LAW 346

ASSIGNMENT
Prepared by :
Nur Syazana binti Khairul Nizam 2012446402
Nasyidah binti Mohd Fauzi 2012636958
Nurul Amalina binti sman 2012696958
Azrul !isham bin Azahar 2012601918
Prepared for :
Madam Norintan binti "ahab
Class :
#A$1105%
Marks :

50
Ques!o" # $%& 'arks( :
%is&uss all th' r'stri&tions im(os'd by la) on th' (o)'r o* a &om(any to alt'r its arti&l' o*
asso&iations+
A"s)er :
I"rodu*!o"
,h' arti&l's o* a &om(any ar' th' r'-ulations *or its int'rnal mana-'m'nt. &orr's(ondin- to th'
(artn'rshi( d''d in a (artn'rshi(+ ,h' mana-'m'nt o* '/'ry &om(any is -o/'rn'd by arti&l's.
thou-h not '/'ry &om(any n''d r'-ist'r arti&l's )ith th' r'-istrar+ Any alt'ration or addition to
th' arti&l's is as /alid as i* ori-inally &ontain'd in th' arti&l's 0 s 31122+ 3ro/isions in th'
m'morandum may r'stri&t th' ability o* th' &om(any to alt'r th' arti&l's by im(osin- som'
r'stri&tions+
La)
,h'r' ar' som' r'stri&tions on &om(any to alt'r its Arti&l's o* Asso&iation 0
1+ Any alt'ration must not b' &ontrary to any o* th' (ro/isions in th' $om(ani's A&t 1965
4n -'n'ral t'rms. any (ro/ision in th' arti&l's )hi&h is in&onsist'nt )ith $A 1965 )ill b' in/alid
and this a((li's to alt'r'd arti&l's as mu&h as to ori-inal arti&l's
Mor' s('&ially. $A 1965. s 33132. (ro/id's that not )ithstandin- any (ro/ision in th'
m'morandum or arti&l's. no shar'hold'r &an b' bound by an alt'ration to th' arti&l's mad' a*t'r
h' b'&am' a m'mb'r in so *ar as th' alt'ration 5r'6uir's him to ta7' or subs&rib' *or mor' shar's
than th' numb'r h'ld by him at th' dat' on )hi&h alt'ration is mad'. or in any )ay in&r'as's his
liability as at that dat' to &ontribut' to th' &om(any8s shar' &a(ital or oth'r)is' to (ay mon'y to
th' &om(any8+ ,his s'&tion is to (rot'&t m'mb'rs *rom ha/in- th'ir *inan&ial obli-ations to th'
&om(any *or&ibly in&r'as'd. and it is th'r'*or' sub9'&t to (ro/iso )hi&h allo)s any m'mb'r to
a-r'' in )ritin-. 'ith'r b'*or' or a*t'r th' alt'ration is mad'. to b' bound by th' alt'ration
1
+
"h'r' th' &ourt has mad' any ord'r on an a((li&ation by diss'nti'nt m'mb'rs or &r'ditors o*
a &om(any and th' ord'r r'6uir's th' &om(any to ma7' any. or any s('&i*i'd. alt'ration in th'
1
S''. A 3ra&ti&al A((roa&h to $om(any :a). 14
th
+'d2. by St'(h'n "+ Mayson. %'r'7 Fr'n&h ; $hristo(h'r <yan. (+=3
arti&l's. th'n. not)ithstandin- anythin- in th' $A. th' &om(any do's not ha/' (o)'r to ma7' any
alt'ration in br'a&h o* that r'6uir'm'nt )ithout th' &ourt8s l'a/'
2
+
A &om(any )hi&h omits th' )ord 5limit'd8 *rom its nam' by /irtu' o* an old li&'ns' &ommits an
o**'n&' i* it alt'rs its arti&l's in su&h a )ay that th'y no lon-'r &on*orm )ith th' r'6uir'm'nts o*
$A 1965+
2+ Any alt'ration must also b' in lin' )ith th' M'morandum o* Asso&iations
,h' (o)'r to alt'r th' arti&l's -i/'n in s 31112 is '>(r'ssly stat'd to b' sub9'&t to any &onditions
in th' &om(any8s M'morandum o* Asso&iation+ ,hus. i* th' m'morandum (rohibits th' alt'ration
o* s('&i*i'd arti&l's. th's' arti&l's ar' unalt'rabl'+ A (ro/ision in th' arti&l's o* asso&iation
(rohibitin- alt'ration o* th' arti&l's )ould b' in'**'&ti/' as a &om(any al)ays has an inh'r'nt
ri-ht to alt'r its arti&l's+ ,h' r'lat'd &as' is Peters American Delicacy Co Ltd v Heath
3
0
+a*
,h'r' )as a dis(ut' b't)''n th' o)n'rs o* (artly (aid shar's on th' on' hand and th'
o)n'rs o* *ully (aid shar's )ho had th' ma9ority o* /ot's on th' oth'r+ ,h' &om(any8s
&onstitution (ro/id'd that i* bonus shar's )'r' issu'd. all shar'hold'rs )'r' 'ntitl'd to
r'&'i/' thos' shar's in (ro(ortion to th' numb'r o* shar's h'ld by th'm. r'-ardl'ss o*
)h'th'r th'ir shar's )'r' *ully or (artly (aid+ ,h' &onstitution )as alt'r'd so that
shar'hold'rs &ould r'&'i/' a bonus issu' only in a&&ordan&' )ith th' amount (aid u( on
th'm+ ,his m'ant that (artly (aid shar'hold'rs )ould r'&'i/' *')'r bonus shar's than
ordinary shar'hold'rs+
,eld
,h' !i-h $ourt o* Australia '>(r'ss'd r's'r/ations about th' b'n'*it o* th' &om(any as a
)hol' t'st *or d't'rminin- )h'th'r or not an alt'ration )as /alid+ ,h' !i-h $ourt r'*us'd to
in/alidat' th' d'&ision o* th' ma9ority shar'hold'rs to alt'r th' &onstitution+ ?/'n thou-h th'
alt'ration ad/'rs'ly a**'&t'd th' (artly (aid shar'hold'rs. th'r' )as no '/id'n&' o*
o((r'ssion or that th' ma9ority a&t'd un*airly+ :atham $# )as o* th' o(inion that m'r'ly
b'&aus' an alt'ration (r'9udi&ially a**'&t'd th' ri-hts o* som' shar'hold'rs. this did not m'an
2
4bid. (+=3
3
S''. 3't'rs8 Am'ri&an %'li&a&y $o :td / !'ath 119392 61 $:< 45=. 4=9
that it )as not *or th' b'n'*it o* th' &om(any as a )hol'+ "h'r' th' alt'ration a**'&t'd th'
r'lati/' ri-hts o* di**'r'nt &lass's o* shar'hold'rs it )ould b' r'-ard'd as /alid unl'ss it )as
(ass'd *raudul'ntly. o((r'ssi/'ly or )as so '>tra/a-ant that no r'asonabl' ('rson &ould
b'li'/' it )as *or th' b'n'*it o* th' &om(any+
Similarly. a &ontra&t not to alt'r th' arti&l's is in'**'&ti/' as a &om(any &annot &ontra&tually
d'(ri/' its'l* o* th' ri-ht to am'nd its arti&l's
4
+ ,h' r'lat'd &as' is Punt v Symons & Co Ltd
5
0
+a*
,h' &om(any )hi&h is to a&6uir' and &arry on a *urnitur' busin'ss th'n &arri'd on by Mr @@
Symonds+ ,h' arti&l's a((oint'd him as th' -o/'rnin- dir'&tor )ith /'ry *ull (o)'rs o*
mana-'m'nt and also -a/' him th' ri-ht to a((oint and r'mo/' dir'&tors+ 4n th' '/'nt o* his
d'ath his trust'' )'r' -i/'n th' sam' (o)'rs+ Furth'rmor'. th' a-r''m'nt b't)''n Mr @@
Symonds and th' &om(any *or th' sal' o* th' busin'ss (ro/id'd that th' &om(any )ill not do
anythin- to alt'r th' arti&l's+ A*t'r his d'ath dis(ut's aros' b't)''n Symonds8 trust''s and
th' oth'r t)o dir'&tors+ A*t'r issuin- additional shar's to th'ir su((ort'rs. a s('&ial
r'solution )as (ass'd alt'rin- th' r'l'/ant arti&l's so as to d'(ri/' th' trust''s o* th'ir
