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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.


Before furthering the discussion, we want to highlight the role and responsibility of Encik Zayed and Puan Hashimah as the Directors of Delima Enterprise Sdn. Bhd. 1. Duty to act bona fide in the best interests of the company This duty is the most basic of all duties. What is meant by bona fide and in the best interests of the company is that a director must at all times ensure that his actions are consistent with the well being of the companys. An example would be found in the case of Re W & M Roith Ltd [1967] 1 WLR 432 a director, Mr Roith, entered into a service contract with his company providing for pension to be given to his wife in the event of his death without taking into consideration as to whether the contract was for the benefit of the company. The object of the contract was considered not to be binding on the company as it did not benefit the company but Mrs Roith. The statutory expression for this principle obtains in Section 132(1) of the Companies Act 1965. 2. Duty to disclose all material information This duty is to avoid potential conflict of interest. In Aberdeen Railway Co v Blaikie Bros (18431860) All ER Rep 249 for example, the director involved was sitting on the boards of both Aberdeen Railway and Blaikie Bros and failed to disclose this when the two companies contracted with each other. This was found to be a failure to disclose material information. 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 non-disclosure. 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. 5. Duty to exercise reasonable care and skill

Lastly in this part of the series we consider the common law contribution to the realm of directors duties, the duty to exercise reasonable care and skill in the performance of one as a company director. This was first laid down by Romer J in the case of Re City Equitable Fire Insurance Co Ltd [1925] Ch 407. Romer J only laid down generally lax standards back then, for example, the standard that a directors skills need not be greater then his skill that may reasonably be epected from a person of his knowledge. I.e. if the director were trained as a lawyer, then the standard of care that would be expected from him would be that of a lawyer. If the director were just a sweeper, it would be a different matter. Romer J also held that there was no need for a director to attend ALL board meetings, provided he makes an effort. However these standards were held too lax. In subsequent cases such as AWA Ltd v Daniels (1992) 7 ACSR 759 and Dorchester Finance Co Ltd & Anor v Stebbing & Ors [1989] BCLC 498 standards were raised much higher.

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. PO are not pre-numbered 7. Weakness time attendance for employer

Hiring a Non Qualify People To Handle Companys Financial Matter. Delima Enterprise Sdn. Bhd conducting business relating to trading and supplying related product including manpower supplies to the oil and gas industries.. Since 2006, the company had been awarded with several engineering project and its cumulative revenue for 2004 and 2005 were nearly RM 1 million and RM 1.7 million. Furthermore, the company will secured a contract worth RM 750,000 in May 2006. We can see that huge transaction have been involved. We believe that it is not suitable for the company to hire Cik Amy who has no experience in handling this task. Refusal of Director (Encik Zayed) To Invest On Necessary Training Training is essential to the achievements of a business. Perhaps its most positive benefit is better employees. A company develops the potential of an employee, and part of the way a company encourages improvement is through training. Often, good training is just as important as a good benefits package for an employee. For employers, training allows them to locate a wider range of 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 RECOMMENDATION Appoinment of Encik Salam and Puan Balqis Improper accounting systems information and records Hiring a non qualify people to handle companys financial matter. Refusal of director (Encik Zayed) to Invest on necessary training Fail to comply with EPF Act 1991 Fail to comply with the rules of Separat Entity Concept