The second defendant was adjudged a bankrupt in 1998. After becoming a bankrupt, he continued to represent himself in the company correspondence as chairman or director and took part in the management of the company and was even appointed general manager. The second defendant's shares in the company was transferred to one Ho Kum Chen at 10 sen per share before being subsequently transferred to the second defendant's wife, namely, the first defendant. The plaintiff prayed to the court for an injunction to restrain the second defendant from continuing to take part in the management of the company and that the transfer to Ho Kum Chen, and subsequently to the first defendant was void because it did not comply with art 34A of the company's articles of association. Held: Allowing the application for injunction.
Section 125(1) of the Companies Act 1965 prohibited an undischarged bankrupt from acting as director of a company or taking part directly or indirectly in the management of a company except with leave of court. There was therefore a basis for granting the application for injunction unless the second defendant was now no longer a bankrupt.
Morris -v- Kanssen; HL 1946
The House considered the effect of provisions relating to the acts of directors in the 1929 Act. Lord Simonds said: “There is, as it appears to me, a vital distinction between (a) an appointment in which there is a defect or, in other words, a defective appointment, and (b) no appointment at all. In the first case it is implied that some act is done which purports to be an appointment but is by reason of some defect inadequate for the purpose; in the second case there is not a defect, there is no act at all. The section does not say that the acts of a person acting as director shall be valid notwithstanding that it is afterwards discovered that he was not appointed a director. Even if it did, it might well be contended that at least a purported appointment was postulated. But it does not do so,...
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