mana-'m'nt (o)'rs+ ,h' trust''s sou-ht an in9un&tion (rohibitin- th' &om(any and its dir'&tors
*rom holdin- an '>traordinary -'n'ral m''tin- to &on*irm th' alt'ration+
,eld
,h' &om(any &ould not &onta&t its'l* out o* its statutory ri-ht to alt'r its arti&l's 'ith'r by an
a-r''m'nt insid' th' arti&l's or in an a-r''m'nt )hi&h is ind'('nd'nt o* th' arti&l's+ ,h'
in9un&tion )as -rant'd but on th' -round that th' dir'&tors had not issu'd th' additional
shar's *or th' b'n'*it o* th' &om(any but to s'&ur' th' n'&'ssary /otin- ma9ority+
!o)'/'r. th'r' is nothin- to sto( th' m'mb'rs *rom a-r''in- amon- th'ms'l/'s ho) th'y
)ill '>'r&is' th'ir /otin- ri-hts on a r'solution to am'nd th' arti&l's+ Su&h a shar'hold'rs8
a-r''m'nt is /alid
6
+ ,h' r'lat'd &as' is Russell v Northern Ban Develo!ment Cor!oration
"
0
+a*
4
S''. $om(any :a). 12
nd
+'d2. by "alt'r "oon. (+131
5
S''. 3unt / Symons ; $o :td A1903B $h 506
6
S''. $om(any :a). 12
nd
+'d2. by "alt'r "oon. (+131
=
S''. <uss'l / North'rn Can7 %'/'lo(m'nt $or(oration A1992B C$:$ 1016. 1021
,yron' Cri&7 :td and its *our shar'hold'rs had 'nt'r'd into a shar'hold'rs8 a-r''m'nt that
(ro/id'd that no *urth'r shar' &a(ital shall b' &r'at'd or issu'd in th' &om(any or th' ri-hts
atta&hin- to th' shar's alr'ady in issu' in any )ay alt'r'd+++)ithout th' )ritt'n &ons'nt o*
'a&h o* th' (arti's h'r'to+ ,h' board o* dir'&tors -a/' noti&' to th' shar'hold'rs o* an
'>traordinary -'n'ral m''tin- to b' h'ld at )hi&h a r'solution to in&r'as' th' shar' &a(ital
)as to b' &onsid'r'd+ n' o* th' shar'hold'rs. <uss'll. sou-ht an in9un&tion r'strainin- th'
oth'r shar'hold'rs *rom /otin- u(on th' r'solution+
,eld
,h' a(('al )as allo)'d and a d'&laration )as -rant'd that &laus' )as /alid+ "hil' a&&'(tin-
th' (rin&i(l' that 5a &om(any &annot *or-o its ri-ht to alt'r its arti&l's8. an a-r''m'nt outsid'
th' arti&l's b't)''n shar'hold'rs as to ho) th'y )ill '>'r&is' th'ir /otin- ri-hts on a
r'solution to alt'r th' arti&l's is not n'&'ssarily in/alid+ !'r'. th' &om(any8s und'rta7in-
)as un'n*or&'abl'. but not that o* th' shar'hold'rs+
Furth'rmor'. i* th' m'morandum (ro/id's that hold'rs o* (r'*'r'n&' shar's should ha/' a
(r'*'r'ntial ri-ht to r'(aym'nt o* th'ir &a(ital in )indin-Du( 1)hi&h th' &ourts &an &onstru' as
m'anin- that th'y ha/' no ri-ht to (arti&i(at' in sur(lus ass'ts in a )indin-Du(2. and th' arti&l's
ar' alt'r'd to (ro/id' that in )indin-Du( th' sur(lus ass'ts should b' di/id'd amon- all th'
m'mb'rs in (ro(ortion to th' &a(ital (aid u( on th'ir shar's. both (r'*'r'n&' and ordinary. th'
alt'ration )ould b' no '**'&t
8
+
!o)'/'r. arti&l's &an '**'&ti/'ly b' r'nd'r'd unalt'rabl' sin&' any (ro/ision &ontain'd in
th' m'morandum )hi&h &ould ha/' b''n &ontain'd in th' arti&l's &an b' mad' unalt'rabl' by th'
a-r''m'nt o* th' shar'hold'rs. th' m'morandum may not
9
+ ,h' r'lat'd &as' is Cane v #ones
$%
0
+a*
A &om(any in&or(orat'd by t)o broth'rs 3'r&y and !arold #on's+ ,h' shar's )'r' di/id'd
'6ually b't)''n 3'r&y8s sid' o* th' *amily on th' on' hand and !arold8s sid' on th' oth'r+
Coth )'r' dir'&tors and th' arti&l's (ro/id'd that th' &hairman )as to ha/' a &astin- /ot' at
both board m''tin-s and -'n'ral m''tin-s o* th' &om(any+ A dis(ut' b't)''n th' t)o sid's
8
S''. $om(any :a). 113
th
+'d2. by %'nis K''nan. (+105
9
S''. A 3ra&ti&al A((roa&h to $om(any :a). 14
th
+'d2. by St'(h'n "+ Mayson. %'r'7 Fr'n&h ; $hristo(h'r <yan. (+=3
10
S''. $an' / #on's A1981B 1 All ?< 533
o* th' *amily aros' as to )h'th'r 3'r&y )as th' &hairman+ ,h'n th' shar'hold'rs 'nt'r'd into
a )ritt'n a-r''m'nt that th' &hairman should not '>'r&is' his &astin- /ot' and that an
ind'('nd'nt &hairman should b' a((oint'd inst'ad+ !arold8s dau-ht'r sou-ht a d'&laration
that th' a-r''m'nt had th' '**'&t o* alt'rin- th' arti&l's so that an att'm(t to (ut 3'r&y8s son
on th' board usin- th' &astin- /ot' )as /oid. b'in- in br'a&h o* alt'r'd arti&l's as '**'&t'd
by th' a-r''m'nt+
,eld
,h' alt'ration o* th' arti&l's by th' a-r''m'nt )as '**'&ti/' b'&aus' all th' shar'hold'rs o* a
&om(any. &ould a&tin- to-'th'r. do anythin- )hi&h )as intra /ir's th' &om(any+
3+ ,h' alt'ration o* Arti&l's o* Asso&iation is sub9'&t to som' limitation on th' m'mb'r8s /otin-
(o)'r+ ,h' m'mb'rs must /ot' in th' b'st int'r'st o* th' &om(any as a )hol'
"h'n /otin- to alt'r th' arti&l's. a m'mb'r must /ot' 5&ona 'ide *or th' b'n'*it o* th' &om(any
as a )hol'8+ ,h' 5&om(any as a )hol'8 in this &ont'>t is not a r'*'r'n&' to th' *i&tional 'ntity but
is usually r'-ard'd as m'anin- 5th' m'mb'rs8
11
+ ,h' r'lat'd &as' is Allen v (old Ree's o' )est
A'rica Ltd
12
0
+a*
,h' &om(any8s arti&l's o* asso&iation -a/' th' &om(any a li'n o/'r (artly (aid shar's *or
d'bts o)'d to th' &om(any by th' r'l'/ant m'mb'r+ A shar'hold'r &all'd Eu&&ani di'd
o)in- th' &om(any F6.000 in r's('&t o* un(aid &alls on his (artly (aid shar's+ A*t'r his
d'ath. th' &om(any alt'r'd th' arti&l's by '>t'ndin- th' li'n to &o/'r *ully (aid shar's as
)'ll+ Eu&&ani )as th' only hold'r o* *ull (aid u( shar's )ho )as in arr'ars )ith his &alls and
All'n. on' o* his '>'&utors. &hall'n-'d th' alt'ration+
,eld
,h' alt'ration )as /alid as it )as &arri'd out &ona 'ide *or th' b'n'*it o* th' &om(any as a
)hol' in that it )as int'nd'd to r'&o/'r th' lar-' d'bt du' to th' &om(any *rom Eu&&ani+
11
S''. $om(any :a) by C'n 3'tt't. (+105
12
S''. All'n / @old <''*s o* "'st A*ri&a :td A1900B 1 $h 656 $ourt o* A(('al
Sir Nathani'l :indl'y M< 0
G,h' (o)'r thus &on*'rr'd on &om(ani's to alt'r th' r'-ulations &ontain'd in th'ir arti&l's is
limit'd only by th' (ro/isions &ontain'd in th' statut' and th' &onditions &ontain'd in th'
&om(any8s m'morandum o* asso&iation+ "id'. ho)'/'r. as th' lan-ua-' o* s 31 is. th'
(o)'r &on*'rr'd by it must. li7' all oth'r (o)'rs. b' '>'r&is'd sub9'&t to thos' -'n'ral
