator suing on
behalf of the creditors.
 4 Promoters
Promoter: One who undertakes to form a company with reference to a given project, and who takes necessary steps to accomplish that purpose.

Full Disclosure
Per Erlanger v New Sombrero Phosphate Co, a promoter stands in a fiduciary position to the Company. If a promoter contracts with the company without full
disclosure, the contract is voidable at instance of the company.

➔ To a wholly independent board of directors

➔ IF it is part of the promoter’s scheme to invite others to invest in the company, then it is necessary that the relevant disclosure to be extended to such
intended investors.

Secret Profits
Per Gluckstein v Barnes, a promoter must account to the company for any secret profits arising from a transaction entered in breach of his fiduciary duty.

➔ EXCEPTION: An account of profits is not available where promoter did not acquire the property with a view to sale to company.
 5 Company’s Constitution – ALTERATION

5.1 Entrenching Provision

Finding/Effects of Entrenching Provision
Per s 26A(4) of the CA, clause is an entrenching provision if it provides that another clause cannot be altered:

a. in accordance with the CA;

b. without more than 75% majority;
c. unless any other specified condition is satisfied.

Here,

Validity/Creation of Entrenching Provision

[CLAUSE] is not a valid entrenching provision because it was/was not passed in accordance with s 26A(1) of the CA. s 26A(1)(a/b) provides that an entrenching
provision may

a. Be included in constitution on company formation; or

b. At any time be inserted if all members of the company agree.

Here, ___.

Altering Entrenching Provision

Here, [PARTY] will be able to challenge the validity of the [RESOLUTION] under s 26A(2). Pursuant to s 26A(2) of the CA, [CLAUSE] is an entrenching provision.
This means that [CLAUSE] can only be altered if all members of the company agree.

Here, ___.
 5.2 Special Resolution
Here, [PARTY] is able/unable to challenge the validity of [RESOLUTION].

Pursuant to s 26(1) of the Companies Act, [COMPANY]’s constitution can be altered by passing a special resolution. s 184(1) CA stipulates that a special resolution
is one that is passed by 75% or higher majority of the votes cast at a general meeting.

Following Allen v God Reefs of West Africa, under Common Law, the resolution is invalid unless the shareholders voted for it bona fide for the benefit of the
company as a whole.

[Procedural]
• Procedurally, s 184(1) of the CA requires that at least 14 days written notice be provided for all members if the company is a private company.

• Procedurally, s 184(1) of the CA requires that at least 21 days written notice be provided for all members if the company is a public company.

o However, this is qualified by s 184(2) of the CA, where a special resolution can be passed if 95% of all members with voting rights agree that
a resolution proposed and passed at a meeting be passed as a special resolution.

STATUTORY EXCEPTIONS – [MAKE SH PAY MORE $]

By virtue of s 39(3) CA, _(member)_ of _(company)_ will not be bound by an alteration that he did not consent to
if:

a. The alteration was made after he joined as a member;

b. The relation requires him to subscribe for even more shares/increase his liability/pay more money to
the company; and
c. This is subject to him agreeing in writing before or after the alteration.
5.2.1 Bona Fide Test
TRANSITION
Here, [PARTY] is able/unable to challenge the validity of [RESOLUTION] using the Common Law rule. As held in
Allen v Fold Reefs of West Africa, an alteration to the constitution has to be made bona fide for the benefit of the
company as a whole.

Before diving into the analysis, it is important to first decide which test is applicable in this situation.

Citco Banking Corporation NV v Pusser’s Ltd identified two categories of alteration to the constitution:

a. Those affecting the company as a commercial entity

b. Others – i.e. which usually affect different groups of shareholders differently without having direct
impact on the company itself

5.2.1.1 CITCO: CATEGORY 1

Here, [RESOLUTION] falls under the first category of Citco.

Following Shuttleworth, the relevant test is primarily subjective – whether the shareholders honestly believed the alteration to be in the company’s interest.
• However, it is qualified by an objective component, namely, that the alteration will not be upheld if it is one which no reasonable person would consider to
be for the company’s benefit.

Here, ____.

5.2.1.2 CITCO: CATEGORY 2

Here, [RESOLUTION] falls under the second category of Citco.

[RESOLUTION] discriminates against shareholders as [ELABORATION].

The appliable test here would be the test as set out in Re Charterhouse Capital Ltd. The Charterhouse test stipulates that a power to amend would only be validly
exercised provide the amendment does not amount to oppression of the minority or is otherwise unjust or is outside the scope of the power.

Here, ___.
 Lower Dividends In Peters’ American Delicacy v Heath, the amendment provided that shareholders would henceforth receive
dividends rateably according to the amounts paid up on their shares. This is contrasted to previously, where it was
according to the number of shares (fully or partly paid) which they held. This prejudiced the shareholders who
owners who owned partly-paid shares
Pre-emption Clause In Greenhalgh v Aderne Cinemas, the amendment was to remove a pre-emption clause to facilitate a sale of control
to a third party. The court held that this prejudiced the minority shareholders as they were stripped of their pre-
emption rights, whereas the majority retained control over the minority’s share transfers through the requirement of
ordinary resolution.

[Expropriation of Shares or Share Rights]

Eliminate harm to Co In Sidebottom v Kershaw, Leese & Co Ltd a company amended its constitution to provide that its directors may by notice require a
shareholder or director who carries on a competing business to transfer, at fair value, all his shares to a person or persons nominated
by the directors. The alteration was upheld; the court found that the majority had acted in the honest belief that it would benefit the
company to have the power to remove shareholders engaged in competing businesses, and so eliminated harm to the company.
Force sale on Minority In Brown v British Abrasive Wheel Co Ltd the majority shareholders controlling 98% of the issued shares of a company in urgent need
of fresh capital were willing to provide the funding only if they had 100% control over the company. The majority failed to negotiate a
buyout of the minority. The majority then amended the constitution to require that a minority transfer his shares at fair value when
requested to do so by a 90% majority. The court held that the amendment was invalid because it was not just or equitable for the
majority to force a sale on the minority, and that this benefitted only the majority and not the company. [however the company would
have gone without the necessary capital and would likely cease business but for the expropriation – this upheld the stubborn
intransigence of the minority at the company’s expense. It could similarly be argued, though, that the company could have sought
funding elsewhere and did not need to accede to the majority’s demands.]
Naked Compulsory An amendment to include a naked compulsory transfer clause that gives a party an unrestricted power to require transfers of shares
Transfer Clause with no reference to any harm done or intended to be done by the affected member is invalid: Dafen Tinplate Co Ltd v Llanelly Steel Co
(1907) Ltd. In that case an amendment to give the majority shareholders power to compulsorily transfer a member’s shares at fair value
was invalidated even though the alteration was motivated by a desire to protect the company’s interest in deterring members-
customers from diverting their custom from the company. The court held that the clause was too wide and conferred expropriation
powers on the majority in respect of a shareholder which had done, or intended to do, no harm. If the power was only exercisable on
shareholders who had done, or intended to do, harm, it would be held to be valid.
GAMBOTTO
The test set out in Gambotto v WCP Ltd is relevant here, as [RESOLUTION] permits the compulsory acquisition of a shareholder’s share/ proprietary rights
attaching to shares of the minority.

The Gambotto test stipulates that the alteration would only be valid if it was exercisable for a proper purpose, and its exercise was fair.

First, the alteration would be exercisable for a proper purpose if the amendment would be a reasonable means of eliminating or mitigating a detriment
to the interests of existing shareholders generally.

Here, ___.

Second, the alteration would be fair if it was procedurally and substantively fair.

• Procedural fairness pertains to a fair process for effecting the alteration.

• Substantial fairness largely pertains to the acquisition being at a fair price.

Here, ___.
 6 Company’s Constitution – Enforcing Articles

6.1 Enforcement by Member

Pursuant to s 39(1) of the Companies Act, the constitution of the company binds both the company and all members of the company.

Company vs Member
Any member can bring an action against the company to enforce the observance of the constitution, and vice versa.

Member v Member
Further, one member may compel another member to comply with an obligation in the constitution without joining the company as a party to the proceeding, as
per Rayfield v Hands.

Here, ___.

6.2 Enforcement by Non-member

Pursuant to s 39(1) of the Companies Act, the constitution of the company binds both the company and all members of the company.

As per Eley v Positive Government Life Assurance Co Ltd, a non-member cannot enforce any obligation in the constitution.

Here, ___.

7 Qua-member rule
Here, the “qua-member” rule is relevant.

Pursuant to Hickman v Kent, s 39(1) of the Companies Act only relates to those rights which affect the member in his capacity as a member (“member right”),
and not those in his personal capacity (“outsider rights”).

Here, ___.
 7.1 Extrinsic Contracts

7.1.1 Constitution Incorporated into a Separate Contract

Here, [PARTY] may look to argue that the performance of the [EXTRINSIC CONTRACT] is affected by [TERM OF THE CONSTITUTION] as the term was
incorporated into [EXTRINSIC CONTRACT].

Expressed Incorporation Implied Incorporation

Here, [TERM] was incorporated into the Here, [TERM] was impliedly incorporated into the contract.
contract expressly, as seen from the
[DISCUSS].
NO WRITTEN OR In Chaly Chee, the appointment of auditors was effected by an exchange
EXPRESS TERMS of letters between the parties, which included a letter of offer from the
company accompanied by, inter alia, a copy of its memorandum and
articles of association. The court held that it would be sensible for the
court to infer that the parties intended to contract “on the footing of the
articles” (or constitution) if there was no written or express terms of
appointment.
DIRECTORS Per Oro Negro Drilling, where a person has accepted the office of director
and acted as such, there would be an inference that there was an
agreement between the company and the director that the latter would
serve the company on the terms of the company’s constitution as it stood
from time to time.

Here, ____.
7.1.2 Effect of Constitutional Change on Extrinsic Contract
CONSTITUTION INCORPORATED CONSTITUTION NOT INCORPORATED
As established earlier, [TERM] from the contract has been incorporated into the Here, ___.
[CONTRACT]. Here, [CONTRACT] does not incorporate the constitution. However, the
amendment has affected the performance of the contractual obligation –
Following Swabey v Port Darwin, should the term that has been incorporated be [DISCUSS].
amended, this would have a prospective effect.
Per Southern Foundries Ltd v Shirlaw, the company cannot act on the
amendment. The company remains bound to the [CONTRACT] and acting on the
amendment would result in a breach of the contract.
 8 Shareholder’s Agreements
Here, following Russell v Northern Bank Development Corp Ltd, the court will find that the shareholder agreement between [PARTY] and [PARTY] was binding,
This is since Shareholder agreements are contractually binding between the parties to the agreement.

Therefore, [CONCLUSION].

[SHAREHOLDER AGREEMENT TO STOP THEM FROM ALTERING THE CONSTITUTION]

Pursuant to the case of Russell v Northern Bank Development Corp Ltd, it is evident that while a company may not contract out of the statutory power to amend
the constitution, an agreement amongst shareholders not to vote in favour of any such amendment is nevertheless valid and enforceable.

Hence, a company may effectively be prevented from altering its constitution so long as those shareholders with sufficient votes to block a special resolution are
contractually bound to do so.

Here, ___.

[SHAREHOLDER AGREEMENT VS CONSTITUTION]

As per The Wellness Group Pte Ltd v Paris Investment Pte Ltd, in the event of any inconsistency or conflict between the provisions of the Shareholder’s agreement
and the provisions of the constitution, the provisions of this Agreement shall as between the Shareholders prevail (subject to applicable law) and the Shareholders
shall, so far as they are able, cause such necessary alterations to be made to the Articles as are required to remove such conflict.

Here, ___.
 9 Shares

9.1 Share Issue

FRAMEWORK
Public Company: s 161, s 64A
Private Company: s 161, s64A → s 75

9.1.1 Issuance of Ordinary Shares

Board Decision (Reg 7 MC)
1. Without prejudice to existing shares of class of shares (i.e. pari passu with preference shares; s 74(6))
2. Directors, subject to any ordinary resolution, has the power to determine the type of share to be issued.

Priority to Shareholders (Reg 45 MC)

Existing shareholders have the right to subscribe to new shares before new shareholders.

[PARTY], as a director, may only issue shares with the prior approval of the company in general meeting in accordance with s 161(1). Pursuant to s 161(2), a general
approval is permitted. Furthermore, the general meeting mandate is only valid until (s 161(3)):
a. The conclusion of the next AGM commencing after the approval was given; or
b. The date of which the next AGM is required to be held by law,

depending on whichever is earlier.

Here, [DIRECTOR] has obtained the prior approval of [COMPANY] in [GENERAL MEETING] in the form of [ordinary resolution/particular exercise].
Furthermore, the issuance of share was completed before [WHICHEVER DATE IS EARLIER]. Therefore, the issuance of the [ORDINARY SHARES] is valid.

[If Contravenes s 161]

By virtue of s 161(6), the issue of [SHARES] is void as [DIRECTOR] had not obtained the prior approval. [BUYERS OF SHARE] will be able to recover the
consideration given for the shares. Additionally, [DIRECTOR] shall be liable to compensate the company and the person to whom the shares were issued for any
loss as [DIRECTOR] knowingly contravened/permitted the contravention of issuance of shares. This is ubject to [PF] commencing the proceedings within 2
years from the date of issue.

IF THE ISSUE DATE AFTER EXPIRY OF GENERAL MANDATE BUT OFFER/AGREEMENT TO DO SO WAS BEFORE
 Even though the issuance of [ORDINARY SHARES] was completed only after the [WHICHEVER DATE IS EARLIER], the issuance is still likely to be valid as [SHARES]
were issued in pursuance to a/an [offer/agreement/option] which would/might require shares to be issued after the expiration of the approval, and the
[offer/agreement/option] were granted while the approval was in force and it was authorized by the approval.

9.1.2 Issuance of Difference Class of Shares – Public Company

Here, for [PUBLIC COMPANY], a public company to issue the [CLASS SHARE], the requirements laid out in s 64A(1) must be satisfied:

a. First, such an issue is permitted by its constitution; and

b. Second, the rights attached to each class of shares is set out in its constitution.

Here, __.

NO/MULTIPLE VOTING RIGHTS (s 64A(1) → s 64A(3))

Here, the share carries multiple/no voting rights. Hence, pursuant to s 64A(3) of the CA, there is a requisite of special resolution to approve the issuance of the
shares.

Here, ___.

9.1.3 Issuance of Difference Class of Shares – Private Company

The issue is whether, [PRIVATE COMPANY], will be able to issue [CLASS SHARES]. Per s 64A(6), a private company’s right to issue different classes of shares is not
restricted by s 64A and is subject to its constitution.

Here, ___.

Pursuant to s 75 of the CA, the rights attached to [CLASS SHARES] must be set out in the company’s constitution.

Here, ___.
9.1.4 Consideration for Share

9.1.4.1 [Non-Cash Consideration]

Per Re Wragg Ltd, value of asset received is generally determined by the company. The court does not inquire into adequacy of consideration unless it is wholly
illusory.

9.1.4.2 [No Consideration]

Pursuant to s 68 CA, a company having a share capital may issue shares for which no consideration is payable to the issuing company.

9.1.5 Share Certificates & Share Register

Share certificates
Pursuant to s 123(1) of the Companies Act, a share certificate under the common seal of a company specifying any shares held by any member shall be prima facie
evidence of the title of the member to the shares.

Section 123(2) of the Companies Act states that every share certificate shall contain:

a. The name of the company and the authority under which the company is constituted;
b. The address of the registered office of the company in singapore, or, where the certificate is issued by a branch office, the address of that branch office; and
c. The class of the shares, whether the shares are fully or partly paid up and the amount unpaid on the shares

Share Register
By virtue of s 19(6) of the Companies Act, the subscribers to the constitution have agreed to become members of the company and on the incorporation of the
company shall be entered as members

a. Public company - register of members kept by (unlisted) public company under s 190
b. Private company - electronic register of members kept by the Registrar under s 196A Note: transfer only occurs when the register has been updated
 9.2 Share Transfer

9.2.1 Unlisted Companies

Transfer of shares in unlisted companies:

1. The transferor and transferee must fully execute a share transfer form;

2. The transfer or transferee lodges said fully executed share transfer form with the company;
2b. Constitution MAY say directors have to approve the transfer. → Director’s duties, any refusal must be bona fide and for a proper purpose.
[REFER BELOW]

3. The company lodges notice of the transfer of shares with the registrar: s 126(2) of the CA

4. The transfer is updated into the electronic register of members by the registrar: s 126(3) of the CA; and

5. The company issues new share certificates in the name of the transferee.

9.2.2 Listed Companies

Transfer of shares in listed companies;

Transfers are effected through the scripless trading system used by SGX. Shares in listed companies are held and transferred through the Central Depository (CDP)
system. Beneficial owners of shares immobilized at the CDP are treated as the legal owners of the shares.

Exception
Where the shares in the public company are not lodged with the CDP, a transfer of shares in a public company is only deemed to have occurred a “proper instrument
of transfer” has been delivered to the company: s 130(1) CA.

Note that the registration of the transfer with the registrar is not mandatory: s 130(2) CA.
9.2.3 Other Mechanics

9.2.3.1 Lodging of Transfer Form → Warranty Genuineness

The lodgment of a share transfer form carries with it an implied warranty that the form is genuine: Yeung Kai Yung v HSBC.

9.2.3.2 Blank Transfer Forms

The giving of a blank transfer form signed only by the transferor but not the transferee, alongside the physical share certificate, creates an equitable or beneficial
interest in the shares to whom the blank transferor form and the physical share certificate is given. The equitable interest may be passed on to another without
registration: Pennington v Wayne.
9.2.4 Restrictions on Transfer

9.2.4.1 Pre-Emption Rights

Pre-emption rights may be incorporated in the company’s constitution to enable existing members of the company to purchase the shares of other shareholders
who wished to withdraw from the company.

• This is triggered upon the transfer of legal interest of the company; the transfer of beneficial interests is irrelevant: Khoh Chen Yeh Shane v Seng Realty &
Development Pte Ltd. In that case, a transfer of shares from a bare trustee to the beneficiaries was held to have triggered a pre-emption clause in the
constitution of the company.

CANNOT BYPASS BY BUYOUT

The shareholders of a company cannot bypass the operation of a pre-emption clause by making an application to the court to grant a “buy-out” order under s
254(2A) of the CA – i.e. to make an order for the interests in shares of one or more members to be purchased by the company or one or more members of the
company on terms to the satisfaction of the court: Ting Shwu Ping v Autopack Pte Ltd.

9.2.4.2 Refusal to Register Transfer

BOARD DECLINE TRANSFER: Reg 26 MC
The board of directors can decline the transfer if (a) shares are not fully paid; (b) directors do not approve of the
transferee; and (c) company has a lien on the shares.

