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Duty To Act Bona Fide in The Best Interests of The Company
Duty To Act Bona Fide in The Best Interests of The Company
Delima Enterprise was founded in1981 by En Zayed. The main business are trading and
supplying related products including manpower supplies to the oil and gas industries. The
enterprise was incorporated in 2004 as Delima Enterprise Sdn Bhd, with En. Zayed and his wife
Puan Hashimah, as the controlling directors and two principal shareholders. The company
activities had expanded into provision of engineering services as part of their business
diversification and expansions plan. However, due to lack of knowledge about corporate
administration, there are issues arose that need to be settle by them.
Similarly in Guinness plc v Saunders [1990] 2 AC 663, the company had as its consultant one of
its directors, and this was only later realised by the rest of the board, and so was held to be nondisclosure. The duty to disclose finds expression in Section 131 of the Companies Act 1965.
Section 132(2) of the Act as amended by the Companies (Amendment) Act 2007 also prohibits
generally competing with the company.
3. Duty to avoid conflict of interest
Conflict of interest can be described as one situation whereby one profits by ones position as a
director at the companys expense. In Cook v Deeks [1916] 1 AC 554 three out of four directors
in a railway company diverted contract in which the company was interested to another
company formed by them. The contract was held belonging to the company and the directors
were not entitled to expropriate it to make a present to themselves. This duty is so strict it applies
even when the company by some reason is incapable of performing the contract, for example,
where the offeror dislikes most of the board, but likes one of the directors and offers the contract
personally to him, as in the case of Industrial Development Consultants Ltd v Cooley [1972] 1
WLR 443. The statutory expression for this rule can be found in Section 131(7B) of the
Companies Act 1965 which was added by the Companies (Amendment) Act 2007, which makes
voidable all contracts done in conflict of interest at the option of the company involved. The
newly added Section 131A also makes it impossible for the interested director to vote on the
issue.
4. Duty to retain discretion
As company director, what powers invested within one to do cannot generally be subdelegated.
This is not a rule followed too strictly, however, as then the directors would not be capable of
taking more important, abstract decisions at the board level as held in Dovey v Cory [1901] AC
477. In Re Brazilian Rubber Plantations & Estates Ltd [1911] 1 Ch 425 it was held that a
director is justified in trusting officers of the company to perform all duties that, having regard to
the exigencies of business, may properly be left to such officers. The board of directors is also
not prevented from relying on information provided by others in the dispensation of their duties,
as stated in Section 132(1C) of the Companies Act 1965.
DIRECTOR MISSCONDUCT
Base on the explanation above, we have found out that there are misconduct that have
unintentionally done by both the directors. Among them are:
Appoinment of Encik Salam and Puan Balqis
From the case, we know that both Encik Salam and Puan Balqis were the family members of the
directors. Both only have have secondary school background but still, they are appoint to be
Operation Manager (Encik Salam) and Human Resource Manager (Puan Balqis). The posts that
hold by them are actually a managerial level, that can only be handled by person who have
higher education level such as degree onwards. We believe that the appointment is been carry out
because Encik Salam and Puan Balqis is related to the directors.
Improper Accounting Systems Information and Records
It is the responsible of the directors to make sure that all accounting matters are properly
handled. We can see here that there are defect in the companys accounting procedure and
administration control such as:
1. The MYOB programme was not integrated
2. Sales invoices are manually produced
3. Sales invoiced are not pre numbered
4. Weakness in monitoring their debtors, resulted in poor cash flow
5. PO are manually prepared
6.
people with the kind of outlook that matches the company mission statement. The right kind of
perspective is a hard thing to cultivate, whereas workplace specific proficiencies are easier to
nature. The other advantage employers should remember about training is it offers them an
improved retention rate. Employees are more loyal to companies that value their growth and
want to cultivate it, and thusly provide a better performance and decrease the rollover rate at any
company, no matter how small or large. If an employee thinks a company values him or her, that
sentiment will go into whatever the employee is designing, selling, manufacturing and others.
Fail To Comply With EPF Act 1991
The EPF contribution for contract workers were not deducted and remitted to EPF. As prescribed
in the EPF Act 1991, all employers and employees are required to contribute to the fund at the
rate of 11% and 12% respectively of the employees monthly wages.
Fail to Comply With The Rules of Separat Entity Concept
Under Separate Entity Concept, Delima Enterprise Sdn. Bhd. is treated in its own capacity, but it
is not a human being, it is an artificial being, therefore, it has to be managed by people in
different capacities such as owners, directors, managers or employees, those are supposed to
work ethically and represent it in their vested authorities. Corporation seal is used for corporation
signature on important and legal documents. We can see that the issue here arise when Encik
Zayed and Puan Hashimah charged their personal vehicle expenses amounting RM 50,150 to the
company during 2005.
ISSUES
Appoinment of Encik Salam and Puan Balqis
Improper accounting systems information and
records
Hiring a non qualify people to handle
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