(rin&i(l's o* la) and '6uity )hi&h ar' a((li&abl' to all (o)'rs &on*'rr'd on ma9oriti's and
'nablin- th'm to bind minoriti's+ 4t must b' '>'r&is'd. not only in th' mann'r r'6uir'd by
la). but also &ona 'ide *or th' b'n'*it o* th' &om(any as a )hol'. and it must not b'
'>&''d'dH+
4n &onsid'rin- )hat th' int'r'sts o* th' &om(any ar'. th' &ourt )ill not im(os' its o)n id'as
u(on th' m'mb'rs+ 4t is *or th' m'mb'rs to d'&id' )h'th'r a (arti&ular am'ndm'nt is or not *or
th' b'n'*it o* th' &om(any. as lon- as th' d'&ision is not on' that no r'asonabl' man &ould ma7'+
Althou-h in -'n'ral a m'mb'r may '>'r&is' his /ot' as h' (l'as's in his o)n int'r'sts. this rul' is
sub9'&t to th' (rin&i(l' that th' ma9ority may not o((r'ss or tr'at th' minority un*airly
13
+ ,h'
r'lat'd &as' is (reenhal*h v Arderne Cinemas Ltd
$+
,
+a*
,h' d'*'ndant &om(any )as &ontroll'd by th' Mallard *amily+ ,h' (lainti** )as a minority
shar'hold'r in th' &om(any and this a&tion )as on' o* a numb'r o* r'(ort'd &as's in/ol/in-
a lon- runnin- dis(ut' b't)''n th' (lainti** and th' Mallards. &on&'rnin- th' )ay that th'
&om(any )as run+ ,h' Mallard *amily 'nt'r'd into an a-r''m'nt to s'll th'ir shar's to Sol
Sh'&7man+ ,his arti&l' )as an obsta&l' to th' sal' o* Sh'&7man )ho )as a nonDm'mb'r. so
th' Mallard *amily arran-'d an '>traordinary -'n'ral m''tin- o* th' &om(any and (ass'd a
s('&ial r'solution alt'rin- art 10+ ,h' alt'ration allo)'d any m'mb'r to s'll his shar's to an
outsid'r i* san&tion'd by an ordinary r'solution. )hi&h )as also duly (ass'd+
,eld
,h' r'solution )as /alid b'&aus'. althou-h it d'(ri/'d th' minority o* th'ir ri-hts o*
(r''m(tion und'r th' arti&l's. th' (lainti** *ail'd to sho) that it )as not &ona 'ide *or th'
b'n'*it o* th' &om(any+ Furth'rmor'. th' alt'ration did not un*airly dis&riminat' b't)''n th'
ma9ority and th' minority as it allo)'d any m'mb'r to s'll his shar's to an outsid'r+
13
S''. $om(any :a). 12
nd
+'d2. by "alt'r "oon. (+129
14
S''. @r''nhal-h / Ard'rn' $in'mas :td A1951B $h 286 $ourt o* A(('al
Sir <aymond ?/'rsh'd. M< 0
G4 thin7 it is no) (lain that 5&ona 'ide *or th' b'n'*it o* th' &om(any as a )hol'8 m'ans+++that
th' shar'hold'r must (ro&''d u(on )hat. in his hon'st o(inion. is *or th' b'n'*it o* th'
&om(any as a )hol'+++th' (hras' 5th' &om(any as a )hol'8 do's not 1at any rat' su&h a &as'
as th' (r's'nt2 m'an th' &om(any as a &omm'r&ial 'ntity. distin&t *rom th' &or(orators0 it
m'ans th' &or(orators as a -'n'ral body+ ,hat is to say. th' &as' may b' ta7'n o* an
indi/idual hy(oth'ti&al m'mb'r and it may b' as7'd )h'th'r )hat is (ro(os'd is. in th'
hon'st o(inion o* thos' )ho /ot'd in its *a/our. *or that ('rson8s b'n'*it+ 4 thin7 that th'
matt'r &an. in (ra&ti&'. b' mor' a&&urat'ly and (r'&is'ly stat'd by loo7in- at th' &on/'rs'
and by sayin- that a s('&ial r'solution o* this 7ind )ould b' liabl' to b' im('a&h'd i* th'
'**'&t o* it )'r' to dis&riminat' b't)''n th' ma9ority shar'hold'rs and th' minority
shar'hold'rs. so as to -i/' to th' *orm'r an ad/anta-' o* )hi&h th' latt'r )'r' d'(ri/'dH+
Anoth'r r'lat'd &as' is Bro-n v British A&rasive )heel Co.
$5
0
+a*
,h' &om(any n''d'd *urth'r &a(ital+ ,h' ma9ority. r'(r's'ntin- 98 ('r &'nt o* th'
shar'hold'rs. )'r' )illin- to (ro/id' this as lon- as th'y &ould buy out th' minority 2 ('r
&'nt o* th' shar'hold'rs+ ,h'y *ail'd to do this by a-r''m'nt and so th'y (ro(os'd to alt'r
th' arti&l's to allo) th'm to &om('l th' minority to s'll th'ir shar's+
,eld
,h' (ro(os'd alt'ration )as not *or th' b'n'*it o* th' &om(any but *or th' b'n'*it o* th'
ma9ority+ An in9un&tion )as -rant'd (r'/'ntin- th' alt'ration o* th' arti&l's+
S 181 (ro/id's that i* a r'solution is (ass'd )hi&h un*airly dis&riminat' a-ainst a m'mb'r.
r'li'* may b' obtain'd+ A r'solution that )as (ass'd mala 'ide or on' that )as o((r'ssi/' or in
&l'ar disr'-ard o* a m'mb'r8s ri-hts )ould also b' &au-ht by s 181
16
+
!o)'/'r. an alt'ration may b' /alid '/'n i* it ad/'rs'ly a**'&ts a minority (ro/id'd it is *or
th' -'n'ral -ood+ ,his )as illustrat'd in Shuttle-orth v Co/ Brothers & Co. 01aidenhead2 Ltd
$"
0
15
S''. Cro)n / Critish Abrasi/' "h''l $o :td A1919B 1 $h 290
16
S''. $om(any :a). 12
nd
+'d2. by "alt'r "oon. (+129
1=
S''. Shuttl')orth / $o> Cros ; $o 1Maid'nh'ad2 :td A192=B 2 KC 9 $ourt o* A(('al
+a*
,h' (lainti** )as a((oint'd a ('rman'nt dir'&tor o* th' &om(any und'r th' &om(any8s
arti&l's o* asso&iation+ !' )as also 'm(loy'd on a salary as th' )or7s mana-'r+ ,h'n. h'
*ail'd to a&&ount *or mon'y h' had r'&'i/'d on 22 o&&asions and a*t'r an in6uiry into th'
matt'r h' )as dismiss'd as )or7s mana-'r+ ,h' &om(any8s arti&l's o* asso&iation )'r' th'n
alt'r'd by addin- an additional '/'nt to art 22 dis6uali*yin- a dir'&tor. nam'ly. i* as7'd to
r'si-n in )ritin- by all o* th' dir'&tors+ ,his alt'r'd arti&l' )as th'n in/o7'd and h' )as
r'6u'st'd in )ritin- to r'si-n+ ,h' (lainti** &laim'd that h' )as 'ntitl'd. by a &ontra&t
&ontain'd in th' arti&l's. to b' a ('rman'nt dir'&tor+ !' also &hall'n-'d th' r'solution
alt'rin- th' arti&l's and sou-ht a d'&laration that h' )as still a dir'&tor+
,eld
,h' a(('al )ould b' dismiss'd+ ,h'r' )as no br'a&h o* &ontra&t *or th' &ontra&t )as
&ontain'd in th' arti&l's only and )as th'r'*or' ta7'n to b' alt'rabl'+ ,h' r'solution alt'rin-
th' arti&l's )as (ass'd &ona 'ide *or th' b'n'*it o* th' &om(any as a )hol'. as th'r' )as no
'/id'n&' that th' m'mb'rs had a&t'd oth'r than in -ood *aith+
,h'r' ar' thos' &as's that d'al )ith )h'th'r an alt'ration o* th' Arti&l's o* Asso&iation is
('rmissibl'+ ?>am(l' )h'r' th' alt'ration o* Arti&l's o* Asso&iation )as h'ld to b' in/alid is in
th' &as' o* Da'en 3in!late Co Ltd v Llanelly Steel Co
$4
0
+a*
