Tutorial2 2013
Tutorial 2
1. Nor Luc is a Malaysian and has a sole proprietorship in Singapore in the form of a retail shop. The shop is rented. He has a car registered in his name and he uses it for both business and private purposes. He also owns an expensive Rolex watch. He lives in a rented HDB house. He also has $1000 in his local bank account, which is in his name. Of late his business has not been doing well and he has run into huge debts. The total debts of the business amount to $170000.
(a) Advice the creditors as to some of the options open to them.
As Nor is a sole proprietor, creditors should sue Nor personally and not the sole proprietor, as is not a separate legal entity. Thus, they are able to sue Nor for debts which he would be liable for under contractual agreements with creditors.
As his debts are substantial at $170000, suing would probably make him bankrupt as the car and Rolex watch (his assets) would most likely not cover this amount. This would result in the dissolution of the sole proprietorship and he would have to reapply to the High Court or the official assignee to allow him to continue his business. He would have to find other means of earning money to repay creditors.
Creditors can also apply for a garnishee order if they are able to find out his local bank to seize the $1000 available in the account.
(b) If after all the legal avenues for redress have been exhausted (such as bankruptcy), assuming the creditors have not been fully repaid, is there anything else they can do at that stage? What’s the implication of your answer on a business?
After all legal avenues have been exhausted; the creditors may discuss a repayment plan with Nor so as to ensure that the creditors get back their cash. This can be in the form of Nor finding a full-time job where a percentage of his salary goes back to repaying creditors. In return, after fulfilling the entire payment, Nor gets discharged as a bankrupt.
Bad debt, write off the debt.
If it was a
1. Nor Luc is a Malaysian and has a sole proprietorship in Singapore in the form of a retail shop. The shop is rented. He has a car registered in his name and he uses it for both business and private purposes. He also owns an expensive Rolex watch. He lives in a rented HDB house. He also has $1000 in his local bank account, which is in his name. Of late his business has not been doing well and he has run into huge debts. The total debts of the business amount to $170000.
(a) Advice the creditors as to some of the options open to them.
As Nor is a sole proprietor, creditors should sue Nor personally and not the sole proprietor, as is not a separate legal entity. Thus, they are able to sue Nor for debts which he would be liable for under contractual agreements with creditors.
As his debts are substantial at $170000, suing would probably make him bankrupt as the car and Rolex watch (his assets) would most likely not cover this amount. This would result in the dissolution of the sole proprietorship and he would have to reapply to the High Court or the official assignee to allow him to continue his business. He would have to find other means of earning money to repay creditors.
Creditors can also apply for a garnishee order if they are able to find out his local bank to seize the $1000 available in the account.
(b) If after all the legal avenues for redress have been exhausted (such as bankruptcy), assuming the creditors have not been fully repaid, is there anything else they can do at that stage? What’s the implication of your answer on a business?
After all legal avenues have been exhausted; the creditors may discuss a repayment plan with Nor so as to ensure that the creditors get back their cash. This can be in the form of Nor finding a full-time job where a percentage of his salary goes back to repaying creditors. In return, after fulfilling the entire payment, Nor gets discharged as a bankrupt.
Bad debt, write off the debt.
If it was a