Re Haeusler, Thomas

• Jurisdiction: Singapore
• Judge: Vinodh Coomaraswamy J
• Judgment Date: 23 April 2021
• Docket Number: Originating Summons No 1028 of 2018
• Year: 2021
• Court: High Court (Singapore)

Re Haeusler, Thomas

[2021] SGHC 93

Vinodh Coomaraswamy J

Originating Summons No 1028 of 2018

General Division of the High Court

Companies — Directors — Prohibitions — Director being disqualified from acting as director under s 155A(1) Companies Act (Cap 50, 2006 Rev Ed) — Statutory objective of s 155A Companies Act — Proper approach to discretion under s 155A(3) Companies Act — Whether leave to act as director during period of disqualification should be granted — Sections 155A(1) and 155A(3) Companies Act (Cap 50, 2006 Rev Ed)

Held, dismissing the application:

The statutory objectives of sections 344 and 155A of the Act

(1) Section 344 of the Act gave the Registrar the power to strike a defunct company off the register on his own initiative. Its sole statutory objective was to allow the Registrar to ensure that only companies which had a corporate purpose remained on the register: at [31], [35] and [63].

(2) Section 155A of the Act provided that a person who was a director of not less than three companies which had been struck off the register within a five-year period was disqualified from acting as director of, or taking part in or being concerned in the management of, any company for a period of five years commencing after the date on which the last company was struck off. The sole statutory objective of s 155A was to deter a director of a defunct company from leaving it to the Registrar to strike it off the register under s 344: at [67] and [81].

The proper approach to the discretion under section 155A(3)

(3) What underlay the statutory objective of s 155A was deterrence. Section 155A supported the statutory objective of s 344 by imposing a draconian penalty to deter directors from allowing defunct companies to remain on the register, and giving them a powerful incentive voluntarily to strike off or wind up these companies. A disqualification under s 155A(1) could arise without any wrongdoing whatsoever, and therefore did not engage the protection of the public: at [110], [111] and [113].

(4) The conceptual approach to the discretion under s 155A(3) required a bespoke set of factors which recognised the unique nature of the disqualification imposed by s 155A and which supported, or at least did not undermine, its deterrent objective: at [120].

(5) While the discretion under s 155A(3) should be exercised only if there were some circumstances which were unusual or not typical, the starting point should not be weighted against granting leave: at [123] and [124].

(6) Where the three strikings off under s 344 arose from a breach of the Act, an applicant had to demonstrate a capacity for compliance in order to secure leave under s 155A(3). There were three dimensions to this. First, his capacity for compliance as demonstrated by the circumstances which had led to the three companies in question being struck off under s 344. Second, his capacity for compliance as demonstrated by the compliance record of the other companies of which he was a director, excluding the three struck-off companies. Third, his capacity for compliance as demonstrated by his conduct during the period of his disqualification: at [126] and [128].

(7) It was outside the court's power under s 155A(3) to grant a blanket application for leave to act as a director of any company. An applicant should therefore identify the specific company or companies in respect of which he was seeking leave to act as a director; explain the specific level of involvement he was seeking leave to have in that company; and explain why that level of involvement was necessary or desirable and appropriate: at [130] and [137].

(8) Section 155A(1) envisaged that an applicant had to serve at least some period of disqualification before being granted leave. The period for which an applicant had served his disqualification was therefore also a relevant consideration: at [132] and [133].

(9) Subject to the above, it was possible for an applicant to secure leave under s 155A(3) by satisfying the court: (a) that he left it to the Registrar to strike off the three defunct companies because of circumstances beyond his control and despite his best efforts; and (b) that the breaches of the Act which led to the three companies being struck off came about because of circumstances beyond his control and despite his best efforts. If an applicant had accepted appointment as a director after s 155A came into force, he would also have to establish how the terms on which he accepted his appointment catered for the risks he faced: at [134].

Whether leave should be granted under section 155A(3)

(10) The applicant had displayed a pattern of regulatory non-compliance. He had failed to file annual returns for the three struck-off companies for at least two consecutive years, and on seven occasions within four years. In addition, ten other companies of which the applicant was a director had repeatedly failed to file annual returns, including his personal corporate vehicle. The fact that he was unaware of the existence and effect of s 155A until his attention was drawn to it on 31 July 2018 also weighed against his capacity for compliance: at [141] to [143] and [145].

(11) The period of disqualification the applicant had served was too short for the court to grant him leave under s 155A(3) to act as a director of even a single company. Although he had been disqualified with effect from 6 June 2017, he had not commenced serving his disqualification until 5 September 2018. He had served only seven weeks of disqualification when his application for leave was heard: at [154] to [156].