,h' (lainti** &om(any )as a shar'hold'r in th' d'*'ndant &om(any and also a r'-ular
(ur&has'r o* th' d'*'ndant &om(any8s st''l+ ,h' (lainti** &om(any th'n )ithdr') its &ustom
and b'-an to to (ur&has' its st''l *rom on' o* th' d'*'ndant ri/als+ 4n r's(ons' to this. th'
d'*'ndant tri'd to a&6uir' th' (lainti**8s shar's by a-r''m'nt+ "h'n this *ail'd. th' d'*'ndant
alt'r'd th' arti&l's to allo) th' ma9ority o* th' shar'hold'rs. )ithout -i/in- r'asons. to
&om('l any m'mb'r to trans*'r his shar's at a (ri&' *i>'d by th' dir'&tors+ ,h' ob9'&t o* th'
alt'ration )as to (rot'&t th' d'*'ndant &om(any *rom &ondu&t on th' (art o* any shar'hold'r
)hi&h )as d'trim'ntal to th' int'r'sts o* th' &om(any+ ,h' &ourt )as as7'd to d't'rmin' th'
/alidity o* th' r'solutions alt'rin- th' arti&l's o* asso&iation+
18
S''. %a*'n ,in(lat' $o :td / :lan'lly St''l $o 1190=2 :td A1920B 2 $h 124
,eld
,h' r'solutions )'r' in/alid+ ,h'y )'nt *urth'r than )as n'&'ssary to (rot'&t th' &om(any
as th'y -a/' th' ma9ority th' (o)'r to '>(ro(riat' any shar'hold'r at th'ir )ill and (l'asur'+
4t has b''n h'ld that an alt'ration in th' arti&l's to /ary th' ri-hts o* on' &lass o* shar'hold'r
)h'r'by som' shar'hold'rs los' an ad/anta-'. not n'&'ssarily in/alid i* it &an b' sho)n that it
)as *or th' b'n'*it o* th' &om(any
19
+ ,h' r'lat'd &as' is Ri*hts and 5ssues 5nvestment 3rust Ltd v
Stylo Shoes Ltd
6%
0
+a*
A minority o* mana-'m'nt shar's had n'arly hal* th' /otin- ri-hts+ ,h' &om(any (ro(os'd
to a&6uir' th' &a(ital o* C &om(any in '>&han-' o* shar's+ ,h' &ontroll'rs in ord'r to 7''(
th' (ro(ortion o* mana-'m'nt shar's &onstant. (ro(os'd an alt'ration to th' arti&l's to
in&r'as' th'ir /otin- ri-hts+ ,h' mana-'m'nt shar's did not /ot' on th' alt'ration+ ,h'
alt'ration )as (ass'd by a lar-' ind'('nd'nt ma9ority+
,eld
So lar-' a /ot' by ('rsons )ho had nothin- to -ain ('rsonally *rom th' alt'ration )as an
indi&ation that th' alt'ration )as r'sol/'d on &ona 'ide *or th' b'n'*it o* th' &om(any as a
)hol'+ ,h' alt'ration o* /otin- ri-hts )as not. as su&h. o((r'ssi/'+
4+ ,h' alt'ration must not d'(ri/' m'mb'rs o* th' ri-hts -i/'n to th'm by th' &ourt
4* th' &ourt has by ord'r mad' an alt'ration in th' arti&l's in ord'r to assist minority shar'hold'rs
to o/'r&om' a&ts o* un*air (r'9udi&' by th' ma9ority. that arti&l' &annot b' alt'r'd )ithout th'
a((ro/al o* th' &ourt
21
+
19
S''. $om(any :a). 112
th
+'d2. by @'o**r'y Mors'. (+111
20
S''. <i-hts and 4ssu's 4n/'stm'nt ,rust :td / Stylo Sho's :td A1965B $h 250
21
S''. $om(any :a). 113
th
+'d2. by %'nis K''nan. (+106
5+ ,h' alt'ration &annot b' don' so as to in&lud' an ill'-al &laus'
An alt'ration )ould b' in/alid i* it tri'd to o/'rrul' th' -'n'ral la)+ For '>am(l'. an arti&l'
-i/in- '>'m(tion to an o**i&'r o* th' &om(any *rom liability *or n'-li-'n&' or br'a&h o* duty
)ould b' /oid
22
+
Co"*lus!o"
!'n&'. th' &om(any must *ollo) th' abo/' r'stri&tions to alt'r its Arti&l's o* Asso&iation+
Ques!o" % $%& Marks( :
Mr+ %hubai is th' mana-in- dir'&tor o* a (ri/at' &om(any d'alin- )ith sho' busin'ss+ %urin- th'
A@M o* th' &om(any. Mr+ %hubai had announ&'d that th' &om(any shall -i/' di/id'nd to th'
shar'hold'rs d's(it' th' *a&t that th' &om(any had not mad' any (ro*its+
?>(lain to Mr+ %hubai th' l'-al im(li&ation o* his a&t bas'd on th' statutory '>&'(tion o* li*tin-
u( th' &or(orat' /'il+
22
4bid. (+105
A"s)er :
Issue
"h'th'r Mr+ %hubai ('rsonally liabl' to (ay th' di/id'nd to th' shar'hold'rsI
La)
A &om(any is normally a (arti&ular *orm o* a busin'ss or-anization+ ,his or-anization do's not
aris' in*ormally. but is th' r'sult o* a statutory (ro&'ss &arri'd out by &'rtain ('o(l'+ A &om(any
may b' a &om(any limit'd by shar's. &om(any limit'd by -uarant''. &om(any limit'd both by
shar's and -uarant'' or an unlimit'd &om(any+ A &om(any may b' in&or(orat'd und'r th'
$om(ani's A&t 1965+
S'&tion 16152 (ro/id's that on and *rom th' dat' o* in&or(oration s('&i*i'd in th' &'rti*i&at'
o* in&or(oration. th' subs&rib'rs to th' m'morandum. to-'th'r )ith su&h oth'r ('rsons as *rom
tim' to tim' b'&om' m'mb'rs o* th' &om(any. ar' a body &or(orat' by th' nam' s't out in th'
m'morandum+ ,his m'ans that a*t'r th' n'&'ssary st'(s l'adin- to in&or(oration o* th' &om(any
ha/' b''n ta7'n and a &'rti*i&at' o* in&or(oration has b''n issu'd by th' <'-istrar. a n') l'-al
'ntity is &r'at'd
23
+ ,his l'-al 'ntity is di**'r'nt )ith its m'mb'rs th' &om(any )ill ha/' its o)n
(o)'r+ 4t is th' s'(arat' l'-al 'ntity )h'r' th' &om(any also ha/' th'ir o)n ri-hts and obli-ations
*or th' la) that )ill r'-ard a duly in&or(orat'd &om(any as a l'-al ('rson in its o)n ri-ht+
C'sid's. th'r' )ill b' no ('rsonal liability o* indi/idual m'mb'rs b'&aus' th' liabiliti's ar' born'
by th' &om(any+ !o)'/'r. th' liabiliti's )ill b' born' by th' dir'&tors or shar'hold'rs ar' to th'
'>t'nt o* un(aid shar's only+
,h' r'&o-nition that a &om(any is a s'(arat' l'-al 'ntity distin&t *rom its shar'hold'rs is
o*t'n '>(r'ss'd as th' /'il o* in&or(oration+ As a -'n'ral (rin&i(l' o* &om(any la). on&' a
&om(any is in&or(orat'd th' &ourts usually do not loo7 b'hind th' /'il to in6uir' )hy th'
&om(any )as *orm'd or )ho r'ally &ontrols it
24
+ 4t )as 'stablish'd in Salomon v. A Salomon &
Co. Ltd. 7$48"9
65
0
+a*
23
S'' 3rin&i(l's o* $om(any :a) in Malaysia. by Shanthy <a&ha-an. #anin' 3as&o'. Anil #oshi.(+24D25+
24
S'' $on&is' 3rin&i(l' * $om(any :a) in Malaysia. 12nd 'd+2. by Shanthy <a&ha-an. #anin' 3as&o' ; Anil #oshi. (+
33
25
See Salomon v A Salomon & Co Ltd 7$48"9 AC 66 0House o' Lords2
Som' m'n ar' born -r'atJ oth'rs a&hi'/' -r'atn'ssJ )hil' oth'rs. li7' Aron Salomon. ha/'
-r'atn'ss thrust u(on th'm+ Salomon )as a (ros('rous boot and sho' manu*a&tur'r+ !' ran
th' busin'ss as a sol' trad'r und'r th' nam' KA Salomon ; $o+K Ln*ortunat'ly *or Salomon.