The company constitution may permit directors to refuse to register a transfer of shares. In the absence of such a constitutional provision, the directors
have no discretion to refuse to register a transfer of shares.

➔ If such a discretion is provided for and is exercised, the directors must serve on the transferee, within 30 days of the date of lodgment of the transfer, a
notice of refusal: s 129(1) of the CA, and as per David Hey v New Kok Ann Realty Sdh Bhd, a statement setting out the factual basis for such a refusal

• Subjection of Power to Director’s Duties:

As the refusal to register transfers is a power vested in the board of directors, it is subject to fiduciary duties. The directors must exercise this power for a
proper purpose and in the best interests of the company. Any breach of fiduciary duty in exercising this power must be shown by the aggrieved
transferee, i.e. that the directors acted in bad faith (HSBC (Malaysia) Trustee Bhd v Soon Cheong Pte Ltd), or acted in their own interests and without a
rational basis in rejecting the share transfer (Xiamen International Bank v Sing Eng).
 9.3 Ownership of Shares

9.3.1 Legal Owner

Unlisted Companies:
Legal interests in the shares can only pass upon registration, which perfects the transfer

Listed Companies:
Shares in listed companies are held and transferred through the Central Depository (CDP) system. Beneficial owners of shares immobilized at the CDP are treated
as the legal owners of the shares.

Exception
Where the shares in the public company are not lodged with the CDP, a transfer of shares in a public company is only deemed to have occurred a “proper instrument
of transfer” has been delivered to the company: s 130(1) CA.

Note that the registration of the transfer with the registrar is not mandatory: s 130(2) CA.

9.3.2 Equitable Owner

Equitable right cannot be registered with the company as a general rule given that s 195(4) of the CA provides that a company shall not be affected by notice of any
trust express, implied or constructive.

Dividends
Company only has to pay dividends to the named members that are registered on its books. It is a matter of private treaty how the dividends are eventually paid
out, if at all, to the beneficial owners.

9.3.3 Deemed Interest

Deemed interests includes shares which are subject of:
a. s 7(1A) - having authority to dispose of shares
b. s 7(2) - beneficial/equitable interests
c. s 7(6)(a) - contract of purchase
d. s 7(6)(b) - right to transfer (eg under a will)
e. s 7(6)(c) - option to purchase
f. s 7(6)(d) - right to exercise or control rights attached thereto
Deemed interests excludes:
a. interests in unit trusts (collective investment scheme) - s 7(2)
b. interests of a bare trustee - s 7(9)(a)
c. interests of banks/financial institutions held by way of security - s 7(9)(b)
d. interest held by reason of an office - s 7(9)(c)
e. shares bought back by company - s 7(9)(ca)
f. prescribed interests - s 7(9)(d)

s 7(4) – Can link in Chain

Where a body corporate has, or is by the provisions of this section deemed to have, an interest in a share and –
(a) The body corporate is, or its directors are, accustomed or under an obligation whether formal or informal to act in accordance with the directions,
instructions or wishes of a person; or
(b) A person has a controlling interest in the body corporate,
That person shall be deemed to have an interest in that share.

s 7(4A) – Cannot link in Chain

Where a body corporate has, or is by the provisions of this section (apart from this subsection) deemed to have, an interest in a share and ___

(a) A person is;

(b) The associates of a person are; or
(c) A person and his associates are,

Entitled to exercise or control the exercise of not less than 20% of the voting power in the body corporate, that person shall be deemed to have an interest
in that share.

s 7(5): Associate
For purposes of s 7(4A), a person is an associate if he is:
(a) A subsidiary of that other person;
(b) Is accustomed or is under a formal/informal obligation to act in accordance with the directions of the other person in relation to the shares referred to in
(4A); or
(c) A body corporate (or majority of directors of the body corporate) are accustomed or is under a formal/informal obligation to act in accordance with the
directions of the other person in relation to the shares referred to in (4A).
 9.4 Variation of Class Rights
FRAMEWORK
1. Identification of Class Right
2. Variation of Class Right
3. Does the Variation Pass
4. Legal Remedies

9.4.1 STEP 1: Identification of Class Right

Here, [RIGHT] conferred on [PARTY] by [ARTICLE] is/is not a class right because the rights differ from [ORIGINAL SHARES] in having [DIFFERENT RIGHTS].

If Rights Not Attached to a Particular Class of Shares

Here, although the right is not attached to the share, it is still a class right, per Cumbrian Newspapers v Cumberland. Cumbrian Newspapers held that rights
enjoyed by a member can be class rights even though they are not referable to particular shares; the member can enjoy class rights if the company confers upon
him rights in his capacity as a member.

Here, ___.

EVALUATION – CUMBRIAN NEWSPAPER

Although Cumbrian Newspapers have not been applied in SG, would still prove persuasive here. Although Cumbrian Newspapers may have turned upon the
statutory interpretation of English legislation that created a full statutory procedure for protecting class rights, the then English Companies Act 1985 also failed
to define class rights as such, as is the case in s 74 of the Companies Act.

9.4.2 STEP 2: Variation of Class Right

In determining whether there was a variation of class right, we have to ascertain whether it was the right that has been varied, or if the variation merely affected
the enjoyment of the right.

Following White v Bristol Aeroplane Co, the rights of a class of shareholders are not altered by a chance in the company’s structure if this change merely affects the
enjoyment of such rights.

• There, the court held that the class of shareholder’s rights were not altered as each preferred shareholder will have one vote for every £1 of preference stock
held. It did not matter that the total voting power of the class may have less force.
 Here, ___.

Shares issued rank pari passu with existing preference shares

Per s 74(6), the issue by a company of preference shares ranking pari passu with existing preference shares issued by the company shall be deemed to be a variation
of the rights attached to those existing preference shares unless the issue of new tranche of preference shares was;

a. Authorized by the terms of issue of the existing preference shares; or

b. By the constitution of the company in force at the time the existing preference shares were issued.

Here, ___.

Altering a Provision which affects the Manner in which the rights may be varied
Per s 74(7) of the CA, any alteration of a provision which affects the manner in which the right may be varied, would be deemed a variation of class rights for the
purposes of court protection under s 74(1).

➔ Proceed to s 74(1) remedies.

9.4.3 STEP 3: Does the Variation Pass

9.4.3.1 STEP 3A: General – GM

In determining whether the variation of right passes, we first have to determine whether s 26(1) of the CA has been complied with.

Pursuant to s 26(1) of the Companies Act, [COMPANY]’s constitution can be altered by passing a special resolution. s 184(1) CA stipulates that a special resolution
is one that is passed by 75% or higher majority of the votes cast at a general meeting. It is also noted that pursuant to s 64(4)(b), the non-voting shareholders can
vote if their class rights are being varied.

Here, ___.

[Procedural]
• Procedurally, s 184(1) of the CA requires that at least 14 days written notice be provided for all members if the company is a private company.
 • Procedurally, s 184(1) of the CA requires that at least 21 days written notice be provided for all members if the company is a public company.

o However, this is qualified by s 184(2) of the CA, where a special resolution can be passed if 95% of all members with voting rights agree that a
resolution proposed and passed at a meeting be passed as a special resolution.

Following Allen v God Reefs of West Africa, under Common Law, the resolution is invalid unless the shareholders voted for it bona fide for the benefit of the company
as a whole.

[REFER TO BONA FIDE ABOVE]

9.4.3.2 STEP 3B: Modification of Rights Clause
NO MOR CLAUSE
Where the constitution of the company does not contain a modification of rights clause, the question is whether the company had been formed before amendment
to the Companies Act 2014, and, if it was, then, pursuant to s 36(2) CA 2004 of the old Companies Act 2004, Art 4 Table A in the 4th Schedule would have been
imported into the Constitution. If this is the case, then the constitution would be held to have contained a modification of rights clause.

But where the company was formed after 2014, and its constitution does not contain a modification of rights clause.

Here, there is no MOR clause in the constitution. Hence, the class right can be varied with a special resolution.

MODEL CONSTITUTION MOR CLAUSE

Given that [COMPANY] adopts the Model Constitution, Article 8, a Where the constitution contains a modification of rights clause, the
modification of rights (“MOR”) clause would apply. procedure and requirements of said clause must be followed in varying
the relevant class rights.
Hence, by adoption of this clause, a separate meeting of the class share
members has to be held and consent from 75% of class members is Here, ___.
required.

Here, ___.

BONA FIDE TEST – CLASS MEETING

Here, although the requisite consent from the class members in the separate class meeting has been met, [PARTY] can still look to rely on the bona fide test as set
out in Re Holder Investment Trust. There the court held that the class shareholders must bona fide believe that they are acting in the interests of the class
members.

• [-] There, the court held that the preference shareholders considered what was best in their own interests, without applying their mind to what was best
for the whole class. The court hence held that the consent to the modification of class rights was invalid.

Here, ___.
 [+] If Passed
But even if the relevant class rights were successfully varied or abrogated in such a manner, the holders of not less in the aggregate than 5% of the total number of
issued shares of that class may apply to the court to have the variation or abrogation cancelled. Until such an application is confirmed by the court, the variation or
abrogation is not effected: s 74(1) CA.

9.4.4 STEP 4: Remedies – s 74(1)

Here, [PARTY] may still apply to the court to have the variation of class rights cancelled under s 74(1) of the CA if the following requirements are fulfilled:

1. The company has a separate class of shareholders;

2. The company has a modification of rights clause;
3. The rights of the separate class of shareholders are varied; and
4. Holders of not less than 5% of the class of shares have applied.

Here, [REQUIREMENTS] made out.

Hence, upon application, the variation of class right shall not have effect until confirmed by the court.

By virtue of s 74(4), the court will disallow the variation if it would unfairly prejudice the shareholders of the class represented by the [PARTY].

Here, ___.

OTHER PROVISIONS
s 74(1A) - s 74(1) does not apply to treasury shares
s 74(2) - The application shall not be invalid by reason of the applicant consenting/voting in favour of the variation if
the Court is satisfied that any material fact was not disclosed by the company before they so consented/voted.
s 74(3) - application to be made within one month after the resolution was passed, or such further time the court allows
S 74(4) - for purposes of s 74(1), court to have regard to all circumstances of that case that the variation would unfairly
prejudice the shareholders of the class represented by the applicant
 10 Company Management and Meetings
10.1 Directors

10.1.1 Types of Directors

Per s 4 of the Companies Act, “director” includes:

a. Any person occupying the position of director of a corporation by whatever name called;
b. A person in accordance with whose directions or instructions the directors or the majority of directors of a corporation are accustomed to act; and →
SHADOW DIRECTOR
c. An alternate or substitute director. → DE FACTO DIRECTOR

10.1.1.1 De Jure Director

Here, [PARTY] is a de jure director. He was:

a. appointed by the company in accordance with the requirements of the company’s constitution;
b. Consented to act as director; and
c. His personal particulars were sent to ACRA.

10.1.1.2 De Facto Director

Director?
The issue here is whether [PARTY] should be held liable as a director under the Companies Act. It is arguable that [PARTY] can/cannot be found as a de facto
director.

Per The Wellness Group Pte Ltd v Paris Investment Pte Ltd, a de facto director is one who, notwithstanding his not having been validly appointed, nevertheless
performs the functions of a director and was held out by the company as such. In determining this, the court will consider factors such as:

a. Whether he directed others, committed the company to major obligations, and participated on an equal level in collective decisions ade by the board;
b. Whether the company held him out as a director;
c. Whether he used the title “director’;
d. Whether he had proper information on which to base decisions; and
e. Whether he had to make major decisions.

Here, ___
 Liable for Breach of CA?
Although de facto directors are considered “directors” for the purpose of the CA, this DOES NOT mean that they will be required to comply with all the provisions
thereunder. Ultimately, it is a question of statutory interpretations as to which rules will be extended to de facto directors.

At this juncture, it is apposite to note that the purpose of the extended idea of directorship is to identify those with real influence in the corporate affairs of the
company and to prevent the escape of duty or liability by the easy step of declining formal appointment.

Here, the court will likely find that a de facto director has to comply with s___ of the CA as it concerns directors’ liabilities.

[Remuneration]
Here, the issue is whether s 169 of the CA applies to de jure directors.

Following Heap Huat Rubber Company Sdn Bhd, s 169 of the CA does not apply to shadow directors, as the purpose of including shadow directors is to prevent
non-de jure directors from escaping liability as a director.

The rationale can be extended to de facto directors as the purpose is the same: to prevent non-de jure directors from escaping director’s liabilities. Hence, the court
will likely find that s 169 of the CA does not apply to de jure directors.

Therefore, board approval will suffice.

Here, ___.

10.1.1.3 Shadow Director

Director?
The issue here is whether [PARTY] should be held liable as a director under the Companies Act. It is arguable that [PARTY] can/cannot be found as a shadow
director.

Per Raffles Town Club, a shadow director is one “in accordance with whose instructions and directions the directors are accustomed to act”. By “accustomed to act”,
there must be a discernable pattern of compliance with the shadow director’s instructions or directions.

It is noted that as per s 4 of the CA, this influence has to be over a majority of the directors.

Here, ___.
 Liable for Breach of CA?
Although shadow directors are considered “directors” for the purpose of the CA, this DOES not mean that they will be required to comply with all provisions
thereunder. Ultimately, it is a question of statutory interpretations as to which rules will be extended to shadow directors.

At this juncture, it is apposite to note that the purpose of the extended idea of directorship is to identify those with real influence in the corporate affairs of the
company and to prevent the escape of duty or liability by the easy step of declining formal appointment.

Here, the court will likely find that a de facto director has to comply with s___ of the CA as it concerns directors’ liabilities.

[Remuneration]
Here, the issue is whether s 169 of the CA applies to de jure directors.

Following Heap Huat Rubber Company Sdn Bhd, s 169 of the CA does not apply to shadow directors, as the purpose of including shadow directors is to prevent
non-de jure directors from escaping liability as a director.

Therefore, board approval will suffice.

Here, ___.

10.1.2 Eligibility

10.1.2.1 Qualification
[General Requirement]
Per s 145(2), a director has to be:

a. Human
b. Attained the age of 18 and who is otherwise of full legal capacity
10.1.2.2 Disqualifications
Generally, a director who is disqualified is prohibited not only from acting as a director, but also from being involved directly or indirectly in the “management” of
a company.

AUTOMATIC
Adjudged Bankrupt Per s 148(1) of the Companies Act, individual who is adjudged bankrupt by Singapore Court or foreign court having jurisdiction in
bankruptcy is automatically disqualified from acting as a director.
Fraud/Dishonesty Per s 154(1) of the Companies Act, a director is automatically disqualified if he is convicted of any offence involving fraud or
Conviction dishonesty punishable with imprisonment for three months.

o DQ for a period of five years from conviction, or from his release from prison, if he had been sentenced to imprisonment.
Persistent Defaults Per s 155 of the Companies Act, persistent default in complying with those provisions of the CA which require the filing or lodging
with or notifying of the Registrar of any matter will result in automatic disqualification.

o DQ for 5 years from the date the person was last found responsible for such non-compliance

o“persistence”: Conclusive evidence if the person has had on three occasions within a period of five years been found guilty or
made responsible for failure to comply with these provisions of the Act.
3+ Companies Struck Per s 155A, director of at least three defunct companies who had their names struck off the register within a five-year period will be
Off automatically disqualified.

COURT ORDERS
Directors of Insolvent Per s 149 CA, a person may be disqualified from acting as a director if he is considered unfit to hold office.
Companies
This is pursuant to a disqualification order made by the court on the application of the Minister or Official Receiver against a person who
was a director of a company which:

a. Went into insolvent liquidation either while he was a director or within three years of his ceasing to be a director (per s
149(2)(b)(i) of the CA); and
b. That person’s conduct as director of that company or in other companies, as a whole, makes him unfit to be a director or to
be concerned with the management of a company (per s 149(2)(b)(ii) of the CA).

Here, ___.
 Note that per s 149(2)(a) of the CA, a 14 days’ notice has to be given to the person to be disqualified.

Certain Non-fraud Per s 149A, where a company is ordered to be would up by the Court under s 125(1)(n) of the Insolvency, Restructuring and Dissolution
Offences Act 2018 on the ground that it is being used for purposes against national security or interest, a disqualification order can be made
by the court on the application of the Minister or Official Receiver to disqualify the director.

10.1.2.3 Debarment
• The Registrar is empowered to make a debarment order against a director or a secretary of a company which has defaulted in lodging or filing documents
with the Registrar, or in failing to notify the Registrar of any matter as required by the CA. The default must have persisted for a continuous period of at
least three months.

o A debarment order prevents the subject of the order from acting as a director or secretary of any other company except the company of which he is director
or secretary of immediately before the order is made.

▪ Debarment is effective from the date the order is made and continues in force until the Registrar cancels or suspends the order.

▪ Before the order is made, the Registrar must give the director or secretary concerned an opportunity to show cause why the debarment order should
not be made.

10.1.3 Appointment & Removal

10.1.3.1 Appointment
[1 Director who is resident]
Per s 145 of the CA, every company must have at least one director who is ordinarily resident in Singapore.

GENERAL

Step 1:
Per s 149B of the CA, unless the constitution otherwise provides, company may appoint a director by ordinary resolution at a general meeting.

Step 2 (Only Public Company):

 Per s 150 of the CA, appointment for directors must be voted individually unless has been agreed to by the meeting without any vote being given against it. If the
appointment is made in contravention, it will be void.

Step 3:
Per s 145(2), a director has to be:

a. Human
b. Attained the age of 18 and who is otherwise of full legal capacity

CASUAL VACANCY
A casual vacancy can be filled by a board resolution.

NOMINATION UNDER SPECIAL CONSTITUTIONAL POWER

10.1.3.2 Removal
PUBLIC COMPANY
Per s 152(1) of the CA, a public company may by ordinary resolution remove a director before the expiration of his period of office. This is notwithstanding
anything in the company’s constitution or any in any agreement between the company and the director.

Here, ___.

[Represent Class/Debenture]
• Where the director was appointed to represent the interests of any particular class of shareholders or debenture holders, the resolution to remove the director
will not take effect until his successor has been appointed.

Here, ___

PRIVATE COMPANY
Constitution Never State Constitution States
By virtue of s 152(9) of the CA, since there is no provision to the By virtue of s 152(9) of the CA, a private company can validly state the
contrary in the company’s constitution, the private company may by method of removal in its constitution.
 ordinary resolution remove the director as a director before the
expiration of his period of office. This is notwithstanding anything in Here, ___.
any agreement between the private company and the director.

