company law members n directors kelvin

7/24/2019 Company Law Members n Directors Kelvin

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Company Law: Members, Directors and Others

Members Does not necessarily refer to a shareholder. Eg: coy limited by guarantee. Noshareholder but still has members. In the case of coy limited by shares, member

refers to shareholders whose name appears on register of members. However,people who buy scrip less shares in the maret become members without having totae the trouble to register in the coy!s register of members.

Number of members

Each coy at least " member. No ma#imum number of members. If more than $%members, coy cannot be registered as a private company.Members and management

&y virtue of section "$'( of the )ompanies (ct, and usually the articles of

association of the company, directors have the power to manage the company.*hus, members generally cannot tell the directors what to do .)iteAutomatic SelfCleansing !ilter Co Ltd " Cunningham #$%&'(

H+E-E, while members generally cannot tae on management decisions, theymay embar on certain course of action if they are unhappy over managementdecisions.

". /irstly, the (rticles of (ssociation would usually allow members to remove thedirectors by ordinary resolution.In fact in the case of the public company, it is notpossible for the articles to provide otherwise. *hus if members are unhappy with themanagement decisions, they may e#ercise this right and remove the directors0assuming they manage to garner the re1uisite number of votes2 with the hope that

the new directors appointed would mae more agreeable decisions.

3. 4econdly, members theoretically have the option of altering the articles ofassociation, if they manage to garner the pre5re1uisite number of votes, to conferparticular power on themselves, though in practice this is rarely done. +n a more

Automatic SelfCleansing !ilter Co Ltd " Cunningham#$%&'(Members passed a resolution asing the directors to sell coy

assets to another party. Directors refused to obey so matterwas brought to court. )ourt held that directors wereconferred power to determine such issues.


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practical side, member who is unhappy with the management may 6ust sell his staeand place his money elsewhere.

Situations where members must appro"e decisions

*hough generally, members do not have the right to manage the company, the)ompanies (ct and the articles of association may provide that members mustapprove certain decisions. /or instance, it is provided in the )ompanies (ct thatwhen the company wants to issue shares (section 161), or dispose of the wholeor a substantial part of its undertakings or property (section 160), the approvalof members is necessary./urther, if the memorandum or articles of assoc. are tobe amended, approval of members is re1uired.

Member)s *ights

#a( *ight to enforce the memorandum and articles of assoc+

4ection 78 of the )ompanies (ct provides that memorandum and articles of assoc.represents a contract between members and the coy and as between members.

In this regard, the (rticles of (ssoc. usually provide that when the coy is dissolved,any assets remaining after liabilities have been met would be distributed tomembers. )onversely, articles of assoc. usually do not provide that dividends mustbe declaredeven if there are available profits. *hus the member would usually nothave the right to demand dividends.

#b( *ight to amend the memorandum and articles of assoc+

9nless otherwise provided in the )ompanies (ct, section 26usually provides that

the memorandum of a coy may be amended by a special resolution. Articles ofAssoc. can be removed or altered by means of special resolutionas well.4ection 7' provides that sub6ect to the provisions of the )ompanies (ct and thememorandum, articles of association of a company can be removed or altered bymeans of a special resolution. ( special resolutionwould mean that the resolution


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has to be passed with at least !" of ma#ority.

H+E-E, all this is sub6ect to section 3( which allows companies to declarecertain provisions in the articles or memorandum of assoc. to be ;entrenched2.However, section "'$( allows private companies to dispense with the need to have(=M if$%% members agree to it.