h' had &hildr'nD si> o* th'm+ ,h'y ('st'r'd him *or a shar' in th' busin'ss+ K,h'y troubl'd
m'.K said Salomon. Kall th' )hil'K+ At th' l'n-th h' &a(itulat'd and in&or(orat'd his busin'ss
as a limit'd liability &om(any+ !' -a/' on' shar' 'a&h to his )i*' and *i/' o* his &hildr'n
and too7 20.001 shar's+ ,h' busin'ss )as trans*'rr'd to &om(any. in &onsid'ration *or )hi&h
d'b'ntur's )'r' issu'd to Salomon+ !o)'/'r. h' &ontinu'd to run his busin'ss as b'*or'+
,h' &om(any soon *'ll on '/il days+ %'s(it's th' '**orts o* Salomon. it )as (ut into
li6uidation+ ?nou-h &ould ha/' b''n r'aliz'd on th' ass'ts to (ay o** th' s'&ur'd &r'ditors
1in&ludin- Salomon hims'l* as a d'b'ntur' hold'r2. but th' uns'&ur'd &r'ditors )'r' l'*t out
in th' &old+ ,h' li6uidator su'd Salomon+
,eld
,h' $ourt o* A(('al h'ld that h' )as liabl' to ind'mni*y th' &om(any a-ainst its loss's+ ,h'
!ous' o* lords. ho)'/'r. r'/'rs'd this d'&ision+ ,h'y h'ld that in&or(oration o* th' &om(any
&r'at'd a s'(arat' ('rson+ ?/'n thou-h th' busin'ss o* th' &om(any )as th' sam' as b'*or'
and th' sam' ('rsons mana-'d th' busin'ss and th' sam' hands r'&'i/'d th' (ro*its. th'
&om(any )as not an a-'nt or trust'' *or th' m'mb'rs+ ,h' m'mb'rs )'r' not liabl' in
r's('&t o* th' &om(anyKs obli-ations+
,h' basis o* d'&ision )as that a &om(any is a &r'atur' o* statut'. and )hat )as don' by
Salomon )as )ithin th' int'ntion o* th' l'-islatur' as mani*'st'd by th' statut'
26
+ A&&ordin-ly.
)hil' or-anizationally and o('rationally th' busin'ss )as mana-'d sol'ly by Salomon. in la) h'
and th' &om(any )as s'(arat' ('rsons+ ,his s'(arat'n'ss is an in&id'nt o* th' in&or(oration o* a
&om(any. '/'n i* on' ('rson '**'&ti/'ly o)ns and &ontrols it
2=
+
!o)'/'r. in &'rtain situations a &ourt disr'-ards th' '>ist'n&' o* th' &or(oration b'&aus' th'
o)n'rs *ail'd to 7''( on' or mor' &or(orat' r'6uir'm'nts and *ormaliti's+ $ourt )ill loo7 to th'
m'mb'rs or th' &ontroll'rs o* th' &om(any+ 4t is a situation )h'r' th' &ourt )ill i-nor' th'
s'(arat' l'-al ('rsonality o* a &om(any+ ,his is r'*'rr'd to as Kli*tin- th' /'ilK+ ,h' &as' r'lat'd to
this is Atlas 1aritime Co SA v. Avalon 1aritime Ltd
64
0
26
4bid: at ( 31 :ord !alsbury :$
2=
S''. $om(any :a). 12nd 'd+2. by "alt'r "oon. ( 46+
28
S''. '- Atlas 1aritime Co SA v Avalon 1aritime Ltd A1991B 4 A:: ?< =69+
Stau-hton :# obs'r/'d 0
M,h' &r'ation or (ur&has' o* a subsidiary &om(any )ith minimal liability. )hi&h )ill o('rat'
)ith th' (ar'ntKs *unds and on th' (ar'ntKs dir'&tions but not '>(os' th' (ar'nt to liability.
may not '>(os' th' (ar'nt to liability. may not s''m to som' th' most hon'st )ay o* tradin-+
Cut it is '>tr'm'ly &ommon in th' int'rnational shi((in- industry. and ('rha(s 'ls')h'r'+ ,o
hold that it &r'at's an a-'n&y r'lationshi( b't)''n th' subsidiary and th' (ar'nt )ould b'
r'/olutionary do&trin'+M
4n -'n'ral. th' &ourts )ill r's('&t th' &om(anyKs mod'sty and r'*us' to li*t th' /'il+ ,h'
situations in )hi&h th' /'il may b' li*t'd u( ar' '>&'(tional+ ,h' only 9usti*i&ation *or li*tin- u(
th' /'il o* in&or(oration is that th' &om(any is in *a&t not a s'(arat' 'ntity+ ,his r'6uir's
'/id'n&'+ 4* th' '/id'n&' do's not 'stablish that th' &om(any is run as a m'r' '>t'nsion o* its
&ontroll'rsK a**airs. th' /'il o* in&or(oration should r'main *irmly in (la&'+ !o)'/'r. i* it &an b'
(ro/'n that th' &om(any is in *a&t not a s'(arat' 'ntity *rom its &ontroll'rs. a &ourt mi-ht b'
('rsuad'd to li*t th' /'il in th' a((ro(riat' &ir&umstan&'s
29
+ 4n addition. th' &ourts ha/'
som'tim's r'&o-niz'd that th'r' ar' o&&asions )h'n it is n'&'ssary to -o b'hind th' &or(orat'
/'il. but '>'r&is' &aution. as li*tin- th' &or(orat' /'il is an '>&'(tion and not a -'n'ral (rin&i(l'
o* &om(any la)+ 4t &an b' s''n it th' &as' ;a! Sin* Hoc v. Pu&lic Prosecutor
3%
0
4n th' Su(r'm' $ourt 3'h S)'' $hin S$#. said 0
MSu&h /'il has b''n li*t'd by statut'. '- th' $om(ani's A&t 1965 its'l* or by th' &ourts *or
&'rtain s('&i*i& (ur(os's+ ,h' li*tin- o* th' /'il &l'arly &onstitut's a /iolation o* th' (rimary
(rin&i(l' but this has &om' to b' tr'at'd &orr'&tly as an '>&'(tion to th' (rimary (rin&i(l'
)ith su&h '>&'(tion b'in- sub9'&t to th' (aram't'rs and ('rim't'rs indi&at'd by th' statut's
or by th' s('&i*i& (ur(os's so *ar indi&at'd by th' &ourts )h'n li*tin- th' /'il+M
,h'n. th'r' is as y't no sin-l' t'st *or li*tin- th' /'il o* in&or(oration+ 3i'r&in- th' &or(orat'
/'il is an '>&'(tion to th' do&trin' o* s'(arat' l'-al ('rsonality )hi&h &an b' s''n *rom th'
SalomonKs &as'+ !'n&'. th' '>&'(tions *all into t)o &at'-ori's )hi&h is statutory '>&'(tions und'r
29
S''. $om(any :a). 12nd 'd+2. by "alt'r "oon. ( 52+
30
;a! Sin* Hoc v Pu&lic Prosecutor A1992B 2 M:# =14+
th' $om(any A&t and #udi&ial '>&'(tions+
#udi&ial '>&'(tions ar' th' '>&'(tion that is not o('n to a &ourt to disr'-ard th' &or(orat'
('rsonality o* a limit'd &om(any sa/'s in /'ry '>&'(tional &ir&umstan&'s+ C'sid's. *or thos' )ho
s''7 th' &ourtKs int'r/'ntion to (i'r&' th' &or(orat' /'il. th'y must 'stablish s('&ial &ir&umstan&'s
that sho) th' &om(any is a m'r' *a&ad' &on&'alin- th' tru' *a&ts+
,h'r' ar' s'/'ral s'&tions und'r statutory '>&'(tion 0
1+ S+6=132 ma7's its o**i&'rs in d'*ault. and not th' &om(any. -uilty o* a &riminal o**'n&'+ 4n
som' &ir&umstan&'s. th' A&t ma7's an o**i&'r ('rsonally liabl' to &r'ditors *or d'bts in&urr'd
by th' &om(any+ ,his is th' &as' )h'n th' &om(any &ontinu's to in&ur d'bts )hilst it is
insol/'nt
31
+ Lnd'r S+6=132. a &om(any8s 5o**i&'rs in d'*ault8. and not th' &om(any. ar' liabl'
*or a *in' o* <M100000 or *i/' y'ars im(risonm'nt or both+ ,h' s('&i*i& '>&lusion o* any
('nalty on th' &om(any r'&o-niz's that th' &om(any is th' /i&tim o* th' (rohibit'd &ondu&t+
,o im(os' a ('nalty on th' &om(any )ould b' to th' ultimat' d'trim'nt o* its &r'ditors and
shar'hold'rs
32
+ ,h' &as' is Datu 3an Len* 3ec v Sar<ana Sdn Bhd & =rs 7$88"9 + 1L#
368
33
0
+a*s
Au-ustin' 3aul #$ indi&at'd that i* th' transa&tion )as a bona *in' &omm'r&ial
transa&tion 'nt'r'd into in -ood *aith. th' *a&t that th' (ro&''ds o* th' transa&tion
)'r' us'd to assist in a&6uirin- th' &om(any8s shar's )ould not ma7' th'
transa&tion ill'-al+
Au-ustin' 3aul #$. said 0
4t is th'r'*or' my /i') that th' *irst d'*'ndant to a&6uir' th' on' million shar's
*inan&ially as th' transa&tion that th'y 'nt'r'd into r'sult'd in th' s'&ond
d'*'ndant obtainin- th' shar's )ithout any (aym'nt by r'ason o* <M1 million
a&&ruin- *rom th' sal' o* th' land b'in- diminish'd in /alu'+++ C' that as it may.
