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INTRODUCTION

This essay provides an insight of the nature and the basic rules of the Bankruptcy Act of 1984 under Chapter 67 of the Brunei Darussalam Laws.

The bankruptcy act was gazetted on the 1st of January 1957. The commencement in 1984 was then amended twice under Section 32 (Notification No. S 12/96, and S 52/00) of Chapter 67. The same chapter postulates sections namely Transfer of Functions of Minister of Law to Permanent Secretary of Prime Ministers Office [section 75(2)] S 37/99, with subsidiary legislation of Bankruptcy Rules [CAP. 67, 1/1984], Meeting of Creditors Rules, [CAP. 67, 1/1984], and Proof of Debts Rules [CAP. 67, 1/1984].

BANKRUPTCY ACT of 1984

Brunei law defines bankruptcy as the process where the debtor is publicly recognised as insolvent. The chapter identifies two types of insolvency namely voluntary insolvency and force insolvency.

Voluntary insolvency occurs when a debtor is unable to pay his debts. Under chapter 67, a debtor can apply for a Receiving Order (RO) to be filed against himself at the High Court with requirement of a Debtors Petition and a Declaration of Inability to Pay. Upon application of the Receiving Order, the insolvent debtor will also be required by law to complete a Statement of Affairs a list of all debts and income/assets, which will be

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

authorised by the Official Receivers Chambers. Deliberate omission or misstatement relating to the list will be rendered by law as an offence and is punishable by Court.

Forced Insolvency, on the other hand, is the insolvency filed by a creditor against a debtor where the debt owing to the petitioning creditor amounts to B$500 and above. The creditor may file the insolvency by applying under a Creditors petition for A Receiving Order (and subsequently an Adjudication Order). The Official Receiver will then call for a Creditors Meeting after the written request of the creditor. The Creditors Meeting is usually carried out at the same time of the Public Examination of the bankrupts affairs. Notifications of the meeting shall then be sent out to the creditors listed in the filed Statement of Affairs. Unless the creditor has filed a Proof of Debt, the Creditors Meeting shall not be allowed.

The Creditors Meeting has the following purpose 1) To consider and, if thought desirable accept the offer of composition of full settlement of debts; and 2) To pass an ordinary resolution to adjudge the debtor bankrupt.

It is practice that The Court appoints the Official Receiver to administer the bankruptcy institution which includes the selling of assets, the registration of creditors claims and the paying out of dividends to the creditors. The Official Receiver, being the person that handles the bankruptcy shall then take charge of the bankruptcy institutions property and assets. During the course, the bankruptcy institution must cooperate, in every way possible, with the Official Receiver and his deputies. As soon as the Official Receiver takes this role as the
MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

steward of the business, that is, after the Receiving Order (RO) or Adjudication Order (AO), the creditors are required to only carry out transactions with them. Hence, this puts some of the pressure off the insolvent party.

Under the Brunei Law Chapter 67, an insolvent person maintains several rights and at the same time, must abide by specific regulations and responsibilities, too. Unsecured creditors cannot take further action to recover debts; but they may lodge Proof of Debt with the Official Receiver. Creditors who hold security over an insolvents institutions assets can sell the assets and recover the money as a deduction form the assets selling price. Any proceeds from the sales that exceed the amount payable by the insolvent institution to the secured creditors shall then be paid to the Official Receiver. With the exception of the secured creditor with whom arrangements have been made to retain secured property, other creditors that attempt to recover from the insolvent party shall prove the debt at the Official Receivers Chambers. A creditor is also not prevented from claiming under a guarantee and recovering payment from the guarantor. For a party that has jointly signed a loan agreement with a bankrupt institution, that party shall still be liable for the total amount outstanding on all debts incurred in the joint loan.

In Brunei Darussalam, under the Chapter 67 a person who has filed for bankruptcy have the right not to disclose insolvency notifications to its future employers, unless circumstances require him to.