10.1.4 Financial Dealings with Company

10.1.4.1 Remuneration
Constitutional Remuneration
Where the constitution provides for the determination and payment of remuneration, the requirements of the particular provision will have to be adhered to.

• If the proper procedure therein provided was not followed, the director in question will be precluded from claiming quantum meruit or for an equitable
allowance in respect of the services he had rendered.
Payment Made in Capacity as a Director
Here, the payment was made in [PARTY]’s capacity as a director.

Hence, this is subject to s 169(1) of the CA. Per s 169(1), in general, a company shall not, at any meeting or otherwise, provide emoluments or improve emoluments
for a director in respect of his office as such, unless it is approved by the shareholders in a resolution that is “not related to other matters”.

s 169(2) defines “emoluments” to include fees and percentages, any sums paid by way of expenses allowance in so far as those sums are charged to income tax
in Singapore.

Here, ___

Payment Made in Capacity NOT as a Director

Here, the payment was made in [PARTY]’s capacity as a [NON-DIRECTOR].

Hence, s 169(1) does not apply. The power to decide on such payment is likely to be vested in the board of directors.

Here, ___.
10.1.4.2 Termination Payment
Per s 168(1)(a) of the CA, a company may not compensate a director for loss of office or in connection with his retirement from such office UNLESS:

a. The particulars with respect to the proposed payment have been disclosed to; and
b. approved by the members of the company in a General Meeting.

However, a payment which is properly referable to the director’s compensation package as a whole and which is in consideration for the directors’ service would
not be caught by the provision.

Hence, to determine the applicability of s 168 of the CA, we should first consider whether the payment was a compensation for loss of office or a deferred
remuneration.

Here, the payment was a compensation for loss of office/deferred remuneration.

• Compensation for Loss of office: Here, s 168(1)(a) of the CA applies

• Deferred remuneration: Here, s 168(1)(a) does not apply

[-] [IF UNLAWFULLY MADE]

Per s 168(1), if the payment is unlawfully made, the director holds it on trust for the company.

EXCEPTIONS
s 168(1A) Per s 168(1A), there is no requirement for approval as in (1) if the payment to a director is for his holding of a salaried employment or
office in the company, to compensate him for termination of employment pursuant to an existing legal obligations arising from the
agreement made between the company and the director.

This is subject to the following conditions:

a. The amount of the payment does not exceed the total emoluments of the director for the year immediately preceding his termination
of employment; and

b. The particulars with respect to the proposed payment, including the amount thereof, have been disclosed to the members of the
company upon or prior to the payment.
 s 168(5)

10.1.4.3 “Restricted Transactions” – With Director (s 162)

By virtue of s 162 of the CA, companies (other than exempted private companies) are restricted from making transactions with their directors, or directors of
relevant companies (s 6), where the transaction is one which the company:

a. Makes a loan or quasi-loan

b. Enters into any guarantee or provides any security in connection with a loan or quasi-loan made to the relevant director by any other person
c. Enters into credit transaction as the creditor for the benefit of a relevant director
d. Enters into any guarantee or provides any security in connection with a credit transaction entered into by any person for the benefit of a relevant director
e. the director enters into a transaction with a third party, who receives a benefit (including assumption of any rights, obligations or liabilities) from the
company or a related company; the test is, whether it would be a restricted transaction if it was the company, and not the third party, who had entered into
it.

Quasi-Loan Transactions in which the company agrees to pay for the receipt by a director of some financial benefit, but for which payment
the director is liable to make reimbursement to the company: s 162(11) CA

Credit Transaction a. supplies any goods or disposes of any immovable property under a hire-purchase agreement OR a conditional sale
b. lease or hires any immovable property or goods in return for periodic payments; or
 c. otherwise disposes of immovable property or supplies goods or services on the understanding that payment (whether
in a lump sum or instalments or by way of periodic payments or otherwise) is to be deferred;

s 162(11) CA

Here, ___.

EXPANSION
[LOAN TO DIRECTOR’S FAMILY]
By virtue of s 162(8) of the CA, the transaction involving [PARTY] does not cease to be a restricted transaction because the transaction was between [COMPANY]
and the director’s
a. spouse
b. son/daughter
c. adopted son/daughter
d. step-son/daughter

EXCEPTIONS
Exempt Private By virtue of s 162(2) of the CA, an exempt private company, is free to make loans to its directors without being restricted by s 162(1)
Company of the CA.
Other Exceptions – s a. Made for the benefit to meet expenditure incurred/to be incurred by him, for the purposes of the company
162(3) i. Requires the prior approval of the company given at a general meeting at which the purposes of the expenditure
and the amount or extent of the restricted transaction are disclosed; or
ii. On condition that if prior approval of company is not given at the general meeting or before the next following AGM,
the amount of or liability under restricted transaction shall be repaid or discharged within 6 months from the
conclusion of that meeting.

b. Benefit of director who is in full-time employment of the company/corporation related to the company, for the
purposes of acquiring a home, provided only one such outstanding restricted transaction.

i. Requires the prior approval of the company given at a general meeting at which the purposes of the expenditure and
the amount or extent of the restricted transaction are disclosed; or
ii. On condition that if prior approval of company is not given at the general meeting or before the next following AGM,
the amount of or liability under restricted transaction shall be repaid or discharged within 6 months from the
conclusion of that meeting.
 c. Benefit of director who is in full-time employment of the company/corporation related to the company, where the
company has at a general meeting approved for the scheme for the making of such transaction.

d. Benefit of director in the ordinary course of business of a company whose ordinary business includes the lending of
money or the giving of guarantees, and the activities of the company are regulated by any written law relating to banking,
finance companies or insurance or are subject to supervision by Monetary Authority of Singapore.

LIABILITIES
[Liability of director(s) who authorized the transaction]
Since [DIRECTOR] had authorized the making of the above restricted transaction, per s 162(5) of the CA, [DIRECTOR] will be jointly or severally liable to indemnify
the company against any loss arising therefrom.

[Criminal Liability of director(s) who authorized the transaction]

Since [DIRECTOR] had authorized making of the abovementioned restricted transaction, [DIRECTOR] will likely be guilty of an offence under s 162(6) of the CA,
and liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding two years

[Company Recover Restricted Transactions]

By virtue of s 162(7) of the CA, [COMPANY] is not restricted by s 162 of the CA in recovering the abovementioned restricted transactions. Therefore, Company will
likely be able to recover the restricted transactions.

10.1.4.4 “Restricted Transactions” – With Company (s 163)

Per s 163 of the Companies Act, a company (“Creditor Co”) (other than exempted private companies) may not:

a. Make a loan, quasi-loan, or credit transaction to another Company (“Borrower Co”);

b. Give a guarantee or security for a; or
c. The Borrower Co enters into a transaction with a third party, who receives a benefit (including assumption of any rights, obligations or liabilities) from the
Creditor Co or a related company; the test is, whether it would be a restricted transaction if it was the Creditor Co company, and not the third party, who
had entered into it

if directors of the creditor Co are interested in 20% or more of the total voting power in the Borrower Co.
This is subject to prior approval at a general meeting at which the interested directors, or directors and his or their family members abstained from voting.

EXPANSION [of share interest]

[COUNTING OF INTERESTS]
a. Excludes Interests held by the director through the Borrowing Co
b. Interests in shares has the meaning assigned to that expression in s 7 of the CA
c. A person who has interests in a share of a company under s 7 is to be treated as having an interest in the voting power conferred on the holder by that share.

[SHARES OF FAMILY MEMBERS]

Per s 163(5), an interest of a member of a director’s family shall be treated as the interest of the director, where the family member includes;

a. Spouse,
b. Son/Daughter;
c. Adopted son/daughter; and
d. Step-son/daughter

EXCEPTION
EXEMPT PRIVATE By virtue of s 163(1), exempt private company is not restricted by s 163(1) of the CA.
COMPANIES
PRIOR APPROVAL Per s 163(1), the transaction is not restricted if there was a prior approval in a general meeting at which the
interested directors, or directors and his or their family members abstained from voting.
RELATED COMPANY Per s 163(4)(a), the section does not apply where the borrowing company is the creditor company’s subsidiary or
holding company, or a subsidiary of its holding company.
ORDINARY COURSE OF Per s 163(4)(b), the transaction is not restricted if it was in the benefit of borrowing co in the ordinary course of
BUSINESS business of the creditor company whose ordinary business includes the lending of money or the giving of
guarantees, and the activities of the company are regulated by any written law relating to banking, finance
companies or insurance or are subject to supervision by Monetary Authority of Singapore.

LIABILITIES
[Criminal Liability of director(s) who authorized the transaction]
Since [DIRECTOR] had authorized making of the abovementioned restricted transaction, [DIRECTOR] will likely be guilty of an offence under s 163(7) of the CA,
and liable on conviction to a fine not exceeding $20,000 or to imprisonment for a term not exceeding two years
 [Company Recover Restricted Transactions]
By virtue of s 163(6) of the CA, [COMPANY] is not restricted by s 163 of the CA in recovering the abovementioned restricted transactions. Therefore, Company will
likely be able to recover the restricted transactions.

10.1.4.5 Restricted Transfer – General Exceptions

 10.2 Procedures for Making Decisions
10.2.1 Shareholder Decisions

10.2.1.1 Meetings
Virtual
It is noted that Virtual AGMs/EGMs will be permitted util 30.06.21 under s 27 of the COVID-19 (TM)
Act.

AGM
Per s 175(3), any meeting held or summoned can be deemed to be the annual general meeting if –

1. All persons entitled to receive notice of the meeting did receive the notice
2. Company resolves so
WHEN • Per s 175(1)(a), must be held after the end of each financial year within 4 months in the case of a listed public company.

• Per s 175(1)(b), must be held after the end of each financial year within 6 months in the case of any other company.

• Per s 175(2)(a), may apply to the Registrar for extension to period mentioned in (1)(a) or (b), provided there are special reasons
to convine the Registrar with
Purpose • Consider company’s annual financial statements and the directors’ and auditors’ reports
o Financial statements and consolidated financial statements – s 201

• Appointment/reappoint of auditor and directors – s 205

• Declaration of dividends if recommended by the Board

• Other issues
o Approval of company required for issue of shares by directors – s 161
EXCEPTION – PRIVATE Per s 175A(1), [COMPANY] need not hold an annual general meeting for a financial year if
COMPANY
a. [COMPANY] is a private company AND [COMPANY] has passed a resolution to dispense with the holding of general meetings in
accordance with subsection (2). Subsection (2) stipulates that the resolution has to be passed at a general meeting by ALL
MEMBERS who are entitled to vote, whether in person or by proxy; OR
 b. [COMPANY] is a private company at the end of the financial year, and has sent to all persons entitled to receive notice of general
meeting of [COMPANY] of the documents mentioned in s 203(1) within the period specified in s 203(1)(b).

- The documents mentioned in s 203(1) comprises a copy of the financial statements (OR in the case of a parent company,
a copy of the consolidated financial statements and balance sheet) which was duly audited, accompanied by a copy of
the auditor’s report.

- s 203(1)(b) stipulates that the documents have to be sent not later than 5 months after the end of the financial year.

c. [COMPANY] is a private company and a dormant relevant company, satisfying s 201A(2)(a).

However, the right of a member to require the holding of an annual general meeting is expressly preserved in recognition of the
fact that, on occasion, thee minority shareholders may desire the opportunity to openly question those in control.

EGM
Usually refers to all other general meeting additional to annual general meeting

GM – GENERAL
CALLING GM Per s 176 of the CA, members holding not less than 10% of the total number of paid-up voting shares may requisition the directors
to convene a meeting.

Per s 177 of the CA, the right to convene a meeting is accorded to two or more members holding not less than 10% of the total
number of issued shares of the company.

Per s 182, if for any reason it is impracticable to call a meeting in any manner in which meetings may be called or to conduct the meeting
in the manner prescribed by the constitution or this Act, the court has the power to order a meeting to be called, held and conducted in
a manner as the court thinks fit.

• Directions that the court can give under s 182

o One member present in person or by proxy shall be deemed to constitute a meeting
o The personal representative of any deceased member may exercise all or any of the powers that the deceased member
could have exercised if he were present at the meeting
OBJECT OF MEETING Per Credit Development v IMO, if the object of the meeting:

a. Cannot be legally carried into effect; or

b. Is ultra vires the meeting

The directors ought not to be required to convene the meeting.

NOTICE NOTICE PERIOD *SPECIAL NOTICE*
Per s 177(2) [Reg 49 MC], a meeting of a company or of a class of members, which Special Notice is needed where the resolution
does not concern the passing of a special resolution, is validly called as it was called concerns:
by notice in writing of not less than 14 days or such longer period as is
provided in the constitution. a. Removal of auditor: s 205(4)
b. Removal of director: s 152(2)
[EXCEPTION]
Per s 177(3), even though the notice for the meeting did not comply with s 177(2):

a. The annual general meeting is duly called if it was agreed by ALL

members entitled to attend and vote
b. The meeting was duly called as it was agreed by a majority of not less
than 95% of the total voting rights of the members having a right to attend
and vote at the meeting.

[SPECIAL RESOLUTION]
• Procedurally, s 184(1) of the CA requires that at least 14 days written
notice be provided for all members if the company is a private company.

• Procedurally, s 184(1) of the CA requires that at least 21 days written

notice be provided for all members if the company is a public company.

o However, this is qualified by s 184(2) of the CA, where a special

resolution can be passed if 95% of all members with voting rights
agree that a resolution proposed and passed at a meeting be passed
as a special resolution.
 CONTENT OF NOTICE
Content of the notice context-dependent: The notice must contain enough detail
to enable the members to make informed choices as to whether or not to attend the
meeting or to take other steps: Normandy v Ind Coope Co.

METHOD
Reg 113 MC: By post to member’s registered address.
WHO CAN ATTEND • s 180(1) - a member has a right to attend any general meeting of the company and to speak on any resolution
• s 180(2) - company limited by shares - holder of a share can vote in accordance with s 64
• s 180(3) - company not limited by shares - member may vote if the right has been conferred under the company’s constitution
• s 180(4) - preference share carries the right in a poll at any general meeting to at least one per share WHEN preferential
dividend or any part thereof remains in arrears and unpaid
• s 180(5) - for purposes of (4) - (a) preference share either does not entitle the holder thereof
i. to the right to vote at a general meeting (except in the circumstances specified in (4)
ii. to any right to participate beyond a specified amount in any distribution whether by way of dividend, or on redemption, in a
winding up, or otherwise
PROXIES Proxy: A person authorised to represent and vote for a member at a general meeting. A member is not allowed to appoint more than two
proxies for the same meeting: s 181(1A)(b) CA. He may only appoint 2 proxies where he also specifies the proportions of his holdings to
be represented by each proxy, failing which the appointments are invalid: s 181(1A)(c).

• Proxy may vote on poll only: A proxy may only vote on a poll and not show of hands (because to allow that would be tantamount
to allowing members to “split themselves in two”), unless the constitution provides otherwise. However, the proxy may demand
or join in demanding a poll: s 178(2) CA.

• Proxy as agent: A proxy is considered an agent of the member for the purposes of attending and voting at the meeting: Re English,
Scottish Australian Bank. As such, a proxy should vote in accordance with the instructions given by the members who appointed
him: Second Consolidated Trust Ltd v Ceylon Amalgamated Tea Rubber Estate. However, the proxy is not legally obligated to carry
out the appointer’s instructions, or even to act at all, in the absence of a contractual or fiduciary obligation: Tong Keng Meng v
Inno-Pacific Holdings Ltd

QUORUM NUMBER
 This is ordinarily determined by the constitution of the company, but, where this is not provided for, two persons physically
present constitutes a quorum: s 179(1)(a) CA

[DON’T NEED TO STAY]

The quorum ordinarily does not need to be present throughout the meeting: Re Hartley Baird Ltd, although the constitution may provide
otherwise.

VOTING NUMBER OF VOTES

s 64:

(1) Subject to (2) and (3), a share confers one vote on a poll
(2) Constitution may provide that a member shall not be entitled to vote unless all calls or other sums personally payable by him
in respect of shares in the company have been paid
(3) Subject to (4) and 64A, a right specified in (1) may be negated, altered, or added to by the constitution of the company
(4) Notwithstanding subsection (23), a right of a holder of a specified share to vote may not be negated:
a. A resolution to wind up the company voluntarily under s 290; or
b. A resolution to vary any right attached to a specific share and conferred on the holder
(5) “Specified share” means a share in the company, but for subsection (4), does not entitle the holder thereof the right to vote at a
general meeting of the company
(6) Does not operate so as to limit or derogate from the rights of any person under s 74.

S 64A – See above: issuance of weighted share for public company

CONDUCT OF VOTE

General conduct of vote: Voting is generally done on a show of hands, i.e. each member will have one vote regardless of the number of
shares he holds: s 179(1)(c)(i) of the CA.
 Poll: However, a member may wish to demand that a poll be taken, since the “show of hands” basis does not account for the relative
weight of a shareholder’s stake. The exercise of demand may be predicate on conditions in the company constitution, but this cannot
render ineffective a demand that is made by:

a. Five or more members having the right to vote at the meeting; OR

b. A member or members representing at least 10% of the total voting rights of all the members having the right to vote at the
meeting; or
c. A member or members holding voting shares in respect of which is paid up an aggregate sum of not less than 10% of the total
amount that has been paid up on all voting shares: s 184(4)(b) of the CA.

CHAIRPERSON The chairperson has procedural control over the meeting. The chairperson will be as constitutionally provided for, but in the absence of
such a provision, may be elected by the members present among their number: s 179(1)(b) CA.

MINUTES Duty to keep minutes: Minutes must be kept of all proceedings of meetings and entered into the statutory minute books within a month
of the date upon which the relevant meeting was held: s 188(1) CA. They provide prima facie and not conclusive evidence that the meeting
was duly convened and held: s 188(3) CA, and that the proceedings of the meeting were duly conducted: s 188(2). The absence of mention
in the minutes, however, is not fatal to a finding that an unrecorded resolution exists, if it can be independently proved: Re Fireproof
Doors Ltd.

11 Written Resolutions
Written Resolutions are only applicable to Private Companies and Unlisted Public Companies.

• Per s 184A of the CA, private companies may pass resolutions by written means
• Per s 184C, this constitutes sending the member the text of the resolution and the member indicating his agreement thereto by writing
• Per s 184B(1)(a)(ii) of the CA, the circulation requirement (notice, etc) of that resolution pursuant to s 183 has been complied with.