th' *a&t that th' *irst d'*'ndant (ro/id'd *inan&ial assistan&' to th' s'&ond
31
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+3=
32
4bid. (+219
33
4bid. (+3=
d'*'ndant to a&6uir' th' shar's )ill not amount to *inan&ial assistan&' )ithin th'
m'anin- o* S+6=112 o* th' A&t i* th' transa&tion )as a bona *id' &omm'r&ial
transa&tion 'nt'r'd into in -ood *aith+
,eld
,h' &ourt h'ld. on th' '/id'n&' b'*or' it. that th' allotm'nt o* on' million shar's
)as &onsist'nt )ith th' *irst d'*'ndant8s (ro-ramm' *or '>(ansion+ ,his in its'l*
did not m'an that th' allotm'nt o* th' shar's to th' s'&ond d'*'ndant at no &ost
)as a bona *id' &omm'r&ial transa&tion+ As a matt'r o* *a&t. th' subs&ri(tion o*
shar's in th' *irst d'*'ndant by th' s'&ond d'*'ndant )as not a &omm'r&ial
transa&tion as *ar as th' *irst d'*'ndant )as &on&'rn'd+ 4t )as not a transa&tion
)h'r'by th' *irst d'*'ndant a&6uir'd anythin- )hi&h it -'nuin'ly n''d *or its
o)n (ur(os'+
2+ S+304122 should b' r'ad in &on9un&tion )ith S+303132 )h'r' an o**i&'r )ho 7no)in-ly
&ontra&ts a d'bt )ith no r'asonabl' or (robabl' -round o* '>('&tation o* th' &om(any b'in-
abl' to (ay th' d'bt is -uilty o* an o**'n&'+ A &on/i&tion may b' th' basis *or a &ourt to
d'&lar' that th' o**i&'r &on&'rn'd shall b' ('rsonally liabl' to (ay that d'bt+ 4n S+303132. it is
stat'd that. i* in th' &ours' o* )indin- u( or any oth'r (ro&''din-s a-ainst a &om(any. it
a(('ars that an o**i&'r o* th' &om(any )ho )as 7no)in-ly a (arty to th' &ontra&tin- o* a
d'bt had. at th' tim' o* &ontra&tin-. no r'asonabl' or (robabl' -round o* '>('&tation o* th'
&om(any b'in- abl' to (ay th' d'bt. th' o**i&'r &ommits an o**'n&'
34
+
3+ S+169 stat'd that th' dir'&tors o* a holdin- &om(any ar' r'6uir'd to (r'(ar' &onsolidat'd
a&&ounts &onsolidatin- th' *inan&ial (osition o* th' holdin- &om(any and its subsidiari's+ 4n
this r's('&t. th' A&t do's not tr'at do's not tr'at 'a&h &om(any in th' -rou( as a s'(arat'
l'-al 'ntity but r'&o-niz's th' r'ality that a -rou( o* r'lat'd &om(ani's *un&tions as a sin-l'
'ntity
35
+
,h' s'(aration o* th' -rou( into distin&t &om(ani's is not n'&'ssarily in any )ay
im(ro('rJ it may )'ll b' th' most '&onomi&al and &on/'ni'nt arran-'m'nt )h'n th'
&on&'rn &arri's on a numb'r o* s'(arat' busin'ss's. or )h'n it is d'sirabl' to distin-uish
b't)''n th' manu*a&turin- and th' mar7'tin- (art o* th' 'nt'r(ris' or b't)''n trad' in its
/arious (rodu&ts+ 4t may also 'nabl' th' ad/anta-'s o* siz' to b' obtain'd )ithout th'
disad/anta-'s o* o/'rD&'ntralization+ And su&h arran-'m'nt may &om' about in'/itably
34
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+423
35
4bid. (+3=D38
)h'r' on' &om(any has -radually '>(and'd its &ontrol o* an industry by buyin- u( th'
shar' &a(ital o* '>istin- &om(ani's in th' sam' *i'ld+
N'/'rth'l'ss. it is an arran-'m'nt )hi&h is &l'arly &a(abl' o* abus'+ 4t is still
(ossibl'. and ind''d usual. *or a (ubli& &om(any to &arry on busin'ss throu-h subsidiary
o('ratin- (ri/at' &om(ani's. but th's' &an no lon-'r 's&a(' *rom th' obli-ation to *il'
&o(i's o* th'ir annual balan&'Dsh''ts and (ro*it and loss a&&ount )ith th' <'-istrar o*
$om(ani's so that th'y ar' o('n *or (ubli& ins('&tion+ ,his alon'. ho)'/'r. )ould not ha/'
(r'/'nt'd th' a&&ounts o* th' (ubli& holdin- &om(any *rom b'in- (r's'nt'd in su&h a )ay
as to b' totally unin*ormati/' or (ositi/'ly misl'adin- as to th' tru' (ros('rity o* th' -rou(+
Mor'o/'r. i* th' la) insists on al)ays tr'atin- 'a&h &om(any as a )holly distin&t 'ntity.