5 Members have opportunity to 1uery directors on performance of coy and otherissues. &?4 must be laid out. (ppointment of auditors done here. (rticles of (ssoc.typically provide that at (=M, appointment and remuneration of directors must bedetermined and members must approve the dividends (if any) declared by directors.(LINK Members have no right to demand dividends B! must approve of thedividends declared by the directors)

/-M #.mpt(:5 E#traordinary general meetings are where resolutions may be passed. (rticles of(ssoc. usually provide that directors could convene such meetings. Members incertain circumstances 0coy act and articles of assoc.2 may be allowed to call formeetings 0pg 332. @te coy in certain circumstances may allow resolution to be

passed by written means.5 hen E=M is called, notice of it has to be given to members. (mt of noticedepends on the type of resolution. 4pecial esolution (* AE(4* 3" days noticefor public coy and "> days notice for pte coy.+rdinary esolution(* AE(4* "> day notice.


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However, there are provisions that allow for shorter notice in certain circumstances.

(lso, the notice has to minimally "#! $! !%# !#&! $' #"$L!I$N, somembers can decide whether or not to attend the meeting. .! not done, resolution

passed at meeting may be in"alidated.)ite0up Seng Co Ltd " Chin 1in #$%'(

.M23 #pg ''4(*o successfully pass a special resolution cannot be less than '$B ma6ority ofvotes+rdinary resolutionmore than $%B of votes5oting may be done by4how of handsNo. of shares held not important+ by pollno. of shares matter-oting is usually a fundamental right of the member &9* in the case of nonvotingpreference sharesC this right may not be available.

0up Seng Co Ltd " Chin 1in #$%'( pg '@urpose of the resolution was not made nown to members.(s a result, resolution passed at them meeting becameinvalidated

#d( *ight to .nformation

Members have a right to receive info from the coy. /or instance, member mayinspect various registers held by the company. In addition, the company!s balancesheet and profit and loss accounts have to be sent to the members prior to the (=M0section 3%72. /urther members have the right to inspect the minutes of meetings0section "82. *heoretically, by receiving such information, members can asseswhether the company is being run properly.


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#e( *ight to be treated fairly

4ection 3" of the )oy (ct gives members a right to apply to court if the affairs ofthe coy are being run oppressively or in disregard of the member!s interest.

However, for this section to be successfully invoed, there must be more than amere disagreement with the decisions made by the ma6ority. *here M"! be someelement of unfairnessor a visible departure from standards of fair dealing (NgSing 6ing " 2SA .nternational 2te Ltd #&&7((.

)ite*e 0* 0armer Ltd #$%78( and Scottish 9 Coop " Meyer #$%7%( to showthat minority member can apply for leave and remove ma6ority shareholder?director.

*e 0* 0armer Ltd #$%78(H was a ma6ority shareholder and director. He ran thebusiness himself without consulting the other directors ormembers. He set up branches abroad and dismissed adirector on his own accord without the approval of others./urther he drew money without the approval of others. *hecourt held that the minority shareholders could petition for arelief of a ma6or shareholder and director as there wasoppression

Scottish 9 Coop " Meyer #$%7%(M and 4 were in business together. 4 was the ma6orityshareholder and controlled the board. (fter some time, 4diverted all the business from the company and M petitionedfor relief on the grounds of oppression and the court grantedit.

Liabilities of Members #pg '(

( shareholder may also incur liabilities. If a company is being wound up and amember is yet to pay up on his shares, he may be called to do so by the company0section 3$%2


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)ompany 4ecretary 4ection "'"0"2 of the )ompanies (ct provides that every coy shall have oneor more secretaries who must be resident in &'. *he company secretaryhas to be appointed by the directors 0section "'"0722. *he company secretaryhas the duty to ensure that various administrative matters reuiredunder the ompanies $ct are adhered to.Eg: esponsible for organiing meetings, file various documents, sendnotices etc

;ualifications

@ublic coysecretary would need to have certain 1ualifications set out insection "'"0"((2. *ypically, this would mean that the secretary must be aprofessionally 1ualified person, such as an accountant or lawyer.

@rivate coy (directors can act as secretary as well)sub6ect to section"'"0"(&2, it is not necessary to appoint professionally 1ualified people. *husa director 0other than a sole director F section "'" 0"E22 or any person whom

the directors deem fit may act as a company secretary.)ompany (uditor 4ection 3%$ of the )ompanies (ct re1uires every )oy to have an auditor ?auditors. Directors appoint the first auditors, but members in the generalmeeting appoint subse1uent auditors.

