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Directors who cheat, beware
Mon, Dec 07, 2009
my paper
By Kenny Chee
DIRECTORS of companies that hoodwink customers and hope to get away with it, watch out.
The Consumers Association of Singapore (Case) is likely to put up a recommendation to amend consumer laws to hold the directors accountable for the unfair consumer practices by their companies.
If the recommendations are adopted, it means that consumers can still seek recourse from the directors even if their firms have closed down, or if they try to shirk responsibility for their staff's malpractices.
Unfair practices include making false claims on products sold, and pressuring a consumer to make a purchase by refusing to allow him to leave a shop.
Mr Seah Seng Choon, executive director of Case, told my paper that it plans to present its proposal to the Ministry of Trade and Industry as it has witnessed, in the past few years, 'instances of companies closing down and consumers having difficulties in recovering money as the directors went missing and were not directly liable'.
He also cited cases where consumers were left in the lurch after a firm closed down, only to have the same directors of the company opening another business later and offering more or less the same services that would mislead more consumers.
Just last month, the Wellness Village spa suddenly closed its branches at Pan Pacific Hotel and Pagoda Street, leaving more than 500 customers stranded. Some had paid between $550 and $6,000 for spa packages, The Straits Times reported last week.
Mr Seah said that, under the current company law, directors are generally not liable for the debts of the company, such as in circumstances where it runs into financial difficulties and closes down.
He added: 'This has resulted in directors and officers of companies escaping from their responsibilities as they give excuses that they are not involved in day-to-day operations and are thus not personally responsible for their companies' actions.'
Mr Seah said that the details of the recommendation are still being fine-tuned and Case is likely to raise the new proposal to hold directors culpable in the next review of the Consumer Protection (Fair Trading) Act, or put it up with other interim recommendations.
A date for the Act's next review has not yet been set.
Lawyer Amolat Singh, a managing partner of Amolat and Partners, said that there are two ways for consumers to seek recourse from company directors.
Consumers have to either show that the directors set up the company to commit fraud, or that they established the firm knowing that it will definitely fail. But Mr Singh noted it is very difficult to prove these acts.
Case's latest recommendation to protect consumers has to be balanced, he added.
He warned that by making company directors liable for their firms' practices, they could be less willing to take risks and be entrepreneurial.
'Who would want to set up a company, or take risks that could help the firm grow'' he said. 'Nobody would want to be a director.'
However, he suggested that Case's proposal could be limited to industries like timeshare.
Case received 1,881 cases against timeshare companies, including misleading claims, from January to September this year.
There were nearly 2,280 cases last year, up from nearly 200 cases in 2007.
Mr Seah has said that Case hopes its recommendation would help address unfair practices in the timeshare industry.
The latest amendments made to the Consumer Protection Act in April allow consumers to cancel their timeshare-related contracts within five days of signing.
The Private Education Act, passed in September, contains regulations similar to Case's recommendation.
Under this Act, managers of private schools face criminal charges if they cheat students of their fees, such as when the school closes suddenly.
Bank executive S. K. Sim, 26, feels that Case's new proposal would have sped up her claims against a spa company.
It took her two years, with help from Case, to make the firm's director give her a partial refund this year for a $14,000 beauty package she said she was pressured into buying.
'I wish the recommendation had been implemented before my case,' she said.
Mon, Dec 07, 2009
my paper
By Kenny Chee
DIRECTORS of companies that hoodwink customers and hope to get away with it, watch out.
The Consumers Association of Singapore (Case) is likely to put up a recommendation to amend consumer laws to hold the directors accountable for the unfair consumer practices by their companies.
If the recommendations are adopted, it means that consumers can still seek recourse from the directors even if their firms have closed down, or if they try to shirk responsibility for their staff's malpractices.
Unfair practices include making false claims on products sold, and pressuring a consumer to make a purchase by refusing to allow him to leave a shop.
Mr Seah Seng Choon, executive director of Case, told my paper that it plans to present its proposal to the Ministry of Trade and Industry as it has witnessed, in the past few years, 'instances of companies closing down and consumers having difficulties in recovering money as the directors went missing and were not directly liable'.
He also cited cases where consumers were left in the lurch after a firm closed down, only to have the same directors of the company opening another business later and offering more or less the same services that would mislead more consumers.
Just last month, the Wellness Village spa suddenly closed its branches at Pan Pacific Hotel and Pagoda Street, leaving more than 500 customers stranded. Some had paid between $550 and $6,000 for spa packages, The Straits Times reported last week.
Mr Seah said that, under the current company law, directors are generally not liable for the debts of the company, such as in circumstances where it runs into financial difficulties and closes down.
He added: 'This has resulted in directors and officers of companies escaping from their responsibilities as they give excuses that they are not involved in day-to-day operations and are thus not personally responsible for their companies' actions.'
Mr Seah said that the details of the recommendation are still being fine-tuned and Case is likely to raise the new proposal to hold directors culpable in the next review of the Consumer Protection (Fair Trading) Act, or put it up with other interim recommendations.
A date for the Act's next review has not yet been set.
Lawyer Amolat Singh, a managing partner of Amolat and Partners, said that there are two ways for consumers to seek recourse from company directors.
Consumers have to either show that the directors set up the company to commit fraud, or that they established the firm knowing that it will definitely fail. But Mr Singh noted it is very difficult to prove these acts.
Case's latest recommendation to protect consumers has to be balanced, he added.
He warned that by making company directors liable for their firms' practices, they could be less willing to take risks and be entrepreneurial.
'Who would want to set up a company, or take risks that could help the firm grow'' he said. 'Nobody would want to be a director.'
However, he suggested that Case's proposal could be limited to industries like timeshare.
Case received 1,881 cases against timeshare companies, including misleading claims, from January to September this year.
There were nearly 2,280 cases last year, up from nearly 200 cases in 2007.
Mr Seah has said that Case hopes its recommendation would help address unfair practices in the timeshare industry.
The latest amendments made to the Consumer Protection Act in April allow consumers to cancel their timeshare-related contracts within five days of signing.
The Private Education Act, passed in September, contains regulations similar to Case's recommendation.
Under this Act, managers of private schools face criminal charges if they cheat students of their fees, such as when the school closes suddenly.
Bank executive S. K. Sim, 26, feels that Case's new proposal would have sped up her claims against a spa company.
It took her two years, with help from Case, to make the firm's director give her a partial refund this year for a $14,000 beauty package she said she was pressured into buying.
'I wish the recommendation had been implemented before my case,' she said.