i-norin- th' *a&t that th' -rou( is tru' '&onomi& unit. th' r'sults )ill som'tim's b'
nons'nsi&al+
!'n&' it has b''n r'&o-nis'd at l'ast sin&' th' $om(ani's A&t 1948 that )h'r' th'r'
is a r'lationshi( b't)''n &om(ani's su&h that on'. th' (ar'nt or holdin- &om(any. &ontrols
th' oth'rs. th' subsidiary or subDsubsidiary &om(ani's. th'n. *or &'rtain (ur(os's. in&ludin-
's('&ially (r's'ntation o* *inan&ial stat'm'nts. all must b' tr'at'd as on'+ ,h' di**i&ulty is
that G&ontrolH is not an 'asy &on&'(t to d'*in' satis*a&torily. th' ob/ious t'stDholdin- a
ma9ority o* th' shar'sDb'in- both too narro) and too )id'+ 4t is too narro) b'&aus' &ontrol
&an b' '>'r&is'd )ithout a ma9ority shar'holdin-. *or '>am(l' throu-h /otin- ri-hts )hi&h
n''d not b' &omm'nsurat' )ith shar'holdin- and )hi&h may b' 'ntir'ly di/or&' *rom it+ 4t
is too )id' in that a ma9ority holdin- )ill not &on*'r &ontrol i* th' shar's h'ld ar' nonD
/otin- shar's or i* th' /ot's ar' )'i-ht'd in *a/our o* anoth'r &lass
36
+
C'sid's that. a&&ordin- to this s'&tion. n'&'ssary a&&ounts and r'(orts r'6uir'd to b'
laid b'*or' th' annual -'n'ral m''tin- must in&lud' &o(i's o*
3=
0
D ,h' (ro*it and loss a&&ount
D ,h' balan&' sh''t
D ,h' dir'&tors8 r'(ort
D Auditor8s r'(orts
D A stat'm'nt by dir'&tors
,h' A&t r'6uir's th' dir'&tors o* a holdin- &om(any to ma7' out &onsolidat'd
a&&ounts d'alin- )ith th' (ro*it and loss o* th' holdin- &om(any and its subsidiari's *or
th'ir r's('&ti/' last *inan&ial y'ars. th' stat' o* a**airs o* th' holdin- &om(any and its
36
S'' @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a).14
th
+'d2. by :+$+C+ @o)'r. (+11=D120
3=
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+43=
subsidiari's as at th' 'nd o* th'ir r's('&ti/' last *inan&ial y'ars and to -i/' a tru' and *air
/i') o* th' (ro*it or loss and stat' o* a**airs o* th' holdin- &om(any
38
+
4+ S+36 stat'd )h'n th' m'mb'rshi( o* a &om(any *alls b'lo) t)o+ 4* at any tim' only on'
m'mb'r o* a &om(any r'mains. that m'mb'r has si> months in )hi&h to *ind anoth'r
m'mb'r+ 4* a*t'r th' si>Dmonth -ra&' ('riod th' &om(any is still &arryin- on th' busin'ss
)ith only on' m'mb'r. that m'mb'r is liabl' *or all o* th' d'bts o* th' &om(any &ontra&t'd
a*t'r th' -ra&' ('riod+ ,his is sub9'&t to t)o '>&'(tions0 *irst. th' sol' m'mb'r is '>on'rat'd
i* h' )as not &o-nizant o* th' *a&t that th'r' )as only on' m'mb'r r'mainin-0 s'&ond. this
rul' do's not a((ly )h'r' th' sol' m'mb'r is a holdin- &om(any o)nin- all o* th' shar's o*
th' &om(any in 6u'stion
39
+
4t )ill b' obs'r/'d that this s'&tion do's not o('rat' to d'stroy th' s'(arat'
('rsonality o* th' &om(anyJ it still r'mains an '>istin- 'ntity '/'n thou-h th' shar'hold'rs
ar' too *') or ind''d. althou-h th'r' is non'+ n th' oth'r hand. it -o's *urth'r than to
&on/'rt a limit'd &om(any into an unlimit'd on'. *or in an unlimit'd &om(any d'bts r'main
thos' o* th' &om(any althou-h th' m'mb'rs ar' liabl' to &ontribut' to)ards th'ir (aym'nt
and ar' in th' (osition o* 6uasiDsur'ti's+ Lnd'r this s'&tion. th' m'mb'rs may b'&om' liabl'
dir'&tly to th' &r'ditors and. as th' s'&tion '>(r'ssly stat's. Gmay b' s'/'r'ly su'd
th'r'*or'H+ Cut th' ri-hts o* &r'ditors ar' s'/'r'ly limit'dJ it is only th' m'mb'rs )ho
r'main a*t'r th' si> months that &an b' su'd 1not thos' )hos' )ithdra)al has l'd to th' *all
b'lo) th' minimum2 and '/'n th'y ar' liabl' only i* th'y ha/' 7no)l'd-' o* th' *a&ts and
only in r's('&t o* d'bts &ontra&t'd a*t'r th' '>(iration o* th' si> months+ Mor'o/'r. th'
)ordin- su--'st that th'y ar' liabl' only in r's('&t o* li6uidat'd &ontra&tual obli-ations. but
in th' abs'n&' o* authority it &annot b' said )h'th'r th' &ourts )ould -i/' this r'stri&ti/'
int'r(r'tation to it+ 4t is also not' )orthy that th' liability atta&h's only to m'mb'rs. and not.
as mi-ht ha/' b''n '>('&t'd. to th' dir'&tors as su&h
40
+
5+ S+304112 is r'lat'd to th' &as' o* *raudul'nt tradin-+ 4* th' busin'ss o* th' &om(any has b''n
&arri'd out to d'*raud &r'ditors or *or a *raudul'nt (ur(os'. th' &ourt may d'&lar' that any
('rson )ho )as 7no)in-ly a (arty to th' &arryin- on o* th' busin'ss in that mann'r )ill b'
('rsonally liabl' *or th' d'bts o* th' &om(any+ ,his ord'r may b' mad' on th' a((li&ation o*
th' li6uidator. &r'ditor or &ontributory+ ,his s'&tion o/'rla(s )ith S+339132 in that th'
38
4bid. (+460
39
S'' $om(any :a).12
nd
+'d2. by "alt'r "oon. (+53
40
S'' @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a).14
th
+'d2. by :+$+C+ @o)'r. (+114
&ontra&tin- o* a d'bt )ithout a r'asonabl' or (robabl' '>('&tation that it )ould b' (aid
mi-ht amount to *raud in &'rtain &ir&umstan&'s
41
+
4t &an b' only in/o7'd )h'n th' &om(any is b'in- )ound u( and th' a((li&ant has
to dis&har-' th' burd'n o* (ro/in- *raud+ Althou-h an 'arly &as' su--'st'd that this )ould
-'n'rally b' in*'rr'd )h'r' Ga &om(any &ontinu's to &arry on busin'ss and to in&ur d'bts at
a tim' )h'n th'r' is. to th' 7no)l'd-' o* th' dir'&tors. no r'asonabl' (ros('&t o* th'
&r'ditors '/'r r'&'i/in- (aym'nt o* thos' d'bts.H lat'r d'&isions su--'st that mor' than that
)ill ha/' to b' sho)n+ ,h' &ourt. i* it d'&id's to ma7' a d'&laration. )ill do so *or a d'*init'
sum not n'&'ssarily limit'd to th' amounts du' to &r'ditors sho)n to ha/' b''n d'*raud'd
but. normally at any rat'. th' mon'ys thus r'&o/'r'd )ill *orm (art o* th' -'n'ral ass'ts o*
th' &om(any a/ailabl' *or th' (aym'nt o* all &r'ditors and not m'r'ly o* thos' )hos' d'bts
)'r' &ontra&t'd durin- th' tim' )h'n th' busin'ss )as &arri'd on *raudul'ntly
42
+
6+ S+121 ma7's it an o**'n&' by an o**i&'r o* th' &om(any i* th' o**i&'r authoriz's th' issu' o*
do&um'nts and &h'6u's on )hi&h th' nam' o* th' &om(any do's not a(('ar+ An o**i&'r o*
th' &om(any )ho issu's a &h'6u' or oth'r n'-otiabl' instrum'nt on b'hal* o* th' &om(any.