4ection 3%$) now provides that an e#empt private company may bee#empted from appointing auditors or having audited accounts in respect of afinancial year if its revenue for that year falls below a prescribed amount.


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Directors 4ection ">$0"2 of the )ompanies (ct provides that every company shall haveat least " director who shall be ordinarily resident in &'. *here is no limitto the number of directors but (rticles of (ssoc. may have a provisionpertaining to that.

*he term ;director< is not restricted to persons appointed as such. 4ection>0"2 of the )ompanies (ct provides that a person, in accordance with whosedirections or instructions the officers of the company are accustomed to act,or any person acting as an alternate or substitute director, would also beconsidered a director.

Eg: If G indirectly manages coy but is never formally appointed as a directoror if G is gotten to act as a director on behalf of someone sub#ect to allduties imposed on directors.

/


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;ualifications

4ection ">$032 of the )ompanies (ct provides that a director must be anatural person who is at least " years of age and who has full legal capacity.

(side from this, the )ompanies (ct does not prescribe any other necessary1ualifications to be a director. *hus, there is no re1uirement that the directormust have certain education 1ualifications or years of e#perience. However,the articles of assoc. may have provide for other necessary pre5conditions.

Ma< age of directors:/or public companies, section "$70"2 provides that the ma#imum age fordirectors is '%. However, there are certain provisions in section "$7 that allowa director who has reached '% years to be re5appointed on a year5to5yearbasis if certain conditions are satisfied.

/or private companies, )ompanies (ct does not provide any ma#. age


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Dis1ualification ofdirectors

Dis1ualifications F (utomatic and Not automatic dis1ualifications. &y)ompany (ct or (rticles of (ssociation. /or automatic dis1ualifications, is itoptional to dis1ualify a director even though he fits the circumstances

#a(Section $8 #$utomatic *isualification( pg '?

4ection ">0"2 of the )ompanies (ct provides that an undischargedbankrupt cannot be a director or indirectly take part in the managementof a coyC the rationale being that if a person cannot manage his own affairs,he should not be managing the affairs of a company. *he dis1ualification isautomatic and the person who disobeys the dis1ualification will be guilty ofan offence.

H+E-E, the dis1ualification may be lifted if the leave of court or writtenpermission of the official assignee is obtained 0section ">0322.NO3/: not lifting bankruptcybut lifting a dis@ualification

Ain to earlier topic

(ny part of the worldC court has the power toad6udicate a person to banruptcy. *hat person would be considered abanrupt in 4= as well.#b( Section $% #Not automatic dis@ualification( .M23

4ection ">80"2 of the )ompanies (ct allows the minister or official receiver tomae an application to court asing for a dis1ualification order in certaincircumstances.

/or section ">8 to be triggered, the circumstances must be that the directorwas a director of a company which became insolvent while he was adirector, or within three years of him ceasing to be one, and the director!sconduct was such as to mae him unfit to be a director. Matter that have to

be considered in determining whether the director!s conduct maes him unfitto be a director are set out in section ">802. *hese include matters lie,whether director breached his fiduciary or other duties, misappropriatedmoney and whether director!s conduct contributed to coy!s insolvency


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If the court is satisfied that he conditions are satisfied, a dis1ualification orderfor up to 7 years may be imposed. If the director disobeys thedis1ualification order, that would amount to an offence, unless he hasobtained the leave of court to lift the dis1ualification.

#c( Section $7

Section $7#$( #automatic dis@ualification(

4ection "$>0"2 of the )ompanies (ct provides that if a person has been guiltyof an offence 0In 4= or elsewhere2 involving fraud or dishonesty punishableon conviction with imprisonment of + months or more* he isautomatically dis1ualified for $ years from being a director or taing part inthe management of a company.Note: involves only fraudulence ? dishonesty. 4hoplifting etc, not counted.