[DEGREE OF SUPPORT]
The degree of support required for the passing of resolutions by written means may be prescribed by the company’s constitution. In the absence:

• Special Resolution: Passed by written means if indicated as a special resolution and if it is agreed to by members who represent at least a 75% majority:
184A(3)

• Ordinary Resolution; Passed by written means if the resolution is formally agreed on by a simple majority: 184A(4)
[EXCEPTION]
The company’s constitution may, however, prohibit the passing of the resolution in this manner

11.1 Informal Decisions

Per Re Duomatic Ltd, an act which is intra vires, and which is assented to by every member entitled to vote at a general meeting, is valid, notwithstanding that a
meeting to authorise that act has not been held. Hence, this would override the formal requirements in relation to the passing of resolutions at general meeting.

The two core requirements are:

a. The consent of shareholders must be unanimous; and

b. The shareholders must consent with full knowledge of what it is they are consenting to.

LIMITATIONS
[Mere Awareness]
• Per Yong Kheng Leong, being aware of the impugned payments in itself is not enough to amount to approval of the arrangement.

[Minor Irregularity]
• Per Dovechem Holdings Pte Ltd v Ng Joo Soon, the Duomatic Principle can only be applied to a relatively minor irregularity

[Consistent with Constitution]

• Per Dovechem Holdings Pte Ltd v Ng Joo Soon, the Duomatic Principle can only be invoked to enforce an alleged agreement relating to an amendment which
is consistent with the express provisions of a Company’s constitution.

[Sufficient Conduct]
• Per Yong Kheng Leong v Paneweld Trading Pte Ltd, the conduct between the parties must be such that there is sufficient basis for the court to infer that:

a. There was in fact an agreement; and

b. what the key contents of the agreement were.
 11.2 Board Decisions
Generally, there are no mandatory legal rules on how a board should conduct its meetings or make decisions. Each company is free to decide on these matters and
typically sets out the minimum requirement in its constitution.

[Constitution Silent]
Where the constitution is silent on a matter of a board procedure, the board is entitled to regulate its meetings as it thinks fit.

MC
Board of Directors

83. Director can call for meeting at any time

84. Majority votes required; if 50:50 chairman of the meeting votes twice
86. Quorum required is 2, unless stated otherwise
87. (1) Vacancy in the body is okay;
(2) If the no. of directors < necessary quorum of directors → The continuing directors can only act for the purpose of (1) increasing the number of directors
to the required amount; or (2) summoning a general meeting
88. Directors can choose the chairman of the meeting
89. [one man company] For a company with only one director, he may pass a resolution by recording it and signing the record.

Committee
89. The director may delegate their powers to committees.
90. A committee may elect a chairman of its meetings
91. A committee may meet and adjourn as it thinks proper

Effect of meetings
92. All acts done by any meeting of directors/committee of directors is valid, even if afterwards it is found that there is a (a) defect in the appointment; or (b)
disqualification of any person acting as director

93. A resolution in writing is as valid and effectual as a meeting of the directors, insofar as it is signed by all the directors within the notice period.
 11.3 Procedural Irregularities
STEP 1 AUTOMATIC Per s 392(1), a procedural irregularity including:
Is there a [→ STEP 2]
procedural a. Absence of quorum at a meeting
irregularity b. Defect, irregularity or deficiency of notice or time
c. [s 392(3)] Accidental omission to give notice of the meeting or which notice was not received by an intended recipient

Would be automatically validated without any need for a validating court order
COURT Per s 392(4), the court has a general power to make a validation in respect of any contravention of the CA and the
ORDER constitution.

To do so, the court must be satisfied that [s 392(6)]

• The person concerned in the contravention acted honestly
• It is in the public’s interest that the order be made;
• No substantial injustice to be caused to any person

[Commission of Offence]
Per s 392(5), a validating order may be made even where the contravention resulted in the commission of the offence

Step 2: The proceeding would be invalidated should substantial injustice be caused.

Did it cause
“substantial Per Chang Benety, in ascertaining whether substantial injustice was caused, the court does a “holistic weighing and balancing of the various
injustice” interests of all the relevant parties.” The court considers the following principles:
a. Direct link between irregularity and injustice suffered;
b. Injustice is substantial, not theoretical;
c. Outcome might have been different but for the irregularity.
 11.4 Division of Powers Between Board & GM

Per Chan Siew Lee v TYC, the division of power between the board of directors and the shareholders in a general meeting is a matter of contract which is set out in
the company’s constitution. That contract is between the shareholders and the company, and between the shareholders inter se.

11.4.1 s 157A
STRICT READING Given that s 157A grants original authority to manage to the board, it should follow that only the board may exercise these powers.

The general power will have only those powers that have been specifically granted to it under the Companies Act, and as permitted
by s 157(2)., under the constitution but no other

Any attempt to reserve, in the constitution, anything wider than specific powers to the general meeting would be contrary to the
statute and thus invalid
WIDER INTERPRETATION Per TYC Investment Pte Ltd v Tay Yun Chwan Henry, s 157A establishes a default rule which may be varied by the company’s
constitution.

Per s 157A(1), the business of the company shall be managed by the company. However, pursuant to s 157A(2), this power is
subject to any powers that the Companies Act or the constitution requires the company to exercise at a general meeting.

Here, ___.
Which to follow?
Per TYC Investment v Tay Yun Chwan, as a matter of practicality and commercial reality, it would be impossible to prescribe a set form of corporate governance…
[and] there may be good commercial justifications for certain management powers to be reserved to the members.

Hence, we should look at whether there is indeed a good commercial justification for the management power to be reserved to the members.
11.4.2 Reserve Powers of GM
Per Chan Siew Lee v TYC, management powers are reserved to the shareholders in a general meeting only when the directors are deadlocked or is unable or
unwilling to act. The scope of power is limited to what is necessary to resolve the deadlock.

The need to invoke WILL NOT ARISE when:

1. There is no deadlock; or
2. The deadlock can be broken by appointment of additional directors and/or removal of existing directors in the general meetings

Furthermore, the reserve power must be LIMITED to cases where the dispute relates to:

1. The performance of a bona fide obligation owed by the company to a third party; and
2. There is no suggestion that it would not be in the company’s best interests to honor these obligations.

Here, ___.
 12 Directors’ Duties

12.1 Non-Directors*
*VERY RARE
Here, although [PARTY] is not a director, he may still owe fiduciary duties to [COMPANY].

Per Smile Inc Dental Surgeons v Lui Andrew, there is a possibility of imposing fiduciary duties on non-director employees of a company. In determining whether
a fiduciary relationship arises in the context of an employment relationship, it is necessary to identify the particular duties undertaken by the employee, and whether
in all circumstances he placed himself in a position where he must act solely in his employer’s interests.

Here, ___.

12.2 Duty to Act in Good Faith (Bona Fide in the company’s interest)
The issue is whether ___, as a director, had acted in good faith.

In Re Smith and Fawcett Ltd, it was held that it is trite that directors owe a duty to act in good faith in the company’s interests.

Per Goh Chan Peng v Beyonics Technology Ltd, the test to be applied is principally subjective, but subject to a minimum level of objectivity.

Here, [REFER BELOW].

STEP 1: First, the court will consider whether a director had exercised discretion bona fide in what he (and not what the court) considered was in
Subjective Test the interests of the company.

Here, [DIRECTOR] will contend that he had honestly believed ___.

STEP 2: For the objective element, following Charterbridge Corp Ltd v Lloyds Bank Ltd, the test is whether an intelligent and honest man
Objective Test would reasonably believe that the transaction is for the company’s benefit. If a transaction is not objectively for the company’s
benefit, the court may infer that the director is not acting honestly, i.e. mala fides.
 Relevant Factors
Criminal Liability In Ho Kang Peng v Scintronix Corp Ltd (“Scintronix”), it was held that where the act subjects the company to
the risk of criminal liability, such an act cannot honestly be believed to be in the company’s interest. This is
because the company’s interest is not profit maximisation at all costs. It includes the shareholders’ interests to
have its directors to act within their powers for proper purposes.

Here, ___.
Stakeholder
In Raffles Town Club Pte v Lim Eng Hock Peter, it was held that a company’s interests can be equated with that of its shareholders’,
employees’ or creditors’.
Shareholder It is noted that since a company is an artificial entity, its interests are also very readily identified with the
interests of its shareholders as a whole, albeit not only a particular segment of them.
Company However, the company may also choose to prefer its own interests as a commercial entity over those of its
different stakeholders. From RTC, when a decision is made to plough profits back into the company rather than
pay them out as dividends or bonuses, it reflects a decision to prefer the interests of the company as a commercial
entity over the interests of the shareholders and employees as individuals.
Employees The director taking into account of the interests of the company’s employees is statutorily recognised under s
159 of the CA. Per Hutton v West Corck Rly Co, the test is simply whether such acts are “reasonably incidental”
to the carrying out of the company’s business.

ILLUSTRATION
In Hutton v West Corck Rly Co, the court held that a company can favour
its employees by sending them for tea

Here, ___.

Creditors Where the company is insolvent or near insolvency, the directors owe a duty to consider the creditors’ interests:
Liquidators of Progen Engineering Pte Ltd v Progen Holdings Ltd. In such a situation, it is the creditor’s assets
which are at stake, and thus, their interests as creditors take primacy.

It is noted that it is unsettled what is “near insolvency”. It is a balancing act between the creditors and the
shareholders’ interests, and the weight to be accorded to the interests of creditors will increase as financial
health of the company decreases.
 Here, ___.
Other Group In Intraco, the directors were alleged to have breached their duty to act in the interests of the company in
Companies causing the company to acquire an asset from a related company at a significant over-value. It was argued that
the directors had acted for the benefit of the group as a whole. The CA held that as an honest and intelligent man
in the position of the directors could have inferred that the transactions were entered into in the interests of the
company, the directors were not in breach of their duty (although they did not exactly clarify if consideration of
the group interest will suffice).

Here, ___.
STEP 3: [benefit of hindsight] Per Intraco v Multi-Pak, the courts should be slow to interfere with commercial decisions of directors which have
Cheeky Conclusion been made honestly even if they turn out, on hindsight, to be financially detrimental.

However, this was not the case of poor commercial decision which was financially detrimental in hindsight. ___.

STEP 4: It is noted that the common law duty of good faith overlaps greatly with s 157(1) of the CA, specifically “a director shall at all times act
s 157(1) Overlap honestly”. Hence, s 157(1) of the CA would likely be made out as well.

Hence, the director will be liable for any profits or damages, as well as criminal penalties.
 12.3 Duty to Act for Proper Purposes
Directors owe a duty to act for proper purposes: Hogg v Crampton. Thus, a power exercised intra vires but for improper purposes is still invalid.

Following Howard Smith Ltd v Ampol Petroleum Ltd, the inquiry is a two stage process.

a. Firstly, determine “proper” purpose(s) of power.

b. Secondly, determine the substantial purpose for which the power was exercised; and
c. Lastly, whether the purpose was proper or not.
STEP 1: The court will first determine the “proper” purpose of power. This is done through the construction of the constitution, considering
Proper Purpose of Power the nature of the power and limits placed on exercise of power. This process is objective.
STEP 2: The court will next determine the substantial purpose for which the power was exercised.
Actual Substantial Purpose
Here, ___.
STEP 3: [Compare if directors acted for proper purposes]
Comparison
MULTIPLE PURPOSES
Here, there are multiple purposes behind the director’s exercise of power. The purposes are ___. Hence, the court may wish to
consider the “causation” test proposed buy the minority in Eclairs Group Ltd v JKX Oil & Gas plc. That is, would the exercise of
power still be made with the absence of improper motives? If yes, then the decision should not be set aside, but if no, then the decision
should be set aside, and it would them be irrelevant that there were other proper motives in mind.

STEP 4: It is noted that the common law duty to act for proper purposes overlaps greatly with s 157(1) of the CA, specifically “a director shall
s 157(1) Overlap at all times act honestly”. Hence, s 157(1) of the CA would likely be made out as well.

Hence, the director will be liable for any profits or damages, as well as criminal penalties.

12.4 Duty of Loyalty

Directors owe a duty of loyalty to their company, as expressed by the (a) no-conflict rule; and (b) no-profit rule in Aberdeen Railway Co v Blaike Brothers and
Bray v Ford respectively.

It is noted that these rules are ones of strict liability. Hence, the finding of liability does not depend on the director’s state of mind, and he may infringe the rule even
if he had acted in good faith.
12.4.1 No-Conflict Rule

*Distinction drawn between (a) CONFLICT OF PERSONAL INTEREST & DIRECTOR DUTIES; and (b) CONFLICT OF DIFFERENT DUTIES*

Preliminary Issues

• [no profit made] Per Parker v McKenna, it is immaterial that the director has not made any profit out of the breach – liability will arise upon conflict.

• [subjective state of mind] Per in Plus Group, the subjective state of mind of the director is irrelevant – liability may arise even where the director
“accidentally” finds himself in a position of conflict. Under such circumstances, it is his duty to either regularise or abandon the action

12.4.1.1 Conflict between Personal Interest & Director Duty

(a) SELF-DEALING TRANSACTION

STEP 1: Here, the issue is whether the director was in breach of the no-conflict rule, specifically by being involved in a “self-dealing” transaction.
Establish
Conflict Per Aberdeen, a director may not enter into engagements where his fiduciary duties to the company may conflict with those of his interests.

• [Beneficial Transaction] It is irrelevant that the transaction was beneficial to the company; application of the rule is strict.

ILLUSTRATION
In Aberdeen, the director entered into a contract on behalf of the company with his own firm, for the purchase of a
large quantity of iron chairs at a certain stipulated price. However, a duty to the company is imposed on him the
obligation of obtaining these chairs at the lowest possible price. Thus, there was a conflict of interest.

• [EXTENT OF POSSIBILITY OF CONFLICT] Here, there is an issue to the extent of possibility of conflict. In Boardman v Phipps, the
majority held that the threshold was whether there was a “real sensible possibility” of conflict. However, in Ng Eng Ghee, the court
preferred the “mere possibility” test, primarily due to the desire to prevent the slightest temptation to a fiduciary to breach his duty.
 • [SG] In Winsta Holding, the SGCA affirmed the “mere possibility” test as set out in Ng Eng Ghee, albeit in obiter.
STEP 2:
Waiver of COMMON LAW
Conflict WAIVER – GENERAL MEETING
The company may waive compliance with the rule, or otherwise relax it to the extent that the company deems proper. What is required for
an effective waiver is the full informed approval of the transaction by the shareholders of the company. To the extent that the company
gives its approval, the conflict is avoided and there is no breach: North-West Transportation Co Ltd v Beatty.

Here, ___.

WAIVER – BOARD MEETING (CONSTITUTION)

However, the constitution may contain provisions which mitigate the strictness of the no-conflict rule: Hely-Hutchinson v Brayhead
Ltd.

Here, ___.

STATUTORY DUTY
STATUTORY DUTY TO DICLOSE TO BOARD – ESCAPE CRIMINAL LIABILITY
According to s 156(1) CA, a director who is directly or indirectly interested in a transaction or proposed transaction with the company must
declare the nature of his interest either at a board meeting or by written notice, as soon as the relevant facts come to his knowledge.
His interest includes that of his family members: s 156(13) CA. (spouse, son, adopted son, step-son, same for daughter)

According to s 156(5) CA, a declaration or a written notice given by a director or CEO shall be treated as sufficient declaration or written
notice if:
a. in the case of a declaration, the declaration is given at a meeting of the directors OR the director or CEO takes reasonable steps to
ensure that it is brought up and read at the next meeting of the directors after it is given;
b. the declaration or written notice specifies the nature and extent of his interest in the firm or limited liability partnership; and
c. at the time any transaction is made with the firm or LLP, his interest is not different in nature or greater in extent than the nature and
extent specified in the declaration or written notice.

EXEMPTIONS FOR s 156(1)

a. if interest not material, then no need to declare: s 156(3)
b. If loan made to his company, and he is guarantor: no need to declare: s 156(4)(a)
 c. If transaction is made by his company for the benefit of a related company of which he is also a director of, then no need to declare: s
156(4)(b).

CONSEQUENCE OF BREACH
Non-compliance leads only to criminal liability under s 156(15): Lee Panavision Ltd v Lee Lighting Ltd. Note that under s 156(14), statutory
disclosure is in addition to and not in derogation of common law rules. Thus, a person who declares to his Board but fails to do so to the
company in general meeting may still have the transaction unravelled in breach of fiduciary duties, see Traxiar Drilling Partners II Pte Ltd
v Dvergsten, Dad Oivind [2018] at [105] & [106]

(b) HIDING INFORMATION THAT MAY BE OF RELEVANCE TO THE COMPANY*

*Situations where information/business opportunity came in a personal capacity

Given that the [opportunity/information] was obtained in [PARTY]’s personal capacity and not in their directorial position, the operative rule would be the no-
conflict rule: Bhullar v Bhullar.

Per Bhullar v Bhullar & IDC v Cooley, the director is under a duty to communicate to the company any information which is of concern to the company and
which is relevant for the company to know. Failure to do so would be allowing their personal interest to conflict with their duty to the company.

• [ILLUSTRATION] In Bhullar, the defendant had been informed that the company did not wish to acquire any more properties. Subsequently, the defendant
discovered, by chance, that a property adjacent to that owned by the company was on sale and acquired it for himself without disclosure to the company.
As the company was still trading at the material time, the property would have been commercially attractive for the company to acquire for itself. The
court held that the non-disclosure was a breach of duty – i.e. the no-conflict rule.

• [INFORMATION OF BUSINESS OPPPORTUNITY] In IDC v Cooley, the director was liable for breach although the business opportunity was one that the
company had 10% chance of getting.

Here, ___.
12.4.1.2 Competing with the Company

*When he is preparing to take up a JOB at another company*

In Foster Bryant Surveying Ltd v Bryant, it was held that the mere taking of preparatory steps to compete will not amount to a breach of the no-conflict rule.

• In that case, the court held that Bryant’s acceptance of a future contract by his firm’s client was a mere preparatory step and did not breach the duty of
loyalty. Each of the judges had slightly varying reasons for holding so, but it seems the following two findings were germane:

a. Firstly, Bryant’s resignation was not tainted with bad faith. He did not resign to make use of a corporate opportunity.
b. Secondly, Bryant did not solicit the corporate opportunity. It was a “customer-led” initiative, and he did nothing more than to merely agree to a future
contract.

12.4.1.3 Conflict between Different Duties

(a) DUAL-DIRECTOR
The issue here is whether the director, by holding the position of director in [Company B], a rival company, is thereby in breach of the no-conflict rule.

The mere act of being directors for two rival companies cannot per se lead to a breach of the no-conflict rule: Kea Holdings Pte Ltd v Gan Boon Hock.