(12) The three strikings off which led to the applicant's disqualification were not due to factors beyond his control, nor had they come about despite his best efforts. He could and should have applied to strike off two out of the three companies voluntarily under s 344A as he was the sole director of those companies: at [161] and [164].

[Observation: A director faced with shareholders who were failing or refusing to co-operate in fulfilling a company's compliance obligations had certain courses of action open to him to minimise the risk of the Registrar striking the company off under s 344 as a result of breaches of the Act. Apart from applying to strike the company off voluntarily under s 344A, a director who accepted his directorship after s 155A came into force could do better due diligence or bargain for terms in his appointment to cater for this risk. In the alternative, a director could now apply for the company to be compulsorily wound up under ss 125(1)(i) or 125(1)(b) of the Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018): at [162] and [167].]

Case(s) referred to

Huang Sheng Chang v AG [1983–1984] SLR(R) 182; [1982–1983] SLR 468 (distd)

Kardachi, Jason Aleksander v AG [2020] 2 SLR 1190 (refd)

Lee Huay Kok v AG [2001] 3 SLR(R) 287; [2001] 4 SLR 248 (folld)

Lim Teck Cheng v AG [1995] 3 SLR(R) 223; [1995] 3 SLR 821 (folld)

Lo-Line Electric Motors Ltd, Re [1988] Ch 477 (refd)

Madhavan Peter v PP [2012] 4 SLR 613 (refd)

Mukherjee Amitava v DyStar Global Holdings (Singapore) Pte Ltd [2018] 5 SLR 256, HC (refd)

Mukherjee Amitava v DyStar Global Holdings (Singapore) Pte Ltd [2018] 2 SLR 1054, CA (refd)

Ong Chow Hong v PP [2011] 3 SLR 1093 (distd)

Quek Leng Chye v AG [1985–1986] SLR(R) 282; [1984–1985] SLR 72 (distd)

Vita Health Laboratories Pte Ltd v Pang Seng Meng [2004] 4 SLR(R) 162; [2004] 4 SLR 162 (folld)

W&P Piling Pte Ltd v Chew Yin What [2007] 4 SLR(R) 218; [2007] 4 SLR 218 (folld)

Facts

The applicant provided consultancy services on corporate finance and estate planning. As part of his services, he incorporated several companies in Singapore for his clients, accepted appointment as a director in those companies and took responsibility for the companies' regulatory compliance.

Three of these companies were struck off the register within the five-year period preceding 6 June 2017. Under s 155A(1) of the Companies Act (Cap 50, 2006 Rev Ed) (the “Act”), the applicant was thereby automatically disqualified from acting as a director of any company for five years commencing 6 June 2017. However, he was informed of his disqualification only on 31 July 2018. By 5 September 2018, he had ceased to be a director of any company, save for one which was undergoing a voluntary striking off.

The applicant applied under s 155A(3) of the Act for leave to act as a director during the period of his disqualification. The Minister opposed the application.

Legislation referred to

Companies Act 1967 (Act 42 of 1967)

Companies Act (Cap 50, 2006 Rev Ed) ss 155A(1), 155A(3), 344(1), 344(1A), 344A (consd);

ss 4, 13, 19(3), 19(4), 19(5), 142(1), 142(2), 145(1), 145(5), 145(6)(b), 154, 154(1), 154(1)(b), 154(2), 154(3), 154(6), 155, 155A, 155A(1)(a), 155A(1)(b), 155A(1)(b)(i), 155A(4), 155A(5), 157, 157(1), 157(3)(b), 197, 197(1), 197(6), 201A, 205B(1), 205B(2), 205B(3), 253(1), 254(1)(i), 339, 344, 344(2), 344(4), 344(5), 373(9), 373(19)(a), 399, Pt XI Div 2

Companies (Amendment) Act 2014 (Act 36 of 2014)

Companies Regulations (1990 Rev Ed) reg 89B (consd);

regs 89B(a), 89B(b), 89B(c), 89B(d), 89B(e), 89B(f)

Companies (Striking Off) Regulations 2015 reg 2

Insolvency, Restructuring and Dissolution Act 2018 (Act 40 of 2018) ss 125(1)(b), 125(1)(i)

Interpretation Act (Cap 1, 2002 Rev Ed) s 2(1)

Securities and Futures Act (Cap 289, 2006 Rev Ed) s 232, Pt XII

Adrian Tan (August Law Corporation) for the applicant;

Gordon Lim and Enoch Wong (Attorney-General's Chambers) for the non-party.

23 April 2021

Vinodh Coomaraswamy J:

Introduction

1 Section 344 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”) (see [31] below) empowers the Registrar of Companies (“the Registrar”) to strike a company off the register if he has reasonable cause to believe that the company is not...