on )hi&h th' nam' o* th' &om(any do's not a(('ar &orr'&tly. may b' *urth'r liabl'+ ,his
s'&tion (ro/id's that th' o**i&'r )ill b' liabl' on th' &h'6u' or oth'r n'-otiabl' instrum'nt
unl'ss th' &om(any (ays th' amount
43
+
4n oth'r m'anin-. on ordinary a-'n&y (rin&i(l's th' o**i&'rs o* th' &om(any )ill. o*
&ours'. ma7' th'ms'l/'s ('rsonally liabl'. not)ithstandin- that th'y ar' in *a&t a&tin- *or
th' &om(any. i* th'y &hoos' to &ontra&t ('rsonally. *or '>am(l'. by *ailin- to dis&los' that
th'y ar' a&tin- as a-'nts+ ,h' $om(ani's A&t. ho)'/'r. (ro/id's that in &'rtain
&ir&umstan&'s th'y shall in&ur ('rsonal r's(onsibility not)ithstandin- that th'y ha/'
'>(r'ssly &ontra&t'd as a-'nts only+ ,his o&&urs )h'r' th'y ha/' si-n'd or authoris'd th'
si-natur' on th' b'hal* o* th' &om(any o* any bill o* '>&han-'. (romissory not'. &h'6u' or
ord'r *or -oods or mon'y. and th' nam' o* th' &om(any is not m'ntion'd th'r'on in l'-ibl'
&hara&t'rs+ 4n addition to liability to *in's. th'y shall b' ('rsonally liabl' to th' hold'r *or
th' amount du' unl'ss it is duly (aid by th' &om(any+
:iability und'r thus s'&tion normally aris's in &onn'&tion )ith bills or &h'6u's. and
o**i&'rs ha/' b''n h'ld ('rsonally liabl' )h'n th' )ord Glimit'dH )as omitt'd. or )h'n th'
&om(any )as d's&rib'd by a )ron- nam'+ ,h' )ord Ghold'rH is r'ally only a((ro(riat' in
41
S'' $om(any :a).12
nd
+'d2. by "alt'r "oon. (+54
42
S'' @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a).14
th
+'d2. by :+$+C+ @o)'r. (+115
43
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+90
&onn'&tion )ith n'-otiabl' instrum'nts. but it has n'/'rth'l'ss b''n h'ld that a ('rson to
)hom an ord'r *or -oods is -i/'n must b' d''m'd to b' th' Ghold'rH and &an ta7'
ad/anta-' o* th' s'&tion not)ithstandin- that th' ori-inal ord'r is lost+ 4t s''ms &l'ar that it
ma7's no di**'r'n&' that th' third (arty &on&'rn'd has not b''n misl'd by th'
misd's&ri(tion+ Cut th' hold'r8s &ondu&t may 'sto( him *rom 'n*or&in- th' liability. *or
'>am(l'. )h'r' th' hold'r has hims'l* )ritt'n th' *orm o* a&&'(tan&' )ith th'
misd's&ri(tion+ 4n any '/'nt th' o**i&'rs &on&'rn'd m'r'ly b'&om' liabl' to (ay i* th'
&om(any do's not and th' &om(any. thou-h misd's&rib'd. )ill not 's&a(' liability on that
a&&ount i* its id'nti*y &an b' 'stablish'd+ ,h' o**i&'rs ar' a((ar'ntly (la&'d in th' (osition
o* sur'ti's 1)ith &orr's(ondin- ri-hts2. in &ontrast )ith th' (rimary liability im(os'd by th'
s'&tions (r'/iously &onsid'r'd+
,h' ob9'&t o* this s'&tion is (lain+ As )' ha/' s''n. th' l'-islatur' introdu&'d
limit'd liability on th' basis that third (arti's )ould r'aliz' that th'y )'r' d'alin- )ith
limit'd &om(ani's+ !'n&' -r'at 'm(hasis has al)ays b''n (la&'d on th' us' o* th' tru'
nam' o* th' &om(any and 's('&ially o* th' )ord Glimit'dH+ ,h' (ro/isions 9ust r'*'rr'd to
*orm (art o* a )id'r s'ri's o* rul's d'si-n'd to 'nsur' that th' nam' o* th' &om(any a(('ars
)h'r'/'r it do's busin'ss. on its s'al. and on all busin'ss do&um'nts and l'tt'rs+ 4n -'n'ral
th's' rul's ar' 'n*or&'d by ('nal san&tions. but th's' ha/' b''n su((l'm'nt'd by &i/il
liability in th' &as's )h'r' it is (ra&ti&abl' to do so and this liability has b''n most stri&tly
'n*or&'d. (arti&ularly in th' 'arly days
44
+
=+ S+140112 o* th' 4n&om' ,a> A&t 196= allo)s th' %ir'&torD@'n'ral o* 4nland <'/'nu' to
i-nor' transa&tions )hi&h ha/' th' '**'&t o* a/oidin- or '/adin- ta>+ ,his s'&tion no)
(ro/id' that any (ro/ision &ontain'd in th' arti&l's or in a &ontra&t )ith th' &om(any )hi&h
'>'m(ts any o**i&'r or auditor o* th' &om(any a-ainst liability arisin- in r's('&t o*
n'-li-'n&'. d'*ault. br'a&h o* duty or br'a&h o* trust. in r'lation to th' &om(any is /oid
45
+
As r'-ards in&om' ta> this a((li's (arti&ularly in th' &as' o* soD&all'd G&los'
&om(ani'sH 's('&ially in r'-ard to Gshort*allH distributions )h'n th' &om(any8s in&om'
may. in '**'&t. b' tr'at'd *or ta> (ur(os's as that o* th' m'mb'rs+ 4n r'lation to &a(ital
trans*'r ta> th' ass'ts o* (ri/at'ly &ontroll'd &om(ani's may in som' &ir&umstan&'s '
tr'at'd as thos' o* its human m'mb'rs+ 4n this *i'ld. th' l'-islatur' has ind''d &ra&7'd o('n
th' &or(orat' sh'll+
44
S'' @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a).14
th
+'d2. by :+$+C+ @o)'r. (+116D11=
45
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+431
Mor'o/'r on r'&onstru&tions and amal-amations th' /'il has b''n li*t'd in th'
int'r'sts o* ta>(ay'rs+ As )' shall s''. th' &a(ital and trans*'r duti's )hi&h )ould b'
(ayabl' i* th' &or(orat' 'ntity (rin&i(l' )'r' stri&tly a((li's may b' a/oid'd or r'du&'d i*
a((ro(riat' st'(s ar' ta7'n+ !'r' a-ain th'r' is a r'&o-nition o* G'nt'r(ris' 'ntityH rath'r
than &or(orat' 'ntity
46
+
8+ S+365122 stat' that any dir'&tor or o**i&'r o* a &om(any )ho )il*ully (ays or ('rmits to b'
(aid a di/id'nd in &ontra/'ntion o* S+365 is -uilty o* an o**'n&' and is ('rsonally liabl' to
th' &r'ditors *or th' &om(any8s d'bt to th' '>t'nt by )hi&h th' di/id'nds '>&''d th' (ro*its
4=
+
,h' tim' at )hi&h (ro*its must b' a/ailabl' *or th' (ur(os's o* s 365 is th' dat' o*
d'&laration o* di/id'nds rath'r than th' dat' o* (aym'nt+ S'&tion 365 stat's that di/id'nds
must b' (aid only out o* (ro*its or (ursuant to s'&tion 60+ S'&tion 60 d'als )ith (aym'nts
*rom th' shar' (r'mium a&&ount+ ,h' (ro*its must '>ist at th' tim' *i>'d *or (aym'nt o* th'
di/id'nd
48
+
Appl!*a!o"
A&&ordin- to th' situation -i/'n. Mr %hubai should not announ&' that th' &om(any )ould -i/'
di/id'nd to th' shar'hold'rs b'&aus' at that tim' th' &om(any had not mad' any (ro*its+ ,h'
di/id'nd )ould b' (ayabl' *rom (ro*its only+ Cas'd on S+365122 )hi&h has b''n stat'd abo/'. Mr
%hubai )ill b' ('rsonally liabl' to (ay th' di/id'nd to th' shar'hold'rs as th' &or(orat' /'il )ill
b' li*t b'&aus' h' ('rmits th' (aym'nt o* di/id'nd )h'n th'r' ar' no (ro*its+
Co"*lus!o"
,h'r'*or'. th' /'il o* in&or(oration in Mr+ %hubai situation )ould b' li*t und'r S+365122+
-efere"*es :
1+ $on&is' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o'.
Anil #oshi. 2
nd
?dition. 2010 (ublish'd by :'>isN'>is Malaysia Sdn Chd+
46
S'' @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a).14
th
+'d2. by :+$+C+ @o)'r. (+120D121
4=
S'' 3rin&i(l's o* $om(any :a) in Malaysia by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi. (+2=8
48
S'' $on&is' 3rin&i(l's o* $om(any :a) in Malaysia. 12nd 'd+2. by Shanthy <a&ha-an. #anin' 3as&o' and Anil #oshi.
(+ 240+
2+ 3rin&i(l' o* $om(any :a) in Malaysia Malaysia by Shanthy <a&ha-an. #anin' 3as&o'.
Anil #oshi. 2002 (ublish'd by Malayan :a) #ournal Kuala :um(ur
3+ $om(any :a) by "alt'r "oon. 2
nd
?dition 199= (ublish' by S)''t and Ma>)'ll Asia
4+ @o)'r8s 3rin&i(l's o* Mod'rn $om(any :a) by :+$+C+ @o)'r. 4
th
?dition. 19=9
(ublish'd by St'/'n ; Sons o* 11 N') F'tt'r :an' :ondon
5+ $om(any :a) by $hris Sh'(h'rd. 3
rd
?dition . 2004 (ublish'd by Critish :ibrary
$atalo-uin-DinD3ubli&ation
6+ A (ra&ti&al a((roa&h to $om(any :a) by St'(h'n " Mayson. %'r'7 Fr'n&h. $hristo(h'r
<yan. 4
th
?dition. 198= (ublish'd by Finan&ial ,rainin- 3ubli&ation :imit'd
=+ $om(any :a) by @'o**r'y Mors'. 12
th
'dition. 1983 (ublish'd by St'/'n ; Sons :td
8+ $om(any :a) by Smith. K''nan8s. 13
th
'dition. 2005 (ublish'd by 3'arson ?du&ation
:imit'd