A person may hold multiple directorship if:

a. The company does not expressly stipulate for his exclusive services; and
b. He does not disclose any confidential information from one rival to the other: London v New Mashonaland
c. The director may not make use of one’s company property for the other: Plus Group v Pyke.

[DISCLOSE]
However, the director has to declare the nature of his interest either at a board meeting or by written notice, as soon as the relevant facts come to his knowledge.

Here, ___.
 (b) NOMINEE DIRECTOR
The issue here is whether [X], the director of [Company A], being the nominee of [Appointer], was in breach of his duty by ___.

• In Scottish Co-operative Wholesale Society v Meyer, it was held that nominee directors owe their first duty to the company itself, and not those of
their appointer’s (Scottish Co-operative Wholesale Society v Meyer). They thus may not subordinate the company’s interest to that of their
appointer’s. Consequently, their position may be made quite untenable in view of their conflicting “duties”, but, as per Golden Village Multiplex Pte Ltd v
Phoon Chiong kit, they should remain “above the fray” and refrain from acting for or against the interests of his nominee or the company.

ILLUSTRATION
In Golden Village, the court found the defendant to be in breach of his duties as the plaintiff’s director as he had openly sided
with the Hong Kong company in its dispute with the plaintiff.

Here, ___.

• [DISCLOSING INFORMATION TO THE NOMINATOR] Under s 158(1) of the CA read with s 158(2), a director may disclose certain information he has due
to his capacity as a director of the company to (a) those who interests he represents; or (b) those whose directions he is required/accustomed to act
accordingly, so long as such disclosure is (i) not likely to prejudice the company; and (ii) is made by the Board’s authorisation.

(c) NO FETTER ON DISCRETION

A director should not bind himself (e.g. by contract) so that he is prevented from exercising independent judgment.

• Following Fulham Football Club Ltd v Cobra Estates plc, while it is true generally that directors must not fetter their discretion by contracts with or promises
to other persons, they may contract in a manner which binds their future conduct. This is because the time to decide if such action is bona fide in the
company’s interest is at the time of contracting, and not performance.
12.4.2 No-Profit Rule

12.4.2.1 Use of Corporate Property, Information or Opportunity

The issue is whether the director is liable to account for profits made from ___.

Per Regal (Hastings) v Gulliver, a director cannot profit from an opportunity which came to him in his capacity as a director.

• [Strictness] The liability arises from the mere fact that a profit was made. It is thus irrelevant that (a) he acted with bona fides; that the company (b) could
not have made that profit, (c) had benefited, (d) suffered detriment.

o [Good faith] Consequently, while the director might have acted with the utmost purest intention for their company, the strict application of the no-
profit rule means that he has to account for the profits made.
STEP 1: Here, [DIRECTOR] came upon the business opportunity in his [PERSONAL/DIRECTORIAL] capacity.
Personal OR
Directorial [PERSONAL] → GO TO CONFLICT OF INTEREST
Capacity
STEP 2a: The next question to be asked is whether the business opportunity falls within the scope of the director’s duty.
STILL A
DIRECTOR: • (+) Per Regal (Hastings), the director would be in breach of duty even if the business opportunity was one that could not itself have
Does the business been used by the company. There, the company would not have been able to make use of the opportunity.
opportunity fall
within scope of • (-) Peso Silver Mines seems to propose an opposing view, suggesting that a director may be able to make use of the opportunity if a
duty? company has bona fide rejected the opportunity. However, the HOL in Regal Hastings disagreed, stating in obiter that the director may
not make use of the opportunity for himself – to allow him to do so would be “dead in the teeth” of the fiduciary principle.

o The Singapore courts appear to be in favour of the more stringent approach – i.e. Regal Hastings. This was seen in the case of
Winsta Holding, where the SGCA affirmed the stringent approach of Regal Holdings, albeit in obiter. Therefore, we will apply
the stringent approach here.

Here, ___.
STEP 2b: The issue is whether the director, by pursuing [business opportunity], is liable to [account for all profits/is precluded from acting on it],
RETIRED despite his resignation from the company.

According to Canadian Aero Service Ltd v O’Malley, three elements must be proven:
a. There was a “maturing business opportunity”;
 b. Which his company was actively pursuing; and
c. His resignation was influenced by a wish to acquire that opportunity for himself.

Here, ___.

12.4.3 Director’s Own Misconduct

In Item Software v Fassihi, it was held that a director who failed to disclose his own misconduct to the company is in breach of his duty of loyalty to the
company.

• [ILLUSTRATIONS] In Fassihi, Item Software discovered Fassihi’s misconduct in seeking to divert Item Software’s business to his own company and Fassihi
was found to be in breach of duty in failing to disclose to Item Software his own wrongdoing.

12.4.4 Overlap with s 157(1)

It is noted that the common law duty of loyalty overlaps greatly with s 157(1) of the CA, specifically “a director shall at all times act honestly”. Hence, s 157(1) of the
CA would likely be made out as well.

Hence, the director will be liable for any profits or damages, as well as criminal penalties.

12.5 Duty of Care, Skill and Diligence

It is trite that directors owe a duty of care to their company. s 157(1) of the CA codifies this through the term “reasonable diligence”: Ho Yew Kong v Sakae Holdings
Ltd.

• [NOT FIDUCIARY] This duty is not a fiduciary duty as it was not imposed to compel loyalty to the company.

12.5.1 General
• [OBJECTIVE] The test is an objective one, as stated in Lim Weng Kee. The director must have exercised the same degree of care and diligence as a reasonable
director found in his position.

STEP 1: The court would determine the minimum standard by reference to his position. This would depend on his role, type of decision made,
Minimum size and business of company.
Standard
Here, ___.
 STEP 2: The level of care may then be raised if the director held himself out to possess, or in fact possessed some special knowledge or experience.
Raise the Bar
Here, ___.

12.5.2 Reliance on Information & Advice

Here, [DIRECTOR] has relied on [PARTY]’s [INFORMATION/ADVICE].

STEP 1: Per s 157C(1) of the CA, a director may rely on information prepared by:
Who
a. An employee whom the director believes on reasonable grounds to be reliable and competent in relation to the matters concerned;
b. A professional adviser or an expert in relation to matters which the director believes on reasonable grounds to be within the person’s
professional or expert competence;
c. Other directors for matters within their designated authority.

Here, ___
STEP 2: Per s 157C(2), a director can only rely on the information if he:
Fault
a. Acts in good faith;
b. Makes proper inquiry where the need for inquiry is indicated by the circumstances; and
c. Has no knowledge that such reliance is unwarranted.

12.5.3 Delegation of Duties

Here, [DIRECTOR] has delegated his duties to [PARTY].

Per Vita Health Laboratories v Pang Meng Seng, it was held that directors must:

a. Delegate their duties in good faith; and

b. Supervise the discharge of those delegate functions.
STEP 1: Here, the director likely delegated his duty in good faith.
Good Faith
 STEP 2: The director arguably failed to adequately supervise his subordinate.
Supervise
The director must remain alert and watchful at the helm. They ought to have an inquiring mind in discharging their supervisory functions.

Here, ___.

12.5.4 S 157(1)
It is noted that the common law duty of care overlaps greatly with s 157(1) of the CA, specifically through the use of “reasonable diligence”. Hence, s 157(1) of the
CA would likely be made out as well.

Hence, the director will be liable for any profits or damages, as well as criminal penalties.

12.6 Duty: EXTRA

Under s 165(1) CA, a director must declare shares, participatory interests, rights or options with respect to the acquisition or disposal of shares, or contracts
entitling him to call on or deliver shares, in the company as well as related corporations, that are in his possession. This must be done by giving notice in writing.

Section 165(4) states that if the director was unaware of a fact or occurrence that caused him to be liable for breach of duty under s 165(1), this shall be a defence.
Section 199 CA: Duty to maintain proper accounting records and to prepare annual financial statements which are “true and fair” (s 201)

Section 199(3) gives a director the right to inspect (and s 369A(3) to copy) such records to enable him to comply with his duties.

12.7 Avoiding the Liability

12.7.1 Ratification
Per Dayco Products Singapore Pte Ltd v Ong Cheng AIk, the director should obtain consent from the shareholders in general meeting; he must fully disclose
the “nature and extent” of his interest, including the “scale of the profit” to be made so that the shareholders are “fully informed of the real state of things”.

• [PRIOR CONSENT] As per Movitex v Bulfield, a company may give its advance consent for a director to proceed with transactions which may be in breach
of his duties to the company.

• [POST BREACH] As per Regal Hastings, where a beach has occurred, a company may pass a resolution at a general meeting authorising the director’s
breach of duty even subsequent to the breach – this would have the effect of absolving the errant director of liability to account.
 • [DIRECTOR ALSO SHAREHOLDER] According to Raffles Town Club Pte Ltd v Lim Eng Hock Peter and North-West Transportation Co Ltd, where a
director-shareholder is concerned, the default position is that he may vote in accordance with his personal interests, ignoring the interests of the
company or that of the other shareholders.

o [Constitutional Restriction]: May be excluded by express provision in the company constitution which may either disqualify an interested
director from voting or dictate that all interested votes cast in favour are to be disregarded.

o Exception 1 – Where company is near state of insolvency

However, where the company is at or near a state of insolvency the creditor’s interests intrude, and such self-voting may be a fraud on the creditors:
RTC

o Exception 2 – Where property gifted to self is already the company’s in equity

However, following Cooks v Deeks, where the benefit of the contract is itself due to a breach of fiduciary duty, that benefit is held on constructive
trust for the company, and the directors cannot ratify a gift of that which in equity belongs to the company. The directors who hold “a majorty of the
votes will not be permitted to make a present to themselves”.

o Exception 3 – Where directors are majority shareholders

However, following Cook v Deeks and North-West Transportation, directors who hold “a majority of votes will not be permitted to make a present
to themselves”, since that amounts to oppression of the minority.

12.7.2 Indemnity
It is noted that the company’s [CONSTITUTION/CONTRACT] provides that [THE DIRECTOR IS EXEMPTED FROM/INDEMNIFIED AGAINST ANY
LIABILITY ATTACHING HINM DUE TO NEGLIGENCE/BREACH OF DUTY]. However, under [RELEVANT SECTION] read with s 17293) CA, such
provision is void.

• Exemption: s 172(1) CA
• Indemnity: s 172(2) CA
12.7.3 Judicial Relief
According to s 391(1) CA< the court may grant relief for liability due to breach of duty where the director had:

a. Acted honestly;
b. Acted reasonably; and
c. It would be fair to excuse him having regard to all the facts of the case
Honestly - An objective inquiry (ASIC v Healy)
o (+) “without moral turpitude” (ASIC v Healy); i.e. the absence of:
▪ Deceit or conscious impropriety;
▪ An intention to gain an improper gain or advantage;
▪ Carelessness or imprudence which would negate the performance in question.

o (-) concealment of information from the company (Vita Health)

[relevance of subjective intention?] Subjective intentions are only relevant insofar as they constitute evidence that may evince the
conclusion that the director’s behaviour was honest. (Daniel Long).
Reasonableness - Per Daniel Long, the threshold of “reasonableness” is determined by reference to whether the director had acted in the affairs of the
company as he would in relation to his own affairs.

o (+) In Daniel Long, the director was not an experienced businessman, and as such would have treated his own personal assets the
same way as he had treated the company’s assets. Hence, his behaviour was reasonable.

Ought to be fairly Whether a director ought fairly to be excused from the consequences of his breach is a holistic assessment, and the court may take into
excused account:
1. the relative importance of the director’s position in the company;
2. the seriousness of the breach and the potential and actual consequences;
3. whether the director had obtained and followed competent advice in his actions;
4. whether the director’s conduct was in accordance with some established practice; and
5. the presence of impropriety.
Limitations • Limit #1: Does not apply to criminal liability
Judicial relief under s 391(1) CA does not include criminal liability: Re IDEAGOLBAL.COM Ltd.

• Limit #2: Only applies to potential proceedings by the company, not third parties
Section 391 only applies to proceedings brought by the company against the errant director, and not by third parties: Daniel.
 12.8 Civil Remedies

12.8.1 Against Directors

12.8.1.1 Rescission
*Co enter into contract with Director

• The transaction is prima facie voidable at the instance of the company

o (-) Bars to rescission applies
12.8.1.2 Account of Profits
*Director obtains “profit”
The director will be required to disgorge to the company any profits that have been made in breach of his duty.

- [causation is irrelevant ➔ look to the rationale] The company need not have actually suffered loss, and considerations of causation are irrelevant. This
is because the rationale behind an AOP is to prevent the director from retaining any profit made from his breach, rather than to compensate the company.

- [if profit is derived from the errant director’s efforts ➔ equitable allowance] In certain exceptional circumstances, Mona Computer Systems stated that an
equitable allowance may be awarded where part of the profit is due to the director’s own efforts. Thus, in Boardman v Phipps, the directors were granted an
equitable allowance as they had undertaken great personal risks, and eventually had greatly improved the position of the trust.

12.8.1.3 Constructive Trust

*Director gets possession of Co’s property
In JJ Harrison (Properties) Ltd v Harrison, it was held that a director who acquires property in breach of fiduciary duties holds it on constructive trust for the
firm.

• [MISAPPLIES ASSETS] Where he misapplies the company’s assets in breach of his fiduciary duties, then he must restore the value of those assets: Bairstow v
Queen’s Moat Houses plc.

o In Bairstow, the directors were held liable for paying out dividends based on their dishonestly prepared financial statements.

12.8.1.4 Damages
*Co suffers loss
As [the director] has breached his duty of care, the company may claim for damages. In this case, the company has suffered loss in the form of [put a value on it].
They may claim this, subject to the common law rules of foreseeability, mitigation, and remoteness.

12.8.1.5 Equitable Compensation

*Co suffers loss
In this case, specific restitution is not available as [e.g. 3rd party rights overrule]. The company may claim from [the director] under equitable compensation instead,
which is awarded in lieu of rescission/specific restitution.

• [misapplied property] Following Bristol v Mothew, the value of the company’s property misapplied is the measure of damages.
 • [common law rules]: Note that the deterrent function of equitable compensation means that common law rules of foreseeability, mitigation, and remoteness,
do not apply: Quality Assurance Management v Zhang Qing.

o However, the but-for test applies, and the person in breach of his fiduciary duty may escape liability if he demonstrates that the loss would have
been suffered even if there was no breach.

12.8.1.6 Injunction
*Breach is continuing
Under s 409A CA, where a person engages, is engaged, or is proposing to engage in any conduct that contravenes the Act, the Court may, on application of (a) the
registrar, or (b) any person whose interests have been / are / would be affected by such conduct, grant an injunction to restrain said person from engaging in that
conduct, and also to do any act or thing.

12.8.2 Against 3P

12.8.2.1 Rescission
*Contract with 3P
In BBL v Puvaria Packaging Industries, it was held that where a third party has ACTUAL knowledge of the director’s breach of duties, the contract cannot be
enforced by him. Consequently, he holds any money/property received as constructive trust for the company.

Here, ___.

12.8.2.2 Constructive Trust

*3P has property
1. Knowing receipt*
- Per Cowan de Groot Properties v Eagle Trust, a 3P who acquires company property may be treated as a constructive trustee under the “knowing receipt” principle
of equity – if so, the 3P may be required to return it to the company.
o [level of knowledge required; only apply if NO actual knowledge]
▪ As regards the level of knowledge required on the part of the third party, George Raymond Zage held that the test is whether the third party had such
knowledge so as to make it unconscionable for him to retain the benefit of the receipt.

• [if no actual knowledge, policy concerns?] Although actual knowledge of the director’s breach would definitely satisfy this requirement, George Raymond
Zage noted that there are also circumstances in which it would be unconscionable for the third party to retain the benefit despite a lack of actual knowledge
2. Dishonest assistance
The elements for dishonest assistance are laid out in Royal Brunei Airlines v Philip Tan:
1. disposal of assets in breach of fiduciary duty;

2. third party’s assistance in or procurement of disposal of the assets;

3. dishonest conduct of the third party; and

The level of knowledge required to constitute dishonest conduct is the knowledge of the irregularity of the
transaction – this is to be objectively ascertained. Thus, George Raymond Zage stated that this would be where
an ordinary honest person would consider the third party’s participation contrary to acceptable standards of
honest conduct if he failed to adequately query them.

4. loss caused to the company.

12.9 Statutory Remedies

- [criminal liability] Breaches of statutory duty will result in criminal liability, under
o s 156(15),
o s 157(3) and
o s 165(9)
➔ the impugned director will be liable for a fine or an imprisonment term.

- [civil remedies available under s 157] In addition, breach of duties under s 157 will make the director liable to the company for any profits made, or damage
suffered by the company, as a result of the breach.

- [injunction BEFORE the director breaches the duty] Where the director is engaging in or proposing to engage in any conduct that would result in a breach
of the Companies Act, the company may apply to the court under s 409A for an injunction, to restrain the director from engaging in such conduct.
 13 Corporate Liability
3 METHODS:

1. PRIMARY RULE OF ATTRIBUTION

• Generally found in its constitution or company law which vests certain powers in bodies such as the
• [EXAMPLE]
o Constitution: A majority vote of the shareholders shall be a decision of the company
o CA: There is a need for collective action of the board of directors in managing the business of the company – (a) board resolution
or (b) informal assent of all the directors of a company (SAL Industrial Lasing v Lin Hwee Guan)

2. GENERAL RULE OF ATTRIBUTION

• Agency: Contract
• Vicarious Liability: Tort

3. SPECIAL RULE OF ATTRIBUTION

• In cases where a rule of law excludes attribution on the basis of agency or vicarious liability
• Requires an act committed by the company itself
• In case involving crimes and intentional torts, where it is necessary to show that the company has acted with a particular mental
state.
 [ILLEGALITY]
RED STAR MARINE

KEY FACTS:
1. Here, the illegality is used by 3P
2. Errant director stands to gain should illegality not be made out
• Company still a going concern
• Director very much in control of company

Facts
- MS and MK had committed and were privy to the fraud.
- RS sought to enforce damages flowing from the fraud against MK.
- Whether RS could enforce the claim would depend on illegality.

Issues
- Primary rules: Were the impugned transactions authorised? [-]
o The primary rules of attribution were not relevant, as it was not practical for Ms Rappa (the only other director) to have authorised transactions which were
so clearly against her own interests.

- General rules: Is the general rule of attribution relevant?

o The general rule of attribution is not relevant for illegality defence, as for the defence of illegality to apply, the appellant must itself be responsible for
the wrong.

- Special rules: Could the defence of illegality be relied upon?

Holding
Allowing MS to benefit from his own illegal conspiracy
- Applying the rule above, allowing the appellant’s claim would NOT be consistent with the defence of illegality. This was because:
o MS owns almost all the shares of the appellant;
o Was the only director involved in the operation and management of the appellant.
Thus, allowing the claim effectively assists MS to recover the fruits of his illegal conspiracy. This is inconsistent with the purpose of the defence of illegality.

