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Unformatted text preview: CONFIDENTIAL LWIJUN 2015/LAW485 UNIVERSITI TEKNOLOGI MARA
FINAL EXAMINATION COURSE : CORPORATE LAW
COURSE CODE : LAW485 EXAMINATION : JUNE 2015
TIME : 3HOURS 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 2015ILAW485 QUESTION 1 a) It was not until the famous case of Salomon v Salomon Co Ltd (1897) AC 22 that the
full implications of the concept of separate legal entity were recognized. With the aid of the above case, explain the concept of separate legal personality.
(10 marks) b) Section 16(5) of Companies Act 1965 provides for the creation of a company as a
separate legal entity upon incorporation. However, in certain circumstances the law will
ignore the separate legal personality of the company and will lift the veil of incorporation to hold the members personally responsible for the actions of the
company. Explain the judicial exceptions to the separate legal entity doctrine.
(15marks) QUESTION 2 a) Lok Lok Sdn Bhd’s main business is supplying of fresh fish to hoteliers.The company
is looking for a piece of land to be developed into fish ponds. Buntal, a director of the
company, is asked to look for a piece of land suitable for this purpose. He conspires
with Gendot, who owns a piece of land, to sell the land to Lok Lok Sdn Bhd. for
RM250,000. The company has now discovered that Buntal received 40% of the price
paid for the purchase of the land. Advise Lok Lok Sdn Bhd.
(13 marks) b) Rashid is a director of Mummy Sdn Bhd (the company). He had approved certain
payments and signed cheques on behalf of the company without knowing exactly
what the money was for. The company has now discovered that the payments were
for services which were never rendered and the cheques had been used by the secretary for setting her personal debts. The company wishes to make Rashid liable
for the losses incurred. Advise Mummy Sdn Bhd.
(12 marks) QUESTION 3 a) Section 33(1) of the Companies Act provides:
“Subject to the provision of the Act, the Memorandum and Articles, when registered,
bind the company and its members to the same extent as if they respectively had been signed and sealed by each member and contained covenants on the part of
each member to observe all the provisions of the Memorandum and Articles”. © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 3 LWIJUN 2015/LAW485 In your own words explain the meaning of the above provision by referring to relevant cases.
(8 marks) b) If the articles contained a clause providing that any dispute between members and
the company management should be referred to arbitration, could a member insists this provision be enforced?
(8 marks) c) Would Miss Molek who works as a company secretary be able to enforce a clause in
the Article which states she should hold ofﬁce for ten years if she were removed
before the expiration of the ten years? (9 marks) QUESTION 4 Afdlin is a director of EcoAktif Sdn Bhd who holds 10% of the company’s shares. The other
90% of the shares is held in equal proportions by two other directors namely Aci and Abu. At a company meeting, the following resolutions were passed despite intense objections by
Afdlin: a) A resolution togdivert a contract which was initially awarded to EcoAktif Sdn Bhd to its
subsidiary company. The members of this subsidiary company are Aci and Abu. b) A resolution to discontinue legal proceedings against Diamond Enterprise for breach of
agreement with EcoAktif Sdn Bhd. c) A resolution to ratify the negligent act of Abu in selling a piece of land belonging to
EcoAktif Sdn Bhd below the market price. Advise Afdlin whether he may institute an action personally against the directors for the
breach of their duties or alternatively institute an action in the name of the company against them.
(25 marks) QUESTION 5 In May 2013, Riafood Ltd, a company engaged in the manufacture of snack foods, borrowed
RM50,000 from Nash, the brother of one of the directors, which loan was agreed expressly
to be repayable on demand. In August 2013 the company created a floating charge over the
company’s assets and undertaking in favour of the Duitr Bank to secure the company’s
overdraft up to a maximum of RM100 000. The floating charge which was duly registered. lt
prohibited the company from granting a further floating charge over all or any of its assets or
undertaking without first giving notice to Duit Bank. It further provide that the granting of any
such floating charge entitled the bank to give notice to Riafood which notice would crystallise
the bank's charge. to Hak Cipta Universiti Teknologi MARA CONFIDENTIAL CONFIDENTIAL 4 LWIJUN 2015/LAW485 In December 2013, the company borrowed RM60,000 from Toto which loan was secured by
a fixed charge over the company’s factory. The charge was duly registered. In January 2014,
Toto threatened to recall his loan unless it was secured by a fixed charge.The company repaid the loan and Toto then lent the same amount of money to the company; the loan was
secured by floating charge. On June 2015 , a petition to wind up the company was presented and a liquidator has been
appointed. Advise the liquidator as to the priority of repayment to the respective creditors of Riafood
Sdn Bhd. (25 marks) QUESTION 6 Auditor can only be liable if there is foreseeability of harm or loss; if a ‘special relationship’
exists; and whether it is just and reasonable to impose a duty on them. This case emphasized that auditors owe a duty of care if they knew the accounts or any
statements they made would be communicated to the investor as an individual or a member
of an identifiable class.lt must be in connection with a particular transaction and the investor
would very likely rely on them for the purpose of deciding whether or not to enter that
transaction. As per Caparo lindustries plc v Dickman  2 AC 605 Discuss (25 marks)
a) Jojo, Juju and Jiji are the directors of Famous Sdn Bhd.They own all its shares,The company is starting to make loses and owes RM65,000 to its creditors.Jojo,Juju and
Jiji are keen to put the company into liquidation because they feel unable 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 to wind up the company
and the procedure required.
(15 marks) b) Distinguish between members voluntary winding up creditors’ voluntary winding up
(10 marks) END OF QUESTION PAPER © Hak Cipta Universiti Teknologi MARA CONFIDENTIAL ...
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