Section $7 #( #not automatic dis@ualification(

4ection "$>032 provides that if person committed any offence in 4= inconnection with the formation or management of the company, or any offenceunder section "$' or 778, he may be dis1ualified for up to $ years. If offenceis technical one and not serious, the court may decide not to dis1ualify him.

If a section "$> dis1ualification has been imposed, the person concernedwho continues to be a director would be guilty of an offence, unless he hasthe leave of court.

4ection "$': director must act honestly and withreasonable diligence in the discharge of his duties

4ection 778: /ailure to eep proper boos of accounts


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#d( Section $77 #.M23( #Automatic Dis@ualification(

*he )ompanies (ct re1uires that various documents and notices be filed withthe egistry of )ompanies. f these documents and notices are not filed,that may amount to a commission of an offence.

(mong other things, section "$$ provides that a person who is persistentlydefault in delivering or filing returns, notices or other documents to theegistrar, will be automatically sub+ected to a $ year dis1ualification formmanaging the company 9NAE44 he has the leave of court.

*he phrase ;persistently in default< has been defined to mean that personmust be guilty of 4 or more offences in relation to the delivery or filing ofsuch returns, documents or notices, or must ha"e had 4 or more ordersmade against himin respect of certain related matters within the last 7years+

#e( Articles of Association #Automatic dis@ualification(

&esides the )oy (ct, the articles of association may provide forcircumstances in which the director could be dis1ualified.Eg: articles may provide that the director would be dis1ualified if he becameinsane or if he has been absent from director!s meeting for more than si#months without permission.


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Appointment and *emo"al

Appointment

How directors are appointed ? removed commonly found in articles ofassociation. /or instance, articles of assoc. commonly provide that thedirectors are to be appointed at the (=M by the members.

*emo"al? *esignation

*he articles of assoc. also commonly provide that directors may be removedby means of ordinary resolution. In addition, as already stated, the articlesof assoc. may provide for automatic removal of directors when certain eventshappen.

Directors may resign on their own account. However, generally, if theresignation has the effect of leaving the company with no director who is

ordinarily resident in 4ingapore, then the director cannot resign 04ection">$0$22. /urther, if the director is an employee, his resignation must be inaccordance to his employment contract.Directors and Management

*he )ompanies (ct 0section "$'(2 and usually articles of assoc. confer ondirectors the power to manage the company.

*he board of directors is treated as an agent of the coy and is authoried toact on behalf of the coy. However, the board may delegate its duties to otherssuch as individual directors or employees. =hat they then do binds the coyprovided it is done within their actual, implied or apparent authority.

Actual authorityrefers to authority that an agent hase#pressly been conferred with.

.mplied authority refers to authority an agent in asimilar position would usually be conferred with.Implied authority of a particular director?employeewould depend on the circumstances.

Apparent authorityarises if the company or someonein authority represents to another person that the agent

in 1uestion has the authority to do certain acts, and thatother person relies on that representation.


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Director)s Duties #arise from both case law and statutes(

#a( Duties imposed by case law

i+ Duty to a"oid conflict of interests

( director owes fiduciary duties to the coy and as such, should not placehimself in a position whereby his duties to the coy and his personal interestconflict.)ite !urs Ltd " 3omies #$%47( and Canadian Aero Ser"ice Ltd "O)Malley #$%?4(

-ven if the coy does not suffer a lossbut there is a conflict and the directormaes a profit, he is still made accountable for that profit as seen in the caseof .ndustrial De"elopment Consultants Ltd " Cooley #$%?2

H+E-E, liability would generally not arise if there is a potential conflict

and the director gets the appro"al of membersof the coy, allowing him togo ahead with a particular course of action.Eg: Director wants to be a director of two competing companies and this isdisclosed to the members, who approve of it, no liability would arise.