- The court attributed Mr Singh’s knowledge and acts relating to the fraud to the appellant.

SCINTRONIX

Note:
Only apply if the company is suing the director for breach of duties, and the director is trying to raise the defence of illegality.

Facts
- HKP, as CEO, had entered S into fraudulent transactions (“BA”).
- S sought to sue HKP for the losses flowing from it; HKP raised the defence of illegality.
 Holding
- Here, the special rules of attribution were inapplicable.
- The court held that while a company should be bound by the improper acts of the directors at the suit of an innocent 3P, that rule should not apply where the
suit is at the instance of the company itself against the director for their breach of duties.
- “Where a company makes a claim against a director premised on the latter’s breach of duty, the company is a victim, and the law will not allow the enforcement
of that duty to be compromised by the director’s reliance on his own wrongdoing.”

13.1 Liability for CONTRACT

13.1.1 PRIMARY RULE
Per Scintronix, where there has been authorisation of an act of a director by the company, the primary rules of attribution ought to apply.

• Constitution: A majority vote of the shareholders shall be a decision of the company

• CA: There is a need for collective action of the board of directors in managing the business of the company – (a) board resolution or (b) informal assent of all
the directors of a company (SAL Industrial Lasing v Lin Hwee Guan)

13.1.2 GENERAL RULE: Agency

13.1.2.1 Pre-Incorporation Contract
Company Ratified Company DIDN’T Ratify
As the company here has ratified the pre-incorporation contract, under s 41(1) CA, Since the company here has not ratified the pre-incorporation contract entered
the company is bound by the contract thereon. into by [THE PROMOTER] on the company’s behalf, then under s 41(2) CA, he
is personally bound by it, absent express agreement to the contrary.

13.1.2.2 Post-incorporation Contract

The issue here is whether [THE COMPANY] is bound by a contract purportedly entered into by [THE AGENT] on its behalf. Two issues arises: (a) the company’s
capacity to contract; and (b) whether [THE AGENT] had actual or apparent authority to enter into the contract.
STEP 1: First, we will ascertain whether the Company had the capacity to enter into the contract.
Capacity to
Contract Under s 23(1) CA, the company has prima facie full capacity, rights, powers and privileges to do any act, although this may be limited by its
constitution: ss 23(1A) & (1B) CA.

• S 23(1A): A company may have the objects of the company included in its constitution
• S 23(1B): The constitution of a company may contain a provision restricting its capacity, rights powers or privileges.

No Restriction Restriction
Since there is nothing in the constitution limiting In the present case, there is a constitutional clause restricting the
the company’s capacity to contract, we will proceed company’s capacity to contract. [ELABORATION]. But under s 25(1) CA,
to look at the second issue. transactions entered into by the company are not invalid solely because of
the company’s incapacity. Accordingly, we proceed to the second issue
dealing with authority.

(+) internal enforcement ➔ more of an INJUNCTION

o Shareholders can invoke s 25(2)(a) to restrain the company
from entering into an ultra vires contract.

▪ [only BEFORE the contract is entered into]

• However, once the contract has been formed with 3Ps, it falls under
s 25(1) and will not be invalidated.
 ▪ [remedies for 3Ps who victim to internal enforcement
are]
Under s 25(3), where internal enforcement (under s 25(2)(a)) is in
relation to an act, conveyance or transfer which is being or is to be
performed or made pursuant to any contract to which the
company is a party, the Court may, if all the parties to the contract
are parties to the proceedings and it the court considers it “just and
equitable”, call for:
(1) compensation for the reliance loss; or
(2) injunction; but not
(X) expectation losses.

STEP 2: Given that the company has the capacity to enter into the contract, we will next look at whether [AGENT] had the authority to enter the company
Authority into the contract.
a) Actual We will first look at whether [AGENT] had actual authority to bind the company.
Authority
Following Freeman & Lockyer, the scope of one’s actual authority depends on the contract between the company and
its agent.

Express
Here, the company’s constitution states/does not state that [AGENT] had the power to enter into such contracts.

[ELABORATION].

Implied [Incidental]
Here, the agent arguably had implied incidental authority. Where an agent is appointed to carry out a function, he has
implied incidental authority to that function.

Here, ___

Implied [Usual]
Here, the agent arguably had implied usual authority. Per Hely-Hutchinson v Brayhead, a person may, by virtue of his
office, have implicit authority to do “all such things as falling within the usual scope of that office”.
 Here, ___.
Implied [Acquiescence]
Here, the agent arguably had implied authority through acquiescence. The facts show that

- (+) Hely Hutchinson v Brayhead

o De facto director had routinely committed the company without appraising the board, only reporting the
matter afterwards.
o This practice clothed the director with both authority by acquiescence AND ostensible authority.

- (+) SPP v Chew Beng Gim

o The company was a one-man show; Ong was the MD of the appellant.
o He had the board’s implied authority to contract for guarantees from the respondents.
o This was because the board had been content to allow Ong to run the company by himself, acquiescing in what
he did.
➔ Thus, SPP had to indemnify the respondents against any consequential liabilities.

UNDISCLOSED PRINCIPAL DOCTRINE

Under this doctrine of agency law, an actually authorised agent can bind the principal even if the counterparty is
unaware of the agency and believes (i.e. mistakenly) that the agent is contracting on his own behalf.

Here, ___.
RATIFICATION? WHO CAN RATIFY?

• The decision to ratify is made by the board of directors or an agent who has been delegated the power to
so ratify.

• [OUTSCOPE SCOPE OF BOARD] Shareholder’s approval is required where the act is one that falls outside
the board’s power.

HOW TO RATIFY?

• Express
 • Implied: If the company has (a) full knowledge of material facts; and (b) is aware that it is being regarded as the
principal but (c) takes no steps to disown that character within a reasonable time.

EFFECTS OF RATIFICATION

• When ratification occurs, an agency relationship arises retrospectively and the principal thereby assumes full
contractual obligations and rights with respect to the agent’s earlier acts – as if the agent had acted with authority
at the time of the contract
o [distinguishing from ratifying the director’s breach] However, agent can still be held liable for his breach –
Edward Goh.

b) Apparent Given that the agent had acted outside his actual authority, and the company did not ratify the contract,
Authority [COUNTERPARTY] may still rely on the principle of apparent authority to bind the company to the contract.

Following Freeman & Lockyer, the elements required are:

a. A representation that the agent has authority to enter into the contract on the company’s behalf;
b. Made by a person with actual authority vis-a-vis the matters to which the contract relates;
c. The counter party relied on such representation to enter into the contract; and
d. The counterparty did not know or have reason to believe that the agent had no authority.

Establishing the first 3 elements indicate that the agent prima facie had apparent authority.

STEP 1: Representation from Authorised Person

Here, the first two elements are satisfied.

Here, the representation is ___.

• Express: Straightforward LOL

• Implied

o Appointing the Director to the position

 Following Skandinaviska, an agent cannot self-authorise. However, in Freeman, it has been suggested that he
principal’s conduct in appointing an agent to a “certain position in the organisation” – thereby allowing him to
partake in the “management or conduct” of the company’s business – may amount to an implied and continuing
representation by the company to the outside world that the said agent has (by virtue of his title) authority to
enter into such transactions.

o Course of Dealing

(+) Freeman & Lockyer

The board was at all material times aware that K had acted as the MD and that he had taken steps to employ
agents; By doing so, the board had represented to 3Ps that K had the kind of authority that a MD in the same
position would usually have.

o Control

(+) Fongsoon Enterprises: given day-to-day overall control over the site operations → held to have had
ostensible authority to hire workers on behalf of the employer.

(-) Cavenagh Investment: entrustment of keys and access card ≠ agent had authority to enter into lease
agreement on behalf of the company.

This representation was made by _____.

CONTROVERSY
Must the Representation Come from Persons with Transactional Authority?
Per The Ocean Frost, a CP cannot rely on the agent’s own representation, as the agent does not have actual authority
to make such representations on his own behalf. Thus, the traditional position is that the representation must
come from persons with transactional authority.

• With regard to “ostensible authority to represent the principal’s approval”, the HoL was sceptical that such a
conceptual distinction could be drawn.
 However, in First Energy, the court found that “there is no conceptual incongruity in holding that an agent
without any transactional authority nay still have the authority to inform outsiders of the principal’s
authority”.
• There, the court held that the “agent” had the ostensible authority to communicate the bank’s approval of the
transaction as such authority was inferred from his position as the highest-ranking personnel at the
branch.

In the court’s view, to hold otherwise would be commercially unrealistic.

• [-] This appears to undermine the very basis of doctrine of apparent authority, which is the third party’s
reliance on a representation emanating from the principal.

• [+] This is a realistic approach that appropriately protects the reasonable reliance of honest parties.

Pursuant to Skandinaviska, there appears to be a greater support for the judgment in First Energy.

There, Chan CJ suggested that that First Energy could be reconciled with The Ocean Frost if the former were
understood as a case where, on its particular facts, the agent did have ostensible authority to make the specific
representation about the principal’s approval.
• Such authority cannot be inferred merely from the agent’s authority to make “general representations”, such
as representations about the condition of goods to be sold under a contract, when the agent has no authority
to conclude that contract for sale. The facts from which an inference may be drawn must therefore point to
the authority to make the specific representation about the principal’s approval.

Here, ___.

STEP 2: Reliance
Turning to element (c), it may be said that the counterparty was indeed induced by such representation to enter into
the contract. According to Freeman, only a change in position is required for estoppel, and this takes the form of the
very act of entering into the contract itself.
 • [3P not aware] The 3P must have acted in reliance of the representation. Where the 3P acts in his reliance on
the belief that the agent has authority but this belief is founded on facts other than the representation made, the
requirement of reliance will not be made out. Here, given that the 3P was not aware of the representation, he
could not be said to have relied on the representation.

• [need not be directed at the 3P] The representation need not be specifically made to the 3P. The 3P can rely on
a representation that has been generally made, if he was objectively a person for whose benefit the
representation was intended.

o [-] [If he knew it was not directed at him] Conversely, where the third party knows or (reasonably should
have known) that the representation was not directed at him or made for his benefit, he cannot rely on such
representations: ING Re (UK) Ltd.

c) CHEEKY [IF THE CONTRACT IS FOUND VOID HERE]

CONCLUSION
The issue is whether the agent is personally liable to the counterparty, since it turns out that the agent’s company is
actually not bound to the contract purportedly made on its behalf.

Per Fong Maun Yee, where a person impliedly or expressly represents that he has authority to act on behalf of another,
and the counterparty, by reason thereof, changes his position, then that person is deemed to have warranted that
the representation is true, and is liable for any loses caused to the counterparty for breach of implied
warranty, even if he had acted in good faith.

• [KNOW OF LACK OF AUTHORITY] However, where the counterparty knows of the agent’s lack of authority, or
the agent expressly disclaims any authority, the warramty will not be implied.
STEP 3: Put on Enquiry
Put on Enquiry The authorities seem to suggest different thresholds for imputation of constructive notice. In BBL v Puvaria, the court held that there must be
“cognizance” that the agent was acting for an improper purpose, suggest a threshold closer to actual knowledge. However, in AL Underwood v
Bank of Liverpool, the court held that constructive knowledge would be imposed where in all the circumstances a reasonable counterparty
would have made inquiries as to the agent’s authority. Lastly, in Kasikorn Bank, the court held that a person is not entitled to rely on apparent
authority where the circumstances show that a person’s belief in the representation is dishonest or irrational. It is submitted that the
 higher threshold for imputation of constructive notice is to be the preferred one, given the need for commercial certainty. Hence, I shall apply
the test as laid out in Kasikorn here.

• [TRANSITION TO S25B] Knowledge of an agent’s lack of authority is often cogent evidence of bad faith. Therefore, a person who transacts
with a company knowing that the agent purporting to act for on the company’s behalf has no authority to do so ought not to be
allowed to take shelter under s 25B unless there are other circumstances that suggest he has good reasons for believing the transaction
would be regularised.
STEP 4: Here, there was a constitutional restriction on the agent’s authority.
Know of
Constitutional “constitution”
Limitation? Per s 25B(3), “constitution” includes (a) company constitution; (2) resolution by shareholders OR any class of shareholders and (3) any
agreement between the members of the company OR class of SH.

STARTING Per s 25A of the CA, the counter party is NOT deemed to have notice of the contents of a company’s constitution or other
POSITION: document merely because it is (a) registered with ACRA; or (b) is available for inspection at company’s registered office.
No deemed notice
TRANSITION: However, 3P can still be placed on constructive notice of the lacked authority by reason that a copy of the constitution
Constitution sent was sent specifically to him.
S 25B: Under s 25B, a person dealing with the company in good faith is entitled to deem a director’s power free of any
Power of Directors limitation under the company’s constitution and does not need to enquire as to any limitation on directors’ powers: s
to bind the 25B(2)(b).
Company
“person dealing with the company”
[STEP 1: RIGHT TO AVOID – insider]
Under s 25C(3), the company has a right to avoid a transaction if the parties to the transaction include its own directors,
or a person connected with the director.

o [CONNECTED WITH DIRECTOR] Per s 25D of the CA, persons connected to the director includes:

a. Family members – Spouse, children, step-children and adopted children

b. Corporate bodies to which the director is connected – a director is connected to a corporate body where
he and the persons connected to him collectively hold at least a 20% interest in the share capital of
that corporate body, or can exercise or control more than 20% of the voting power in a general meeting
of that corporate body.
 c. Trustee of a trust where the director is a beneficiary; and
d. Partners of the director, or a firm the director is a partner of.

[STEP 2: DEFEATING RIGHT TO AVOID]

S 25C(5) states that the company will lose its right to avoid the transaction if:

a. [Bona fide 3P Rights] Rights acquired bona fide by a third party without notice of the excess of director’s
powers would be affected; or
b. [Ratification] The company had already affirmed the transaction;
c. Restitutio in Intergrum impossible
d. [Indemnity] The company is indemnified for any loss resulting from the transaction

“dealing in good faith”

• Under s 25B(2)(b), [3P] is presumed to have acted in good faith.

• [REBUTTING PRESUMPTION]

o [knowledge] Knowledge of an agent’s lack of authority is often cogent evidence of bad faith.

CONCLUSION: Per s 25C(4), regardless of whether the contract is avoided, the errant director, and the errant parties to the
Liability for Parties transaction, will be liable.

• [ERRANT PARTIES] Under s 25C(6) they will not be liable if he shows that at the time of the transaction was
entered into he did not know that the directors were exceeding their powers.

• [LIABILITY TO INITIAL COMPANY]

o Account to the company for any gain he has made directly or indirectly by the transaction

o Indemnify the company for any loss or damage resulting from the transaction
 • [DIRECTOR’S LIABILITY TO COUNTERPARTY]

o The issue is whether the agent is personally liable to the counterparty, since it turns out that the agent’s
company is actually not bound to the contract purportedly made on its behalf.

Per Fong Maun Yee, where a person impliedly or expressly represents that he has authority to act on behalf of
another, and the counterparty, by reason thereof, changes his position, then that person is deemed to have
warranted that the representation is true, and is liable for any loses caused to the counterparty for
breach of implied warranty, even if he had acted in good faith.

• [KNOW OF LACK OF AUTHORITY] However, where the counterparty knows of the agent’s lack of
authority, or the agent expressly disclaims any authority , the warramty will not be implied.

Appendix: The Common Law Indoor Management Rule (“IMR”)

Applies where s 25B does not apply – where the internal regulation is NOT in the company’s constitution.
The IMR provides that a 3P dealing with an agent with apparent authority to act for the company, may, unless he
is put on enquiry to the contrary, assume that all matters of internal management or procedure have been complied
with. (Turquand).

Does not apply where:

(1) 3P has actual or constructive knowledge of the irregularity;
(2) The restriction is absolute rather than conditional
(3) It is relied on by “insiders”.

13.2 Liability for TORT

13.2.1 Company’s Liability

13.2.1.1 PRIMARY RULE

This deals with torts which the company itself is regarded as having committed. For that purpose, some act or knowledge is attributed to the company. The company
is primarily liable for torts that it instigates, authorises, or ratifies e.g. by board, or general meeting.
 Here, ___.

13.2.1.2 GENERAL RULE: Vicarious Liability

A company can be made vicariously liable for the torts committed by its employees. The three elements that are required in establishing vicarious liability are:

a. A tort must have been committed;

b. An employee has committed the tort; and
c. The tort was so “closely connected to his employment that it is fair and just” to hold the employer vicariously liable for his employee’s tort.

The first two elements are made out as [EMPLOYEE], who is an employee, committed [TORT], a tort.

To determine if the tort was so “closely connected”, the court will consider the following factors:

a. Firstly, the opportunity that the enterprise afforded the employee to abuse his power;
b. Secondly, the extent to which the wrongful act may have furthered the employer’s aims;
c. Thirdly, the extent to which the wrongful act was due to inherent friction in the employer’s enterprise;
d. Fourthly, the extent of power conferred on the employee in relation to the victim;
e. Fifthly, the vulnerability of potential victims to wrongful exercise of the employee’s employment.

But it has to be noted that the test is ultimately one of public policy, i.e. whether it would be “fair and just” to hold the principal liable for his employee’s tortious
acts: Skandinaviska. The two issues arise for consideration: (a) the provision of effective compensation for innocent victims; and (b) the deterrence of future harm
by encouraging employers to reduce the risks of future tortious behaviour by their employees.

13.2.1.3 SPECIAL RULE

Here, it is clear that [RULE] excludes the application of attribution via vicarious liability. This is because to be liable under [RULE], the company must itself be
responsible for the wrong/it requires mens rea of ( )].

CONTROVERSY – TESCO SUPERMARKET OR MERIDIAN GLOBAL

It is noted that there are two applicable rules here: (a) the “directing mind and will” test: Tesco Supermaket and (b) the “special attribution rule”: Meridian
Global Funds

In Meridian Global Funds, the court criticised “directing mind and will” as merely a description of the position of the agents of the company where the person is
identified as the one whose knowledge and acts are to be attributed to the company under the special attribution rule, and hence it cannot be a principle of
 attribution in itself. Only when the purposes of the substantive rule is ascertained through the special attribution rule is it then possible to identify the person
whose act or state of mind is relevant for that purpose.

It is noted that the “directing mind and will” test results in unfairness in the context of big companies as the managers who has the requisite mental state will not
be found to be directing mind and will in a big company. Although the “special attribution rule” may create more uncertainty, this is necessary in bringing forth
greater justice.