As for the Public Examination of an insolvent party, Chapter 67 of Brunei Laws states that the bankrupt has to attend the Official Receivers Chambers whenever required. This imposes
MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

that the Official Receiver has every right to investigate into the bankrupt institutions financial affairs, and the bankrupt institution is liable to answer any questions posed.

Other disabilities under the Bankruptcy Act ( CAP. 67 S 52/00] includes placing an obligation for the bankrupt to inform every person, whom he is obtaining credit (exceeding $100) from, that he is an undischarged insolvent person. Failure to provide this notification is an offense punishable by law, with imprisonment of up to 2 years. Under Chapter 67 of Brunei Laws, an insolvent individual may still operate a business. If trading under a name other than that under which is adjudged bankrupt, the Bankruptcy Acts requires that disclosure must be given to anyone who the insolvent person is obtaining credit from. It is an offence under the Companies Act for an insolvent businessman to play either a direct or indirect part in the management of a company without the sanction of The Court of The Official Receiver. The Brunei Bankruptcy Act [CAP 67 S 52/00] also stipulates the requirement of a bankrupt to inform in writing the Official Receiver of any change of address.

Among other offences, below are some of the most important ordinations under the Brunei Bankruptcy Act 1984. y Disposing of property before bankruptcy before bankruptcy with intent to defeat the creditors claims. y y y Failure to disclose assets. Deliberately obtaining credit in which payment initially cannot be met. Gambling and speculation which results in bankruptcy.

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

Incurring debts during bankruptcy for over $100 without disclosing bankruptcy notification.

Operating a business under an assumed name, without disclosing the bankrupts real name bankruptcy notification.

Below are the quotations for the filing fees in the Bankruptcy Registry of the High Court of Brunei Darussalam, with regards to the matters of Companies Act.

IN THE MATTER OF COMPANIES ACT Companies Act 1oth Schedule Table A (Pg 315) FILING OF WINDING UP PETITIONS

ITEM NO. 1 7

PARTICULARS

AMOUNT TOTAL

Fees for filing petition Fees for Affidavit

$50.00 Verifying $10.00

$50.00 $10.00

Petition 1 Fees for Amended Petition $16.00 $16.00

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

ITEM NO. 13 A

PARTICULARS

AMOUNT TOTAL

On Filing Notice of Motion

$80.00

$83.00 7A 7A 7A 13 13 A On filing Affidavit On taking an Affidavit On filing an exhibit On sealing an Order of Adjudication $2.00 $0.50 $0.50 $5.00 $5.00

On sealing an Order to rescind Receiving $5.00 Order

ITEM NO. 13

PARTICULARS

AMOUNT TOTAL

On filing a Bankruptcy Notice on Bankruptcy $5.00 Petition

$10.00

On filing a Request for Issue of Bankruptcy $5.00 Notice

7 5

On filing an Affidavit On taling an Affidavit

$2.00 $8.00

$10.00

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

3 (Cap.67) 5 (Ca.67)

On filing a Creditors Petition

$50.00

$68.00

On filing Affidavit of truth of Statement in $2.00 Petition

22 (a) 22 (b)

Attestation of Creditors Petition On taking Affidavit

$8.00 $8.00 $5.00

13 (Cap.67) On sealing the Receiving Order on Creditors $5.00 Petition 67 8 12 Conducting a search On filing Proof of Debts On sealing a Summon in Chambers $1.00 $1.00 $40.00

$1.00 $1.00 $40.00

SEARCH PERIOD

ITEM NO. Table A (1) Table (20)

PARTICULARS Conducting Bankruptcy Name Search for Registration of Deed

AMOUNT $1.00 of $1.00

DURATION 1 - 2 Weeks 1 - 2 Weeks

A Search

Assignment

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

DISCUSSION

Lately, Brunei Darussalam has been facing a high count in the number of bankruptcy cases. This may be attributed to the fact that anyone can file against a person who owes an amount as little as $750. In other countries, a person can only be declared as insolvent on the order of the court that he is unable to pay debts as substantial as $10000.

