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Unformatted text preview: CONFIDENTIAL LWIJUN 2016/LAW485 UNIVERSITI TEKNOLOGI MARA
FINAL EXAMINATION COURSE : CORPORATE LAW
COURSE CODE : LAW485 EXAMINATION ' : JUNE 2016
TIME : 3 HOURS INSTRUCTIONS TO CANDIDATES 1. This question paper consists of SEVEN (7) questions. 2. Answer any FOUR (4) of the questions in the Answer Booklet. Start each answer on a new
page. 3. Do not bring any material into the examination room unless permission is given by the
invigilator. 4. Please check to make sure that this examination pack consists of : i) the Question Paper
ii) an Answer Booklet -— provided by the Faculty 5. Answer ALL questions in English. _____——______—__—————————— DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO $0 This examination paper consists of 4 printed pages
© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 2 LWIJUN 2016/LAW485 QUESTION 1 The rule established in the case- of Salomon v Salomon & Co  AC 22 requires a
company to be fully liable for all of its debts and no burden shall be placed upon its
managers, directors or shareholders for such debts. This is due to the application of the
corporate veil doctrine which recognizes the company as having its own entity that is distinct
from all other entities therein. With reference to the Companies Act 1965 and case law, explain the above statement.
(25 marks) QUESTION 2 a) Mukhriz was appointed as a managing director of a construction company namely
Maha-Karya Sdn Bhd. According to the company's articles, Mukhriz shall hold the
office for a term of not less than 5 years and no dismissal shall be exercised against
him. In addition to that, the articles provided for a revision of his salary every 2
years. Recently, Mukhriz received a letter of termination from the company despite
the fact that his tenure as director as provided in the articles had yet to expire.
Mukhriz was so upset with the company’s decision and wanted to challenge it. He
also claimed that the company’s failure to revise his salary in accordance with the
term as provided in the articles amounted to a breach of contract. Advise Mukhriz as to whether he could enforce the above clauses against Maha-
Karya Sdn Bhd. (15 marks)
b) Briefly explain the conditions laid down by law as to a valid alteration of the articles of
association of a company.
a) Wanda, a chartered accountant for ' 15 years, was appointed as a director of Setiakawan Sdn Bhd, an established investment company. Two years ago, upon
Wanda’s advice, the company invested a large sum of its capital on a highly risky
business. To date, the company has never gained any profit but instead has incurred
substantial losses when more capital had to be injected into that risky business in
order to stabilize it. The company feels that the business judgment made on the
advice of Wanda is not a good one and blames Wanda for not displaying her duty of
skill, care and diligence as required of every company’s director. Advise Wanda as to whether there is any breach of the duty to Setiakawan Sdn Bhd
under the Companies Act 1965. (15 marks) b) With the aid of case law, explain the requirement of acting in good faith imposed
upon a director towards a company. (10 marks) © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 3 LWIJUN 2016ILAW485 QUESTION 4 Sinar Suria Sdn Bhd ($888) was incorporated in December 2014. During its first Annual
General Meeting (AGM) which was held in March 2016, Jamal and his wife, Siti, who are
members of 8888 did not attend the meeting. They claimed that they did not receive any
notice whatsoever from the company with regards to the meeting. When they sought
explanation from the company for failure to send the notices, the company told them that
there was an accidental omission. At the meeting, there were two resolutions passed by
$883 in relation to the alteration of the object clause and the appointment of an auditor and
both resolutions were passed by a majority of 70%. Jamal and Siti seek your advice on the
following matters: a) The time of which the company should convene its first Annual General Meeting
according to the Companies Act 1965. (8 marks)
b) The validity of the resolutions passed by the company. (8 marks)
c) The legal effect of not sending notice of the meeting to its members. (9 marks)
QUESTION 5 PS Setia Sdn Bhd is a company formed by three shareholders and directors namely Abu,
Bakar and Jaafar. The company’s shares are divided amongst them in which Bakar and
Jaafar hold 40% each and the remainder is held by Abu. Recently, at the company’s
meeting, a proposal was put forward by Bakar to alter the company’s object clause.
Although Abu had vehemently objected to this, the resolution was finally passed by the
majority votes of Bakar and Jaafar. Abu was upset with the resolution and decided to challenge it at a court of law. Upon
hearing this, Bakar and Jaafar immediately called a meeting and several resolutions as follows were passed: i) To insert into the company’s articles a clause that prohibits any member from
challenging any decision made by the company at a meeting; ii) To insert in the company’s articles a clause that provides for compulsory forfeiture of
the member’s shares, who acts in contravention of the above clause. The above clauses were later used against Abu after he brought the matter to court. Abu
comes to you for advice as to whether he has any cause of action against Bakar and Jaafar for the resolutions passed without his consent. Advise Abu.
(25 marks) © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 4 LWIJUN 2016ILAW485 QUESTION 6 Seri Nikmat Sdn Bhd (SNSB) is a manufacturer of modern furniture. The financial statement
of SNSB reported that the company was in a stagnant state of business for almost four years
due to the lack of working capital. To overcome the problem, SNSB decided to ask for loans
from several creditors. The following are the creditors who had advanced loans to SNSB. a) On 1 July, Syarikat Tolong—Menolong advanced a loan worth RM100,000 to SNSB.
The loan was secured by a floating charge created over all of its movable or
immovable assets. The document creating the charge, amongst others contains a
clause that prohibits SNSB from creating a subsequent charge that may rank in pari
passu with or in priority to this charge without the consent of the lender. Any
contravention of this clause may lead to the occurrence of the crystallization process.
The charge was duly registered. b) On 1 August, Bumi Bank granted a loan worth RM150,000. The SNSB agreed to
give a security in the form of a fixed charge to Bumi Bank for the said loan. The fixed
charge was created over all of its immovable assets without the knowledge of
Syarikat Tolong-Menolong. The charge was duly registered. 0) On 15 September, SNSB borrowed from Suhaimi a sum of RM50,000 and a security
in the form of a ﬂoating charge was created over all of its moveable assets.
Unfortunately, the charge was not registered. Due to economic downturn, SNSB is unable to proceed with the business and decided to close it down. Discuss the priority of payment of debts by the company to the above
(25 marks) QUESTION 7 a) Jojo, Juju and Jiji are the directors of Famous Sdn Bhd. They own all of its shares.
The company is starting to incur losses and owes RM65,000 to its creditors. Jojo,
Juju and Jiji are keen to put the company into liquidation because they feel that they
will not be able to make the company profitable again. The valuation of the
company’s premises and fixed assets prepared two weeks ago suggest that
RM90,000 would be realized on a sale. Advise them on the easiest way to achieve their intention and the procedure required.
b) Distinguish between members voluntary winding up and creditors’ voluntary winding
(10 marks) END OF QUESTION PAPER © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL ...
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