Therefore, we shall apply the special attribution rule here.

Here, the. legal rule is [LEGAL RULE].

Following Meridian Global, a two stage inquiry is required:

• Firstly, is the substantive rule intended to apply to companies?

• Secondly, if it was intended to apply, whose act (or state of mind) was for the purpose intended to count as the company’s act (or state of mind)?

Here, [ELABORATE].

13.2.2 Director’s Liability

Here, the issue is whether [director] is liable for the tort that he has committed while acting for the firm.

13.2.2.1 Director Committed the Tort

Per Standard Chartered Bank, the actual tortfeasor is prima facie liable for the tort, even if acting on behalf of another who is liable.

• [ILLUSTRATION] Lord Hoffman: It is irrelevant that the director had made the fraudulent representation in his capacity as an agent of the company.
No person who practiced deceit on another could escape liability by declaring that he did so on another’s behalf.
(-) [Exception] - (-) In Williams v Natural Life Health Foods, the HOL held that the director was not to be personally liable for the company’s negligent
Negligent misrepresentation of its projected figures on a brochure. This was because he had not personally assumed responsibility for the
Misrepresentation: statements made.
 - (+) In Sim Tee Meng, the court applied the Spandeck test, finding that the appellant owed a duty of care which was breached by his
negligent misrepresentations. The DOC arose on the basis of VAR + Reliance, because of (1) expectation of special knowledge (2)
knowledge that the respondents would rely on it (3) no disclaimer.

• In negligent representation cases, the court will have to establish a VAR + R on both the director and the company
separately.

Inducing Breach of Directors may be held personally liable under three potential causes of action (PT Sandipala):
Contract 1. Where a director induces or procures his company to breach its contract with a 3p.
2. Unlawful means conspiracy as between the directors, where the directors conspire to procure their company to breach its
contract.
3. Unlawful means conspiracy as between the director and his company, where the director conspires with the company to cause
the company to breach the contract.

• [Exception] The director is exempted from personal liability for the contractual breaches of their company if their acts,
in their capacity as directors, are not in themselves in breach of any fiduciary or other personal legal duties owed
to the company: Said v Butt.

o Plaintiff bears the burden of proving the breach

13.2.2.2 Authorising, directing and procuring the company’s torts

Per TV Media, a director may be personally liable should the court find that he had authorised, directed, or procured the commission of the tort.

There, the court identified “control” as the essential criterion for establishing authorisation, direction or procurement. The greater his control over the course of
conduct constituting the tort, the more likely it is that he will be regarded as having authorised, directed or procured it.
 13.3 Liability for CRIME
On the facts, [agent] here has committed the offence of ___. The issue is whether the company can also be held liable for the offence, through an attribution of the
director’s acts to the company.

Both the primary and general rules of attribution are not applicable here as:
(a) [AGENT] was not authorised by the Board/General Meeting , nor are their provisions in the Companies Act or the Constitution that attribute [THE AGENT]’s
act/mens rea to the company, and
(b) the principles of agency and vicarious liability are irrelevant here.

Therefore, we shall apply the special attribution rule here: Meridian Global.

Following Meridian Global, a two stage inquiry is required:

• Firstly, is the substantive rule intended to apply to companies?

• Secondly, if it was intended to apply, whose act (or state of mind) was for the purpose intended to count as the company’s act (or state of mind)?

Here, [ELABORATE].
 14 Partnership
14.1 Establishing a Partnership
[GENERAL]
Per s 1(1) of the PA, a partnership is a relationship between persons carrying on business in common with a view to profit.

• [SUBSTANCE, NOT FORM] Per Econ Piling, the true nature of the business relationship has to be objectively inferred from all the relevant facts and
surrounding circumstances…
o Including the manner in which the parties in that business relationship have conducted their business affairs with each other and with third parties.

• [3 FEATURES] There are three features: (a) carrying on a business; (b) business in common; and (c) with a view to profit.

STARTING POINT
The starting point is the contract, i.e. whether what has been agreed on evinces the essential features of a partnership. This is because partnership
arises from contract: Rabiah v Salem.

• [-] [LABELS] However, labels used have “very little” value in proving that both parties intend to be partners in the legal sense. The court can
still find that the true relationship is one of partnership, even if the “labels” put on the agreement indicate otherwise: Rabiah v Salem.

• [+] [STAGGERING USE OF LABELS] However, this not to say that such labels are wholly irrelevant, for instance, where a partnership was
clearly evinced by the staggering use of “partner” related words on documentary evidence presented: Econs Piling.

Therefore, the true nature of the business relationship has to be objectively inferred from all the relevant facts and surrounding circumstances,

o including the manner in which the parties in that business relationship have conducted their business affairs with each other and with
third parties.

CARRYING ON A Here, the parties have mere carried out preparatory steps towards the carrying on of a business. The issue is whether this is sufficient to make
BUSINESS out the element of “carrying on a business”.

• [-] In Keith Spicer Ltd v Monsell, it was held that mere preparatory steps towards the carrying on of a business is insufficient to establish
the “carrying on of business”.
 • [+] In Khan v Miah, it was held that it will suffice if the parties agreed to carry on business activity as a joint venture and they actually
embarked on it. Thus, preparatory steps towards the commencement of the business may still suffice.
o While the latter position is vaguer as it is much more difficult to decide when they have actually started, it will be fairer to parties who
have undertaken certain obligations for the partnership. Therefore, Khan v Miah will be applied here.

Here, ___.
BUSINESS IN According to Econs Piling Pte Ltd v NCC International Abi, the phrase “persons carrying on a business in common” means that a single
COMMON business is carried on by the parties.

Here, ___.

• [+] [overarching business; several corporate vehicles?] In Rabiah Bee, the parties agreed jointly to go into the London property market
by purchasing properties for lease and sale. The properties were purchased in the names of individual holding companies. Nevertheless,
the court held that each purchase was part of a single overarching business, and the parties were buying and selling property together
and were likely to do so frequently. This was thus a single venture expressed through several corporate vehicles.

• [-] Parties who closely collaborate but ultimately carry on separate business are not partners
VIEW OF PROFIT - [need not be primary motive] Per Newstead v Frost, profit does not need to be the only motive of the venture, but just the substantial
motive.
o In Newstead, this requirement was satisfied even though tax avoidance was the primary motive; the view of profit was merely
incidental.
Existence of a Partnership – INDICIA
Co-ownership of Per s 2(1) of the PA, common ownership of property, without more, is an insufficient basis upon which to find a partnership.
Property:
s 2(1) PA • [+] Where the co-ownership of multiple properties is due to the business itself, this feature can be taken to evince a finding of
partnership: Rabiah v Salem.
Sharing of Gross Per s 2(2) PA, sharing of gross returns, without more, is an insufficient basis upon which to find a partnership.
Returns:
s 2(2) PA • [Liabilities not shared] [-] In Cox v Coulson, it was held that where gross takings are shared among the parties, but liabilities are
discharged separately, there is likely to be no partnership. This is because in a case where liabilities are discharged separately, there is
a possibility that one party may suffer losses overall while the others stands to profit. Partnership generally require sharing of both the
good and bad times.
Sharing of - Per s 2(3) PA, sharing of profits in a business is prima facie evidence that he is a partner of the business.
Profits: o NOTE: The absence of profit-sharing does not, in itself, preclude a partnership relation (M Young Legal Associates v Zahid).
 s 2(3) PA The FIVE exceptions (s 2(3)(X)):
(a) [DEBTS] Goes towards a debt or liquidated amount owed to the person.
(b) [WAGES] Is part of profit-sharing as wages or agency fee;
(c) [ANNUITIES] Payment of annuities that is pegged to the business profit;
(d) [LOAN] Repayment of loan and the interest therein based on business profit;
(e) [GOODWILL] Payment for goodwill varying with profits.
Contribution of In Walker v Hirsch, the court found that while the plaintiff had a share of the profits, the fact that he never contributed to the company’s
Capital capital nor have any voice or control over the management meant that he was only a salaried worker, and not. A partner.
Management and Per Tan Cheng Guan, the authority to participate in the management and control of the business will certainly weigh in favour of a
Control partnership.
Sharing of Losses Per Tan Cheng Guan, the presence of an agreement to share losses is indicative of a partnership.

Appendix: Salaried Partner

[substance > form] Per Chua Ka Seng, the courts will look into the relationship of the parties in deciding whether or
not they are partners, disregarding the label that the parties use.

• [TEST] Apply s 1(1) PA test.

14.2 Firm’s Liability in Contract, Tort and Statutory Liability

14.2.1 Liability for CONTRACT

Here, the issue is whether the firm is liable for [PARTNER]’s act of entering into a contract with [COUNTERPARTY].
STEP 1: First, it has to be ascertained whether [PARTNER] was acting in his capacity as an agent for the firm.
Partner’s Capacity
The firm will not be liable for the contract if [PARTNER] did not contract in his capacity as an agent for the firm. This occurs if the partner
does not purport to exercise his authority as an agent, nor did the counterparty understand the partner to be exercising any such
authority.

Here, ___.
 STEP 2: S 5 of the PA states that every partner is the firm’s agent for the purpose of the firm’s business. According to Construction Engineering v
Actual Authority Hexyl, this limb deals with actual authority.

• [PRIMA FACIE AUTHORITY] Partners prima facie have actual authority to bind the firm
• [CONTRARY AGREEMENT] However, the actual authority may be negated by a contrary agreement:

Given that there is no such agreement which negates the actual authority, an act done by [PARTNER] on the firm’s behalf and within the scope
of his actual authority will bind the firm: Orix Capital.
STEP 3: Here, [PARTNER] have exceed the actual authority conferred upon him by the partnership but has conducted himself in a way that led [3P] to
Apparent believe that he had the authority to act on the firm’s behalf.
Authority
The [3P] can look to rely on the second limb of s 5 of the PA, which deals with apparent authority.

Per Orix Capital, a three-step inquiry is required:

a. Firstly, what is the business of the kind carried on by the firm?

b. Secondly, did the partner’s act fall within the usual nature of the firm’s business?
c. Finally, the manner in which the act is carried out must also be usual.

STEP I: [IF HE WENT TO BORROW MONEY]

(a) & (b)
For (a) and (b), the court in Orix Capital distinguished between non-trading partnerships and
trading partnerships and held that the borrowing money by a partner in a non-trading firm is
not usual conduct unless the firm’s busines is of such a kind that it cannot be carried on in the usual
way without such a power.

• As was the case in Orix Capital, since a law firm provides legal services, it does not satisfy this
criterion unless such a power is expressly conferred by the partnership articles to bind the firm
and its partners or impliedly given by clear and incontrovertible conduct.

For (b), the yard stick to be applied is objective i.e. whether the act appears usual to a “reasonably careful and
competent person” in the third parties’ shoes.
 Here, the firm’s business was [ELABORATION]. The partner’s act would/would not be in the usual nature of the firm’s
business as ___.

STEP II: For (c), the yardstick again is objective; The court may also refer to the actions of similar business.
(c)
Here, ___.
STEP IV: The firm will not be bound if [COUNTERPARTY]:
Exception
a. Knows of his lack of authority; or
b. Did not know or believe the acting partner to be a partner.

Here, ___.
STEP 4: In conclusion, the firm is liable for the contract, as per s 5 of the PA.
Conclusion
OR

The firm is not liable for the contract, since there is no actual or apparent authority. According to Orix Capitalm should the firm choose not to
ratify, then the partner who acted alone is liable personally for the transaction.

14.2.2 Liability for TORT & STATUTE

The issue here is whether the firm is liable for [PARTNER]’s [WRONG].

According to s 10 of the PA, a firm is liable if such act/omission was done:

a. With the co-partner’s authority; or

b. In the ordinary course of the firm’s business.

AUTHORITY Here, the authority may be both actual and apparent.

• [ACTUAL] Here, ___.

• [APPARENT]
ORDINARY In the alternative, was the act done in the ordinary course of the firm’s business? The focus is on the “close connection” between the partner’s
COURSE OF alleged wrongdoing and what he was engaged to perform, such that it is fair and proper to regard such acts as being in the ordinary course of
BUSINESS the firm’s business: Dubai Aluminium Ltd v Salaam.

It is no defence that the partner performed the act intentionally, was acting exclusively for his own benefit, or was acting contrary to express
instructions. It is sufficient if the partner is authorised to do acts of the kind in question: Dubai Aluminium. Ultimately, as recognised by the CA
in Skandinaviska Enskilda Banken v Asia Pacific Breweries (S) Pte Ltd, this “test” is one of public policy and the following factors are
relevant:

a. Firstly, the opportunity that the enterprise afforded the employee to abuse his power;
b. Secondly, the extent to which the wrongful act may have furthered the employer’s aims;
c. Thirdly, the extent to which the wrongful act was due to inherent friction in the employer’s enterprise;
d. Fourthly, the extent of power conferred on the employee in relation to the victim;
e. Fifthly, the vulnerability of potential victims to wrongful exercise of the employee’s employment.

But it has to be noted that the test is ultimately one of public policy, i.e. whether it would be “fair and just” to hold the principal liable for
his employee’s tortious acts: Skandinaviska. The two issues arise for consideration: (a) the provision of effective compensation for innocent
victims; and (b) the deterrence of future harm by encouraging employers to reduce the risks of future tortious behaviour by their employees.

Here, ___.
 14.3 Liability of Individual Directors
14.3.1 Nature
14.3.1.1 Tortious Liability
According to s 12 of the PA, each partner is liable jointly and severally for the firm’s [TORTIOUS] liability under s 10 PA incurred at the time when he is a partner.

14.3.1.2 Contractual Liability

According to s 9 PA, each partner is liable jointly with the other partners for the firm’s [CONTRACTUAL] liability incurred under s 5 PA at the time when he is a
partner

14.3.2 Incidence & Duration

14.3.2.1 Deceased Partner

[PARTNER] is dead. However, since liability was incurred when he was a partner, [PARTNER]’s estate is still liable for such liability but subject to prior payment of
his other debts: s 9 PA.

14.3.2.2 Incoming Partners

According to s 17(1) PA, an incoming partner is not liable for pre-admission liabilities.

• [AGREEMENT FOR LIABILITY] However, it is commercially plausible for the firm to have made an agreement with the incoming partner to accept a share of
the pre-admission liabilities.
• [LIABILITY] This would lead to liability to the firm, not the counterparty

[ELABORATION]
14.3.2.3 Outgoing Partners

A. LIABILITIES INCURRED BEFORE RETIREMENT

According to s 17(2) PA, a retired partner does not cease to be liable for liabilities incurred before retirement.

• [AGREEMENT TO DISCHARGE] However, the retiring partner may strike an agreement between himself, other partners (current and incoming) of the firm,
and the creditors to discharge himself from all existing liabilities: s 17(3) PA.

• [AGREEMENT TO INDEMNIFY] However, it is commercially plausible for the firm to have made an agreement with the other partners to indemnify him against
certain pre-retirement liabilities.

B. CONTRACT BEFORE RETIREMENT, LIABILITIES AFTER RETIREMENT

The issue is whether [PARTY], being a retired partner, maybe held liable for the liability that has arisen under the contract with [COUNTERPARTY]. According to
Orix Capital, liability under s 36(1) seems to be limited to that of liability arising under pre-retirement contracts. A three-step test is required:
*It is noted that s 36 PA is appliable to “held out partners under s 14 of the PA: Orix Capital

a. The counterparty must have had dealings with the firm before the change in constitution;
b. At the time of those prior dealings, the partner was an apparent member of the firm; and
c. The partner gave no or insufficient notice of his withdrawal, prior to the dealings upon which it sought to make him liable.

CONTROVERSY – IF PARTNER WENT TO NEGOTIATE FOR CONTRACT BEFORE RETIRIING

Before diving into the analysis, the view that the court in Orix Capital has taken towards the application of s 36 have confined this section greatly.

• The court in Orix Capital held specifically that, “new contracts” – aka contracts concluded after the partner has retired, should not fall within the ambit of s
36. Given that the contract in contention there was one that the retired partner had not even known about during his time as a partner, it is posited that the
term “new contract” should be limited to such a fact scenario – contract which was concluded after the partner left, and one which did not involve the
partner at all when he was still a partner. Hence, it is argued that contracts which the partner was involved in prior to his retirement, should fall under this
provision regardless of whether the contract was concluded post-retirement.
(b) For (b), in Tower Cabinet v Ingram, it was held that members may be “apparent” to the counterparty as the customer has dealt with them
before, had some indirect information on them or because of the presence of their names on some note paper or signage.
(c) For (c), the type of notice also depends on the creditor. Since:

a. A creditor who dealt with firm pre-retirement is entitled to actual notice: Orix Capital.
 b. A creditor who did not deal with the firm pre-retirement, but knew that the retiring partner was a partner, then he is entitled to a
gazette notice: s 36(2) CA
c. The creditor who did not deal with the firm pre-retirement, and did not know that the retiring partner was a partner, then, no notice is
required: s 36(3) CA

14.3.3 Salaried Partners

14.3.3.1 S 1(1) PA – Is he a partner

Appendix: Salaried Partner
[substance > form] Per Chua Ka Seng, the courts will look into the relationship of the parties in deciding whether or not they are partners, disregarding the label
that the parties use.

• [TEST] Apply s 1(1) PA test.

14.3.4 Held out as Partner

A. STEP 1: Establish Liability under s 5 of PA
Here, [PARTY A] is looking to impose the contractual liability on to [PARTY B]. Given that [PARTY B] was not a true partner falling under s 1(1) of the PA, [PARTY
A] would have to rely on s 14 of the PA. Before analysing if [PARTY B] was held out to be a partner under s 14 PA, it is imperative that we first establish if the act
for the [TRUE PARTNER] falls under s 5 PA (Orix Capital).

[REFER TO S 5 PA ABOVE]

B. STEP 2: Establish s 5 of the PA

Given that the act of the true partner falls under s 5 PA, the next issue is whether [NON-PARTNER] was held out to be a partner under s 14 of the PA. If so, then
according to Orix Capital, [NON-PARTNER] is liable for the acts of a (true) partner of firm

Three elements are required:

a. The non-partner represents himself, or knowingly suffers himself to be represented.

b. The counterparty relied on such representation
c. The counterparty “gave credit”, i.e. change of position
 ELEMENT 1: • [-] [NEGLIGENCE & CARELESSNESS] In Tower Cabinet v Ingram, the court held that the presence of Ingram’s name on notepaper was a
Represent, or representation by his former partner that Ingram was still a partner but since this was made without Ingram’s knowledge and authority,
Knowingly suffer then Ingram did not knowingly suffer himself to be represented. That Ingram may have been negligent or careless in not destroying the old
himself notepaper could not suffice.

