Q: advise liquidator
Sonny was an undischarged bankrupt with several convictions for fraud. He together with Tipu, another undischarged bankrupt, incorporated a company in Kuching, Sarawak called the Bandar Kuching Investment Sdn Bhd. (Bandar) in which they were the only shareholders. Sonny, by deception, managed to obtain a timber licence in Sabah on behalf of Bandar. Bandar then promoted a company in Sabah called Bina Kayu Bhd (Bina). Bandar then sold the timber licence to Bina at a hugely inflated price which was then pocketed by Sonny and Tipu. Bina recently went into liquidation. The liquidator sought to make Sonny and Tipu personally liable for the improper profits made as promoters. Sonny sought to argue that the liquidator was barking up the wrong tree as they (Sonny and Tipu) were in law different persons from Bandar and that the promoter was in fact Bandar which is a different legal entity.
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In this situation, the liquidator's attempt to hold Sonny and Tipu personally liable is based on the principle that individuals should not use the corporate structure to perpetrate fraud or improper activities. While it's true that a company is usually considered a separate legal entity from its shareholders and directors, this separation can be disregarded in cases of fraud or wrongful conduct.
Sonny and Tipu's argument that they are legally distinct from Bandar might not hold up if it's proven that the company was merely a facade for fraudulent activities. Courts can 'pierce the corporate veil' in such situations, meaning they can look beyond the legal separation to hold individuals responsible for the company's actions.
Given Sonny and Tipu's history of fraud and their roles in the inflated sale of the timber licence, the liquidator has a reasonable basis to pursue personal liability. It would be advisable for the liquidator to gather substantial evidence showing that Bandar was used primarily as a vehicle for fraudulent activities by Sonny and Tipu.
It's crucial to consult with legal counsel experienced in corporate law and insolvency proceedings to navigate this complex area and develop a strong case against Sonny and Tipu. Their expertise will be vital in arguing the case for piercing the corporate veil and holding them personally accountable for the losses incurred by Bina.
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