Conse@uences: Account for profit, pay for damages

!urs Ltd " 3omies #$%47( pg ? .M23&reach of fiduciary duties in that *omies sold a part ofcoy!s business for a lesser price because he wasbribed. )ourt held that *omies was to return thismoney to the coy as he had obtained it in breach of hisfiduciary duties.

Canadian Aero Ser"ice Ltd " O)Malley #$%?4(,efendant-s dutywas to get the pro6ect for the coy &9*their interestwas to get it for themselves. 4ince therewas conflict and the coy lost the opportunity, thedefendants were liable to pay damages.


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ii+ Duty to Act for 2roper 2urpose

*he articles of association usually confer on the directors various powers.However, these powers have to be used for proper purposes.)ite 0oward Smith Ltd " Ampol 2etroleum Ltd #$%?( and 2unt "Symons > Co Ltd #$%&4(

0oward Smith Ltd " Ampol 2etroleum Ltd #$%?( pg?Directors issued new shares for the wrong purposeeven though that was thought to be the best for thecoy. )ourt held that the powers of directors had notbeen e#ercised for a proper purpose.

2unt " Symons > Co Ltd #$%&4(*he court held that this duty to act for proper purposewas breached when the directors issued new sharesfor the sae of self5interest.

Issuing new shares are usually used to raise money.&ut in the above 3 cases, it can be seen that it wasused for the wrong purpose. 0@otential common misuseof power2

iii+ Duty to Act in the Best .nterests of the Company

(nother aspect of fiduciary duties is that directors must act in the bestinterests of the company. If this is not observed, liabilities can arise.

)ite*e = > M *oith Ltd #$%'?( and Chew 6ong 0uat " *icwil #&&$(to show that directors breached a duty to act in best interest of company andduty to avoid conflict of interest.

In these 3 cases, there was conflict of interests as well. However, there couldbe cases where this duty is breached without there being such conflicts+)ite=aler " =imborne #$%?7(

Conse@uences

If any of the above mentioned fiduciary duties are breached, the directormay have to account for profits he made, returned any property heobtained in breach of those duties, or pay damages to the company forits losses. /urther, any resolutions passed in breach of these duties may be

*e = > M *oith Ltd #$%'?( pg ?4

Director made a provision enabling his wife to drawpension on his death. *he court held that this was inthe interest of his wife and N+* in the best of the coyand hence it was held that the company did not have topay it.

Chew 6ong 0uat " *icwil #&&$(*wo directors of icwil transferred some contractsentered into by icwil to another company in whichthey had an interest in 0they were staeholders of thatother company2, the court held that this duty wasbreached.

=aler " =imborne #$%?7(Directors in coy made an interest free loan withouttaing any security in return. *he court held that thedirectors were not acting in the best interest of theircompany in the circumstances of the case.


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declared invalid. In addition, if the coy enters into contract with a third party inbreach of his fiduciary duties, the contract may be set aside if +rd partyknows or ought to have known of that breach.

i"+ Duty to act with due care, sill and diligence

(s stated in *e City /@uitable !ire .nsurance Co Ltd #$%7(, a director alsohas the duty to act with due care, sill and diligence. If this duty is breachedand the company suffers losses, the director could be liable for thoselosses.)ite *e City /@uitable !ire .nsurance Co Ltd #$%7( and urong*eadymi< Concrete 2te Ltd " 6ai Buit .ndustrial 2ar 2te Ltd #&&&(

/urther, while directors can delegate their duties, if they delegate their dutiesto someone to whom a reasonable person would not have delegated theirduties, there could be liability.

Even if there is proper delegation, but director fails to supervise, there couldstill be liability #*e Barrings 2LC #$%%%((+

*e *ailway and -eneral Light .mpro"ement Co#$88&(Director signs a che1ue without checing why themoney is being paid out.

urong *eadymi< Concrete 2te Ltd " 6ai Buit.ndustrial 2ar 2te Ltd #&&&(Director in 1uestion got his coy to give guarantee whichwas not necessary, without fully understanding thebacground, without consulting the other directors andwithout getting legal advice, it was held that he hadindemnify the company for the losses suffered as aresult.


