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UNlVERSlTl TEKNOLOGI MARA FINAL EXAMINATION

COURSE

: MALAYSIAN CORPORATE LAW : LAW485 : 29 MARCH 2005 :


:

COURSE CODE
DATE

TIME
SEMESTER

3 HOURS (9.00 A.M. 12.00 P.M.)


NOVEMBER 2004 APRIL 2005

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Answer FOUR (4) quest!

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This examination paper consists of 4 prinfed pages


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QUESTION I a) 'The company is at l a w a different person altogether from the subscribers; and though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them." Per Lord Macnaghten in Salomon v. Salomon & Co Ltd [I8971 A.C. 22, H.L. With the aid of the above case, explain the statement. (30 marks) Consider the legal consequences that result from the incorporation of a company.

b)

(70 marks)
QUESTION 2 a)

A company can neither enforce nor be bound by a contract which was made on its behalf by any person before the company itself had been formed.
Consider if the above statement represents the correct position of the law. Support your answer with relevant statutory provisions and decided cases.

(50 marks)
b) Upon incorporation a promoter stands in a fiduciary position towards the company which begins when the promotion itself began and ends after the company is formed. With reference to the above statement and with the aid of decided cases, explain the nature of the fiduciary duties owed by promoters to the company they form and briefly consider the remedies for breach of such duties. (50 marks)
QUESTION 3

The memorandum of JKL Bhd states that its sole object is the manufacture of chocolates. In November 2003, JKL Bhd decided to manufacture motor spare parts as a new business venture. It borrowed RM5 million from Super Bank for this purpose in January 2004. Part of this money was used to purchase a factory lot in Puchong with a view of setting up a factory to manufacture the spare parts. Upon completion of the sale, the legal ownership to the said lot was transferred to JKL Bhd in October 2004. JKL Bhd also entered into a contract with XYZ Bhd for the supply and installation of manufacturing equipment which is to take place in -April2005. To date JKL Bhd has not paid any part of the loan or the interest due on the loan. Last week, Super Bank threatened to commence legal proceedings against JKL Bhd on this matter, 'JKL Bhd has told Super Bank that the loan was invalid because it contravened certain principles of company law.
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Karnari, minority shareholder in JKL Bhd is troubled by the new business venture of the company and is determined to stop the company from proceeding with it. Advise Super Bank and Kamari on the legal position of the abovementioned transactions and the steps, if any, that they can take with respect to them.

(I 00 marks)
QUESTION 4

a)

The articles of XYZ Sdn Bhd provide that the directors may borrow on behalf of the company such sum not exceeding RM100,OOO at any one time without the consent of the company in general meeting, and that they may borrow further sums with such consent. At the request of the managing director of XYZ Sdn Bhd, John gave a loan of RM120,OOO to the company last month. XYZ Sdn Bhd now refuses to repay the loan on the ground that no authority for the transaction was given by the company in general meeting.

Advise John. (50 marks) b) ABC Sdn Bhd is a property development company set up by Peter, Paul and Mary. Peter acted as the managing director of the company although he was never appointed as such. The other directors allowed him to do so. Six months ago, Peter appointed architects Fred & Partners to carry out work for the company. When Fred & Partners sought payment for their services upon completion of their work, they were told that the company is not liable to pay as Peter had no authority to bind the company. Advise Fred & Partners as to their rights against ABC Sdn Bhd in respect of the said contract. (50 marks)

a)

State the circumstances when a floating charge crystallizes and becomes a fixed charge. (50 marks) RST Bhd,.created a floating charge (duly registered) in January 2002 over the whole of its assets and undertaking in favour of Manee Bank for a loan of RM500,OOO. The charge prohibited RST Bhd. from creating any other charge ranking in priority or in pari passu with the floating charge. Recently, RST Bhd. suffered a serious financial setback. To alleviate the problem the company was facing, the board decided to borrow RM 300,000 from Eveready Finance and executed a fixed charge over its office premises in the latter's favour. The charge was duly registered with the Companies Commission. RST Bhd. went into liquidation in February 2005.

b)

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CONFIDENTIAL You are required to advise the liquidator as to the order of priority of the: abovementioned charges. (f00 marks) QUESTION 6 a) Arsene, Alex and Rafael are the directors of PQR Sdn Bhd, a company specialising in the making of football equipment. Last year Arsene was requested by Alex and Rafael to negotiate a contract on behalf of PQR Sdn Bhd with a company in Bangkok for the setting up of a manufacturing plant there. The Bangkok company, however, was not prepared to grant such a contract to PQR Sdn Bhd and Arsene promptly reported this to the board of PQR upon his return. Two months later he left the company. Alex and Rafael have now discovered that since leaving the company he managed to secure the contract with the Bangkok company and has made very high profits. They seek your advice on whether PQR Sdn Bhd can successfully sue Arsene for the profit that he has made from the contract with the Bangkok Company. Advise Alex and Rafael. (70 marks) b) Alex and Rafael atso wish to appoint a person to replace Arsene as a director of the company. They are contemplating appointing Jose, a Portuguese , aged 75. They wish to know whether, and if so, how, such an appointment may be effected. (30 marks)

QUESTION 7 The articles of association of MNO Sdn Bhd states, infer alia : Clause 99 : "All members of the company are entitled to purchase the manufactured goods of the company at a discount of 30%". Clause 100 : "Darbster shall be appointed as the arbitrator in respect of any dispute arising between the company and its shareholders". Despite the above clauses the company has not appointed Darbster as arbitrator. In addition it refuses to sell its products to members at any discount at all, in disregard of the company's articles. Darbster and Ringgam, a member of the company, wish to knowwhether they can successfully sue the company to enforce the company's compliance with the articles of association. Advise Darbster and Ringgarn.
(50 marks)
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b)

'Explain briefly the provision in the Companies Act which provide for the alteration of the companies' articles. Discuss, with the aid of case law, the common law.principle which governs the alteration of articles. (50 marks) END OF QUESTION PAPER CONFIDENTIAL

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