Legal sources also reasons out that the high number of bankruptcy cases can be attributed to Brunei Darussalams antiquated laws. Brunei Darussalams laws are quite lenient and the regulations and disabilities imposed to bankrupt individuals are characterized by tolerance. In other countries like Singapore and Malaysia, an insolvent persons activities are limited by strict rules. For instance, a bankrupt person may not be able to travel overseas without the permission of the Official Receiver. Abroad, a bankrupt person is not allowed to manage, neither directly nor indirectly, businesses or corporations. An insolvent individual is also not permitted to act as trustees or personal representatives without notifying the Official Receiver.

The Bankruptcy Act of Brunei Darussalam does not stipulate in its requirements monthly contributions from the insolvent individual to pay up his debts. Along with this, there are no defined statues in which a bankrupt individual may discharge himself, given that the payment of the debt has been settled.

Another flaw in the Brunei Law Chapter 67 is that enforcement around the country has been weak. Local Official Receivers hardly keep an eye on the code of conduct of a bankrupt individual. In countries abroad, drastic actions are taken against an insolvent person indulging
MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

in profuseness and lavish lifestyle. For example, Singapore enforces a fine of $10000, or possible imprisonment to any bankrupt person who lives beyond his means.

With all the arguments presented, Brunei Darussalam must realise that the bankruptcy code must be improved, and the enforcement with the courts added with rigour. A revised version of the bankruptcy law which is firmly rooted in the needs of a global economy must be enacted.

The amendments must ensure that when an individual/institution becomes financially insolvent, obligations are fairly maintained and met on a regular basis. This then seeks to protect the lawful rights of both creditors and debtors alike.

Furthermore, it would probably be wise to adopt stricter restructuring procedures based on administrative experiences of neighbouring countries. The restructuring may provide balance to the interest of stakeholders and will aid in the prevention of institutions in risk of bankruptcy. The restructuring must also be comprised of reasonable standards set for the courts approval.

The Bankruptcy Law must also be well coordinated with the Companies Law, Securities Law and the rest of the written enactments of the local legislative laws.

CONCLUSION

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

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In conclusion, the Bankruptcy Law enacted under Chapter 67 of the Brunei Law does provide basic rules and regulations for debtors, creditors. However, reinforcement of these rules and the amendment of the statutes is needed for a more efficient and understandable body of rules, and easily enforceable measures.

REFERENCES

1) Carr, C.J. & Kay, P.J. (1994). Employment Law (6th ed) 2) Abbott, K.R., Pendlebury, N. & Wardman, K. (2002). Business Law (7th ed) 3) Supplement to Government Gazette Part II: Employment Order 2009 (2009) 4) Stephen I, Bankruptcy Cases Piling Up In Courts , 14 September 2006, http://www.agc.gov.bn/index.php?option=com_content&view=article&id=105%3Alaws-ofbrunei-b&catid=54%3Ab&Itemid=77 5) http://www.judicial.gov.bn/index.php?option=com_content&task=view&id=88&Item id=186&limit=1&limitstart=1 6) http://www.judicial.gov.bn/index.php?option=com_content&task=view&id=88&Item id=186&limit=1&limitstart=0 7) http://www.judicial.gov.bn/index.php?option=com_content&task=view&id=88&Item id=186&limit=1&limitstart=1 8) http://www.agc.gov.bn/index.php?option=com_content&view=article&id=105%3Ala ws-of-brunei-b&catid=54%3Ab&Itemid=77 9) http://www.scribd.com/doc/29167106/Alphabetical-Table-of-Laws-of-Brunei

MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)

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MS 3254 Corporate Law Bankruptcy in Brunei Darussalam By Madison Sheena Nazareno Vejerano (08B1904)