(a) Are there instances of fraud in relation to a corporate debtor in this economy?

 

Yes.

(b) If so, is it usual that instances of such fraud will be revealed when a corporate debtor is in financial difficulty or becomes insolvent?

 

Yes.

(c) What is the attitude that is normally taken to such fraud in this economy?

 

White collar crime is treated seriously by the Commercial Affairs Department, the division of the Ministry of Finance charged with investigating offences under the Companies Act and under the Securities Industry Act and insolvency administrators who uncover fraud in their work will almost certainly make a report.

Furthermore, where it is the company which has been defrauded, the insolvency administrator has an interest in pursuing such claims in order to swell the assets of the company available to its creditors. This is of course subject to the administrator having some means of funding the pursuit of such claims.

(d) Is it the case, for example, that 'soft' fraud may be overlooked (or not pursued) and 'hard' fraud may more likely be pursued in this economy?

 

There is no general policy of the prosecuting authorities to pursue "hard" fraud and overlook "soft" fraud. Indeed, there have been instances of prosecutions for "soft" fraud.

(e)If there have been instances of fraud:

(i) does the insolvency law (or other civil law) provide for possible recovery of the proceeds of (or damage caused by) the fraud;

 

Under section 340 of the Companies Act, if it appears in the liquidation of the company that the company has been guilty of fraudulent trading, the court can declare any person knowingly a party to that to be personally responsible for the debts of the company without limitation of liability.

(ii) does the criminal law provide for possible sanctions;

 

In addition to offences under the general criminal law of cheating and criminal breach of trust or misappropriation, there are specific offences under section 340(1) of the Companies Act of fraudulent trading and under section 406 of the Act of inducing a person to give credit to a company by fraud.

(iii) how effective is the application of these laws in practice?

 

The application is effective. The prosecuting authorities regularly prosecute such fraud and the courts are prepared to impose deterrent sentences to uphold commercial morality.

(f) Would it be common or usual that instances of fraud would:

(i) be largely ignored;

 

No.

(ii) settled by negotiation; or

 

No. In any event, any settlement would affect only the civil liability of the officers of the company and would not bind the prosecuting authorities.

(iii) pursued through either civil or criminal law sanctions?

 

It is possible that the claims would be pursued through both sanctions. However, the civil sanctions may be not be pursued because of the lack of funding