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#b( Duties .mposed by the Company Act

In addition to duties imposed by case law, there are various duties imposedon directors by virtue of the )ompanies (ct. &reach of these duties may leadto civil or criminal liabilities or both.

i( Section $7'

9nder section "$0"2, when a coy enters into a transaction or is proposing toenter into a transaction and a director has directly or indirectly an interestin that transaction, he must declare the nature of his interest at themeeting of directors as soon as the relevant facts have come to hisnowledge.

4ection "$032 states that interest shall be taen to mean material interest.

#Note the difference between maority and minority shareholder(Eg: If coy ( enters into contract with coy &, and G a director of (, is thema6ority shareholder in &, he has to disclose this to the directors of coy (.However, if )oy & was a public listed coy and G on the other hand is only aminority shareholder in company &, he need not mae a disclosure as hewould not be considered to have material interest.

4ection "$02 also provides that interest of the director includes the interestof his family.

Conse@uence of breach

Section $7'#$&( provides that breach of section "$ results in thecommission of an offence.

)ite

1eo -eo Seng " 2ublic 2rosecutor #&&&(

1eo -eo Seng " 2ublic 2rosecutor #&&&( pg ?7Director entered in a construction contract and got aconstruction coy in which he was also a director in todo the actual construction ithout disclosing this to theboard.*he )ourt held there was a breach of section "$ andhence he was convicted and fined0criminal liability2


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ii( Section $7?

4ection "$'0"2 of the )ompanies (ct states that a director must act honestlyand use reasonable diligencein the discharge of his duties.

*he term ;act honestly< covers a multitude of matters, such as that thedirector must act in the best interest of the company, must not place himselfin a position of conflict of interest, and must not use his powers for improperpurpose.

*he term ;reasonable diligence< is apt to cover due care, sill and diligence.

/&, pair section 1!(1) with civil law director duties.

Section $7?#( of the )ompanies (ct states that an officer of a company0such as a director2 shall not mae improper use of any information ac1uiredby virtue of his office to gain an advantage for himself or any other person, orto cause detriment to the coy.Eg: Director leas out confidential info to another competitor, this sectioncould be breached.

Conse@uence of breach #impt(

Section $7?#4( states that if section "$' is breached, the director would haveto return profits made by him or be liable for losses suffered by the companyand that he would be guilty of an offence.CiteLim =eng 6ee " 22 #&&(

Lim =eng 6ee " 22 #&&( pg ?' .M23Director of a pawnshop released pawn items before theche1ue presented for repayment of the loans werecleared, it was held that he was in breach of section"$'0"2, and hence was convicted and fined.


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iii( Section $'

4ection "30"2 provides that a company other than an e#empt privatecompany shall not mae a loan or provide a guarantee or any security inrespect of a loan to a director.

4ection "302 e#tends the term ;director< to include his family.

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i"( Section $'8

4ection "0"2 provides that any compensation for loss of office of thedirector has to be approved by members.Eg: director decides to retire early and declares himself and enormous sum

of money, he has to see approval from members

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#c( Duties imposed by the Securities and !utures Act #.M2O*3AN3(

2rohibition of insider trading

Section $8#$(of the 4ecurities and /utures (ct provides that if a personconnected to a corporationpossesses information concerning thatcorporation that is not generally available, and the information is such thata reasonable person would e#pect it to have a material effect on the price orvalue of securities of that corporation and the connected person knows orought to reasonably know that the information is not generally availableand might have a material effect on the price or value of those securities, thehe should not among other things:

#$(4ubscribe for, purchase, sell or enter into an agreement to subscribe for,purchase or sell any such securities 0section 3"0322.

#(@rocure another person to subscribe for, purchase, sell or enter into anagreement to subscribe for, purchase or sell any such securities 0section3"0322.