• [IF THE PARTNER HAD ALREADY RETIRED] Here, given that the partner had already retired, the salaried partner could not have
conferred actual authority onto the firm to bind him to contracts or hold him out as a partner post-retirement (Orix Capital). On this
basis, the court found that s 14 PA was inapplicable.

o [BULL] However, it could be argued that where the representation was made generally at the pre-retirement stage, the focus of the
inquiry should shift onto whether a reasonable 3P would indeed rely on the representation.

Following this line of reasoning, the initial representation by ______ would constitute an ongoing representation to the counterparty.

• [COUNTERING BULL] But the court in Orix Capital do not seem to favour such an argument, as the court was of the view
that the counter party “should not have simply assumed that the composition of the partnership remained the same”. They
appear to impose a duty on the counterparty to inquire whether the firm was still made up of the same partners as they had
believed.

Therefore, the SG courts would likely militate against finding such an “ongoing representation”.

ELEMENT 2: • [+] [MERE CAUSE] According to Lynch v Stiff, reliance must be proven, but the representation need not be the sole cause of inducing such
Reliance reliance. It will suffice if it was a cause, and not a “but for” cause.

ELEMENT 3: • STRAIGHTFORWARD LOL

Giving of credit

14.4 Partner’s Duties

It has been said that a stronger case of fiduciary relationship cannot be conceived that that which exists between partners: Chan v Zacharia. Hence, it is imperative
that partners owe fiduciary duties to one another. In Helmore v Smith, it was held that partner, as fiduciaries, owe each other a duty of good faith. The duty of
good faith in turn includes both the no-conflict and no-profit rule: Ang Tin Gee v Pang Teck Guan.

• [+] [POST-DISSOLUTION] Per Chan v Zacharia, partners owe each other fiduciary duties post-dissolution of the firm for the purposes of winding up.
 • [+] [PRIOR FORMATION] It was held that intending partners also owe a duty of good faith to each other.

14.4.1 Duty to Disclose – s 28 PA

According to s 28 PA, each partner has the duty to render true accounts and full information of all things affecting the firm.

• [INFORMATION OF BUSINESS OPPORTUNITY]

o [-] Per Aas v Benham, information which the partnership is entitled to refers to information which can be used for the purposes of the partnership –
whether the purpose of the information is wholly without the scope of the firm’s business?

14.4.1.1 Purchase of Partnership Property

Per Habib Abdul Rahman v Abdul Cader, it was held that partners are not allowed to purchase partnership property unless they did so with the knowledge
and consent of the firm.

• [CONSEQUENCE] The partners will hold the property on trust as trustees.

14.4.1.2 Purchase of Co-partner’s Interest

In Law v Law, the partner bought out shares of another without informing him of the existence of certain partnership assets which would have increased the
purchaser price. The court held that the purchaser “who knows and is aware that he knows more about the partnership accounts than the vendor”, must not conceal
that which he knows, and must put the vendor in possession of all material facts with reference to the partnership assets.

TL; DR: If you are buying a co-partner’s shares in the firm, you have to let him know about everything that would affect the value of the shares.
14.4.1.3 Material Changes to Facts
In Hodgar Estates v Shebron, H agreed to sell his interest in a land development venture to S, since S, the other partner, had informed him that the planning
authorities had indicated a refusal to allow redevelopment. Before closing the buyout, S found out that the town was now likely to grant permission, but did not
disclose this fact, and proceeded to complete. The court set aside the buyout and held that there was a duty incumbent on S to disclose the new information, prior
to closing, even though what he had told H earlier was indeed his original intention at the time.

14.4.1.4 Partnership Information (Information obtained in the course of the firm’s business)
Partners are entitled to partnership information, and the failure to render information might be a breach. Per Dockrill v Coopers, the duty of good faith leaves no
room for exclusion of one partner of knowledge obtained by other partners in the course of the firm’s business.

14.4.2 Duty to Account for Private Profits

According to s 29(1) of the PA, each partner must account for any benefit derived from transaction vis-a -vis the firm without co-partner’s consent, or from any
use of partnership property, name, or business connection. →TL; DR: In his capacity as a partner

• [DEATH OF A PARTNER] The section even applies during the interim between dissolution (due to a partner’s death) and wind-up: s 29(2) PA.

• [HIS SHARE OF PROFITS] But even if the partner has made secret profits in breach of his duty of good faith, there is dicta in both Dunne v English and Olson
v Gullo that the errant partner is still entitled to his share in the profits, as if they had been legitimately made. The reasoning seems to be that the errant
partner holds the benefit on constructive trust for the firm, but since (a) the firm is not a legal entity, and (b) the firm consists of all the partners, then (c)
forfeiting his share in the profits is tantamount to “forfeiting his interest in the partnership property.” Thus, the court in both cases held that the errant partner
of a (e man firm) were still entitled to a half share of the benefits. →He has to account for profits to all the partners, which includes himself LOL

14.4.2.1 Benefit from transaction vis-à-vis the firm without consent

• TL; DR: Self-dealing Transaction
According to Bentley v Craven, the application of the rule is strict. There, Craven resold his firm sugar at the prevailing market price, making some profit in return.
The court held that he was liable to account for the profit even if the transaction had been “perfectly bona fide”. This was because no agent could be allowed to
place himself in a situation where he would be tempted not to do the best for his principal.
14.4.2.2 Benefit derived from use of partnership property, name, or business connection
• [+] [WITHIN] Clearly, where the business opportunity falls squarely within the firm’s area of business, then, according to Lindsley v Woodfull, the court would
have no hesitation in holding that the errant partner holds the benefit of the diverted business opportunity on constructive trust for the firm.

• [OUTISIDE]

o [STRICT] Following Aas v Benham, a firm should not be entitled to benefits derived by a partner from the use of property (e.g. information) that came to
him in the course of the firm’s transactions, if it was used for purposes wholly outside the scope of the firm’s business.

o [LESS STRICT] However, in Guy Neale v Nine Squares, the CA endorsed the test of whether the corporate opportunity was one which the firm itself had
a “real and substantial possibility of pursuing”, having regard to its (a) its existing business activities; and (b) its stated aspirations. It is noted that Guy
Neale was a case dealing with the common law fiduciary duty, but given the significant overlap between the common law and statutory duty, the test can
be applied to the statutory duty as well.

o [MOST STRICT] It is noted that recently, in Winsta Holding, the SGCA had affirmed, albeit in obiter, the stringent approach towards directors’ duties as
expounded in Regal Hastings. The stringent approach is as such – “business opportunity” encompasses opportunity the company would not have been
able to make use of OR even rejected. Given the similarity between partners and directors, it is posited the Singapore courts may take an equally stringent
approach towards partners’ duties.

→ APPLY REGAL HASTINGS

14.4.3 Duty to Not Compete

According to s 30 of the PA, a partner who carries on a business of the same nature of and in competition with his firm without consent of his other partner must
account for all profits made in that business. In Miller v Miller, it was held that the business is only non-competing if it is not an “activity intimately or closely
associated with the existing or prospective activities” of the firm.
14.4.4 Duty of Care
In Tann v Herrington, the court suggested 3 scenarios that could result from a breach of duty of care:

a. Cause firm to incur liability to 3P;

b. Cause loss to firm assets; or
c. In maladministration of firm’s internal affairs, cause loss to firm.

There are varying standards in the finding of a breach that is actionable:

• Per Ong Keng Huat, the standard for scenario (a) and (b) is one of “gross negligence”.

• Per Tann Herrington, the standard for scenario (c) is one of “ordinary negligence”.

14.4.5 Consequences of Breach

LOSS:
According to Ang Tin Gee, where the partnership suffers business losses attributable to the actions of one partner, and the partner acted in breach of his duty of
good faith, then the loss need not be equally borne by the rest of the partners as it would have been (presumably) under s 24(1) PA or under s 24(2) PA (where
indemnity is concerned).

ACCOUNT OF PROFITS
According to Ang Tin Gee, an account of profits is only available for breaches of a fiduciary nature. Accordingly, a breach of the duty of care can
only give rise to damages.

14.5 Rules Governing Partnership

The default rules are laid out in s 24 PA, but subject to variation by agreement, either express or implied between the partners: s 19 PA.

• [CHANGE OF TERMS BY CONDUCT] Per Const v Harris, partners may enter into agreement on terms, but yet if the long course of dealing demonstrates that
all have agreed to change the terms, then the terms are so changed by conduct.
14.5.1 S 24(1) – CAPITAL, PROFITS & LOSSES
Per s 24(1) of the PA, partners are entitled to equal share in capital, profits and losses.

• REBUTTING THE PRESUMPTION

o CAPITAL: Unequal capital contribution will normally be enough to rebut the presumption of equal share in capital: Popat v Shonchatra.
o PROFIT: Must show an agreement to rebut the presumption.

14.5.2 S 24(2) – INDEMNITY FOR LIABILITIES

Indemnity for liabilities incurred in ordinary conduct of firm’s business, or for anything necessarily done to preserve firm’s business or property.

• [X] [BREACH OF DUTY] This does not cover partner’s breach of duties.

14.5.3 S 24(5) – PARTICIPATION IN FIRM’S MANAGEMENT

Per s 24(5) of the PA, each partner can take part in the firm’s management.

• As illustrated in Arif v Yeo where the partner is a managing partner, the court will unlikely interfere in mere squabbles and improprieties, unless there is a
strong case against him.

14.5.4 S 24(8) – SETTLING DIFFERENCES

Any difference arising as to ordinary matters may be decided by a majority of the partners, but any change in the nature of the firm’s business requires
unanimous consent.
→ TL; DR: ordinary stuff just need majority, but if it’s a change in the nature of the firm’s business then you need unanimous consent

• [RIGHT TO BE CONSULTED] In Const v Harris, it was held that a partner has the right to be consulted. His opinion may be honestly overruled, but he ought
to be appraised of the matter. The discretion and judgment of any partner cannot be excluded, and it is not for the majority of partners to say that they shall
do as they please. Partners are therefore “bound to be true and faithful to each other”.
14.5.5 S 24(9) – ACCESS TO FIRM’S BOOKS
The partnership books are to be kept at the place of business of the partnership (or the principal place, if there is more than one), and every partner may, when
he thinks fit, have access to and inspect and copy any of them: S 24(9) PA

14.5.6 Entry & Exit of Partners

14.5.6.1 S 24(7) – CONSENT TO ENTRY

Per s 24(7) PA, a person can only be introduced as a partner with unanimous consent.

• [+] [IMPLIED & SILENCE] In Chiam Heng Hsien v Chiam Heng Chow, it was held that consent may be express, implied or inferred from the surrounding
circumstances including the parties’ conduct at time of agreement. Even silence may be sufficient to signal implied consent if the circumstances were such that
the silent party had a duty to speak up or object.

14.5.6.2 S 26(1) PA – RETIREMENT

*Link to Dissolution
Where no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of his
intention to do so to all the other partners.

14.5.6.3 S 25 PA – EXPULSION
No partner can be expelled unless a power to do so is conferred by express agreement.

14.5.6.4 S 31 PA – ASSIGNMENT
An assignment by any partner of his share in the partnership does not entitle the assignee to interfere in the management or administration of the
partnership business or affairs, or to require any accounts of the partnership transactions, or to inspect the partnership books, but entitles the assignee
only to receive the share of profits to which the assigning partner would otherwise be entitled, and the assignee must accept the account of profits agreed to
by the partners.
 14.6 Dissolution – Grounds
SUMMARY OF DISSOLUTION

14.6.1 Dissolution by Expiration or Notice

According to s 32(1) PA, subject to any agreement, a partnership if entered into:

a. For a fixed term, is dissolved by expiration of that term.

b. For a single adventure, is dissolved by termination of that adventure.
c. For an undefined time, is dissolved by notice of such intention given to the other partners.

FIXED TERM [POST FIXED TERM CONTINUANCE]

According to Chiam Heng Hsien v Chiam Heng Chow, where the fixed term expires, but partners carry on their business as before without
any express new agreement, the new partnership is one at will, under s 27(1) PA. s 27(2) PA itself sets out a presumption of continuance
where parties continue over the fixed term “without settlement or liquidation of the partnership affairs”. Since the partnership is now one at
will, it may be determined by notice at any time, under s 26(1) PA.
UNDEFINED TIME NOTICE
[WHEN IS THE DISSOLUTION?] According to s 32(2) PA, the partnership is dissolved from the date either (a) mentioned in the notice or (b)
where the notice is silent, from the date of communication of the notice.

[WHAT CONSTITUTES NOTICE?]

• [received] In McLeod v Dowling, it was held that notice must be received.

• [verbal] Verbal notice counts: Tham Kok Cheong v Leow Pui Heng
14.6.2 Dissolution by Supervening Illegality – s 34 PA
According to s 34, a partnership is dissolved by the occurrence of an event which makes it unlawful for (a) the firm’s business to be carried on; or (b) the firm’s
members to carry on the business.

• In Hudgell, Yeates & Co v Watson, a partner failed to renew his solicitor’s license, and the court held that the firm was automatically dissolved as it was then
illegal to operate with an unlicensed solicitor. But since the other partners had continued on as before, a new partnership came into being.

• In Pham v Doan, a partnership for a pharmaceutical business was held to be illegal ab initio as it included a non-pharmacist as a partner, in contravention of
the then Pharmacy Act of 1964.

14.6.3 Dissolution by Bankruptcy, Death or Charge – s 33 PA

[DEATH OR BANKRUPTCY] According to s 33(1) PA, a partnership is dissolved by the death or bankruptcy of any partner, subject to any contrary agreement.
This arises by operation of law.
• [WINDING UP] The partner’s personal representative are entitled to bring an action to wind up: s 39 PA

[CHARGE] According to s 33(2) PA, where a partner has his share of the partnership property charged for his own personal debt, then the other partners may opt
to dissolve the firm.

14.6.4 Dissolution by Court Order

Briefly, there are five cases for dissolution by court order – s 35:

a. Where the partner is physically incapable of performance

b. Where partners’ conduct is calculated to prejudicially affect the business
c. Where partner wilfully or persistently breaches the partnership agreement, or conduct himself vis-à-vis the business such that it is not reasonable
for others to carry on working with him
d. Where business is a loss-making one
e. Where it is just and equitable to do so
S 35(c) PA CONTROVERY – REPUDIATORY BREACH
Following Hurst v Bryk, there is no automatic dissolution for repudiatory breach. The main reason seems to be the fact that such
repudiation would be undoubtedly caught under s 35(c) PA, and if dissolution is automatic, then that contradicts the court’s discretuibart
power to dissolve under s 35 PA. In contrast, Ryder v Frolich accepted that repudiatory breach was sufficient to automatically dissolve
the partnership.
 It is submitted that the position is not in contradiction. It was common ground in Hurst v Bryk that Hurt’s acceptance of the repudiatory
breach meant that the firm was dissolved from effect on that date by mutual consent. Accordingly, acceptance of repudiatory breach is
sufficient to dissolve the partnership, but for doctrinal purposes, it should be framed under s 19 as dissolution by mutual consent, see e.g.
Golstein v Bishop.
S 35(e) PA As illustrated in Re Yenidje Tobacco, the court held that it would be just and equitable to order a dissolution if this was a partnership.
Quoting Lindley on Partnerships: “Refusal to meet on business matters, continued quarelling: a state of animosity precluding all
reasonable hope of reconciliation and family cooperation are sufficient to justify a dissolution.”

14.6.5 Dissolution Where Partnership Agreement is Vitiated

According to s 41 PA, a partnership may be rescinded on the ground of fraud or misrepresentation of one of the parties thereto.

• [INDEMNITY OF INNOCENT PARTNERS] The party entitled to rescind is then entitled e.g. to be indemnified by the person guilty of the fraud or the
misrepresentation against all of the firm’s liabilities and debts.

• [ILLUSTRATION] This was illustrated in Conlon v Simms where the lower court had awarded costs against the former partner on an indemnity basis. The
partner, Simms, had fraudulently misrepresented his position and failed to disclose prior the formation of the partnership that he was involved in fraudulent
activity for bank laundering, and was also liable to be struck off the roll for such conduct.

14.6.6 Dissolution by Mutual Consent or Under Express Terms of the Partnership Agreement
There can be dissolution by mutual consent, or where agreement provides for it. Section 19 PA states that mutual consent by all the partners can vary the
mutual rights and duties of partners as defined by the Act.
 14.7 Dissolution – Effects
According to s 39 PA, upon dissolution, each partner is entitled to have the firm’s assets applied to the firm’s liabilities and the surplus thereafter divided up after
accounting for deduction (e.g. for capital). For that purpose, the partner or his estate may apply for a winding up of the firm.

• [CONTRARY AGREEMENTS] This is however subject to contrary agreements, according to s 19 PA and Sobell v Boston.

• [COURT DISCRETION FOR BUYOUT] This is also subject to the court’s discretion to order a buyout instead. Buyout is appropriate in cases where the partner’s
interest is “very small”, and it would not be desirable to order a sale of the firm’s assets: Syers v Syers

ALTERNATIVE TO WINDING UP
• Acquisition of an outgoing partner’s share by continuing partners (commonly provided for in
partnership agreement especially in professional partnerships

o Subject to any agreement between the partners, the amount due from surviving or continuing
partners to an outgoing partner or the representative of a deceased partner in respect of the
outgoing or deceased partner’s share is a debt accruing at the date of the dissolution or
death: s 43 PA.

o If no winding up takes place and some partners continue the business, technically they do so as a
new partnership since there has been a change in membership of the firm: Chiam Heng Hsien v
Chain Heng Chow.

14.8 Dissolution – Partner’s Rights & Duties

Partner’s rights and duties continue for purposes of winding up:
According to s 38 PA, after the dissolution of a partnership, the authority of each partner to bind the firm and the other rights and obligations of the partners,
continue notwithstanding the dissolution so far as may be necessary to wind up the affairs of the partnership, and to complete transactions begun but
unfinished at the time of the dissolution.

Outgoing partner’s right to share in post-dissolution profits where winding up/settlement delayed:
According to s 42 PA, where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of
the firm with its capital or assets without any final settlement of accounts as between the firm and the outgoing partner or his estate, then, in the absence of any
agreement to the contrary, an outgoing partner or his estate is entitled to such share of the profits made since the dissolution as the court may find to be
attributable to the use of his share of the partnership assets, or to interest at the rate of 5% per annum on the amount of his share of the partnership
assets.
 15 QUESTIONS

APPARENT AUTHORITY
→ If the basis of finding that the counterparty has been “put on enquiry” is due to the notice of the constitutional limitation, is there a even a need for us to discuss
the “put on enquiry” since it will overlap greatly with “dealing in good faith” under s 25B of the CA?