#4( Directly or indirectly communicate the information or cause theinformation to be communicated to another person, if the connected personnows, or ought reasonably to now that, the other person would or would beliely to subscribe for, purchase, sell or enter into an agreement to subscribeor, purchase or sell or procure another person to do the same 0section3"0722.

*he phrase Fa person connected to a corporationG is defined in section3"0$2 and this includes officers of the corporation. ;+fficers< has beendefined in section 3"02 to include directors, secretaries and employees of

the corporation.

Section $% of the Securities and !utures Act provides that even personsnot connected to a corporation or persons who receive price5sensitiveinformation from persons not connected to the corporation, come under asimilar prohibition.


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Eg: if G is a director of a coy and has price5sensitive information relating tothe coy, which is not generally available and he passes the information to who passes it to J, and J may fall under prohibition stated in section 3"8,for instance if they purchase shares of the company

Conse@uences of breach #choose #$( or #( and pair with #4((

#$(If section 3" or 3"8 is breached, that could result in criminal liability.4ection 33" provides that a person who contravenes section 3" or 3"8 shallbe guilty of an offence and shall be liable on conviction to a fine note#ceeding K3$%,%%% or to imprisonment for a term not e#ceeding ' years, orboth.)ite2ublic 2rosecutor " 6oh Soe 6hoon #&&'(

#( Alternati"ely, under section 2+2, onetary $uthority of &ingaporemay bring a civil claim for a ;civil penalty< to be imposed against any personwho breached section 3" or 3"8. However, since section 373 involves a civilclaim, it would suffice to establish on the balance of probabilities that acontravention has taken place. *his is unlike criminal proceedingspursuant to section 221 where it must be established beyondreasonable doubtthat a contravention had taen place. *he amount of civilpenalty is provided for in section 373032, and it states that it,

4hall not e#ceed three times the amount of profits gained or lossesavoided by the contravener, or 4hall be an amount e1ual to K$%,%%% 0in the case of individuals2 orK"%%,%%% 0in the case of corporations2HI)HE-E I4 =E(*E. )H++4E ".

#4( Section 4states that a person who has contravened section 3" or3"8 could face civil liability to a person who has, contemporaneously with thecontravention subscribed for, purchased or sold securities and who hassuffered a loss. 4ection 37>02 provides for a ma#imum amount that is

2ublic 2rosecutor " 6oh Soe 6hoon #&&'(Defendant was the managing director of a listedcompany. He had confidential price5sensitiveinformation. &efore the information was made public,he bought more of the company!s shares. hen theinformation was made public, the share price went upand he made profits. *he defendant was charged withinsider trading. +n conviction, he was fined K"%,%%%and in default, " month!s imprisonment for the breachof section 3".


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recoverable under this section. (mt. recoverable is restricted to the amount ofprofits gained or losses avoided by the contravener.

*hus, if G, in contravention of section 3" or 3"8, sold securities to at ainflated price because G had inside information which would greatly lower the

price of the securities had the information been made public, may bring anaction against G and claim the difference between the price he paid and theprice the securities would have been liely to be traded at, had theinformation been made public.

2rohibition of maret riggingHmaret manipulation

*he 4ecurities and /utures (ct also prohibits other unfair practices that mayarise in a stoc maret, such as maret rigging 0section "8'2 or maretmanipulation 0section "82.

/or eg: if ( and & by prior arrangement buy and sell the same shares toand from each other repeatedly, so as to create an impressionof activetrading in that counter, these sections could be breached.

3he maing of false or misleading statements pertaining to securities isalso prohibited #section $%%(+)ite2ublic 2rosecutor " =ang Iiyi Able #&&8(

2ublic 2rosecutor " 6oh Soe 6hoon #&&'(+nline posting of false information that a particularlisted company was raided without caring whether theinformation was true or false and which informationcould have liely induced persons to sell their shares ina company, resulted in a commission of an offence.

company law members n directors kelvin

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