August Sem, 2020 End Semester Examination ACCT 3223 Company

Law

Section A Multiple Choice Questions

Answer ALL questions

Question 1
What is the minimum number of members that a public company can have?
A. 1
B. 2
C. 5
D. 10

Question 2
How many days’ notice is required for a meeting where a resolution requires special notice?
A. 14
B. 21
C. 28
D. 30

Question 3
In a company limited by shares, what is the limit of a member’s liability?
A. The amount they guaranteed to pay in the event of the company being wound up
B. Nothing, the company is liable for its own debts
C. The members are liable to settle all the company debts
D. The amount of share capital they have purchased, including any amounts outstanding on
the shares that they own

Question 4
Which type of company does not have share capital?
A. A company limited by guarantee
B. A company limited by share
C. An unlimited company
D. A public company

Question 5
Which of the following statements regarding the differences between loan capital and share
capital is correct?
A. Share capital is transferable but loan capital is not
B. Unlike loan capital, share capital does not have to be repaid
C. Share capital offers the holder more security than loan capital
D. Loan capital has voting rights attached but share capital does not

Question 6
In which TWO of the following circumstances may the veil of incorporation be lifted?
(i) To allow an auditor access to company records
(ii) To allow directors of insolvent companies to be found liable for the debts of the company
(iii) To allow a private company to re-register as a public company
(iv) To treat a group company as a single economic entity

A. (i) and (ii)

B. (i) and (iii)
C. (ii) and (iii)
D. (ii) and (iv)
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August Sem, 2020 End Semester Examination ACCT 3223 Company
Law

Question 7
What is the principle of capital maintenance?
A. Companies should make profits all the times to maintain capital
B. Companies should seek to maintain or increase their capital at all time
C. Companies should not make payments out of capital to the detriment of creditors
D. Companies should maintain the ratio of their debt and equity capital

Question 8
In which of the following situations will the court order the compulsory winding up of a
company on a just and equitable ground?
A. Where the company has failed to pay its creditors for three months
B. When the main object of the company cannot be achieved
C. Where 50% of the members disagree with the actions of the directors
D. Where the company has not lodged the company’s financial statements with Registrar of
Companies

Question 9
Which of the following statements with regard to a company secretary is incorrect?
A. They must not be above 70 years of age in a public company
B. The subsequent secretaries are appointed by the directors
C. They must have their principal or only place of residence in Malaysia
D. They must not be convicted of offences under the Companies Act 2016

Question 10
The rules of capital maintenance exist to primarily protect which of the following parties?
A. A company’s customers
B. The government
C. A company’s creditors
D. A company’s members

Question 11
What is the relationship between a debenture-holder and the company who has issued the
debenture?
A. A debenture-holder is a debtor to the company
B. A debenture-holder is a creditor to the company
C. A debenture-holder is a chargee to the company
D. A debenture-holder is a member of the company

Question 12
Which TWO of the following are included in the content of a company’s constitution?
(i) Payment of charitable donations
(ii) Appointment of secretaries
(iii) Formation of a remuneration committee
(iv) Transfer of shares

A. (i) and (iii)

B. (ii) and (iii)
C. (ii) and (iv)
D. (iii) and (iv)

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August Sem, 2020 End Semester Examination ACCT 3223 Company
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Question 13
Which of the following is correct for the priority of creditors to be settled their debts by a
liquidator when a company is wound-up?
(i) Repayment of capital to members
(ii) Secured creditor under a fixed charge
(iii) Cost and expenses of winding-up
(iv) Secured creditors under a floating charge
(v) Wages and salary to the employees

A. (ii), (v), (iv), (i), (iii)

B. (iii), (ii), (v), (i), (iv)
C. (ii), (iii), (v), (iv), (i)
D. (v), (iv), (ii), (i), (iii)

Question 14
At which point does a creditors’ voluntary winding-up commence?
A. As soon as the Registrar receives a copy of the resolution to wind-up the company.
B. As soon as the liquidator is appointed.
C. As soon as the directors authorize it after the resolution to wind-up the company is
passed.
D. As soon as the members pass the necessary resolution.

Question 15
Which of the following charges on the same asset, all of which have been properly registered,
has the highest priority? Assume all chargeholders are unaware of the other charges.
A. A floating charge with a value of RM10,000 registered on 1 April 2020
B. A fixed charge with a value of RM5,000 registered on 1 July 2020
C. A floating charge with a value of RM12,000 registered on 1 August 2020
D. A fixed charge with a value of RM15,000 registered on 1 September 2020

Question 16
Which TWO of the following describe the level of knowledge, skill and experience required
by a director in order to meet their statutory duty to exercise reasonable skill, care and
diligence?
(i) The knowledge, skill and experience expected of the director by the members
(ii) The knowledge, skill and experience that the director in fact has
(iii) The knowledge, skill and experience that the board of directors believe the director to
actually have
(iv) The knowledge, skill and experience that is reasonably expected of a person carrying out
the functions of the director

A. (i) and (ii)

B. (i) and (iii)
C. (ii) and (iii)
D. (ii) and (iv)

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August Sem, 2020 End Semester Examination ACCT 3223 Company
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Question 17
Which of the following is not a mandatory appointment in a company?
A. Promoter
B. Director
C. Company sectary
D. Auditor

Question 18
Which of the following criteria must a public company meet before it can trade?
A. It must have obtained a notice of incorporation from the Registrar of Companies
B. It must have obtained a certificate of entitlement from the Registrar of Companies
C. It must have appointed an auditor
D. It must have share capital

Question 19
From which of the following sources may a company pay a cash dividend to its members?
(i) Profit
(ii) Share capital
(iii) Share premium account

A. (i) only
B. (ii) only
C. (i) and (iii)
D. (ii) and (iii)

Question 20
As a minimum, what percentage of the votes is required to pass an ordinary resolution?
A. 50%
B. 51%
C. 75%
D. 76%
[30 Marks]

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August Sem, 2020 End Semester Examination ACCT 3223 Company
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SECTION B
Answer ALL questions

Question 1
a) What is meant by the doctrine of “separate legal entity” in company law? (4 marks)

b) What are the main duties for a company secretary in accordance with company law?
(4 marks)
c) What are the differences between a limited company by share and an unlimited company?
(4 marks)
[12 Marks]

Question 2
a) State the differences between an ordinary share and a preference share. (4 marks)

b) Distinguish a floating charge and a fixed charge. (6 marks)

[10 Marks]

Question 3
a) The common law has long recognized that directors being a fiduciary to the company
owes the company fiduciary duties. What are the fiduciary duties of a company director?
(4 marks)

b) Distinguish between a receiver and receiver manager. (4 marks)

c) What is the difference between a member’s voluntary winding up and a creditor’s

voluntary winding up? (4 marks)
[12 Marks]

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August Sem, 2020 End Semester Examination ACCT 3223 Company
Law

SECTION C
Answer ALL questions

Question 1
Lawrence was appointed as a director of Sunglight Bhd last year. He has never got along
well with his fellow directors on the board and has been quick with his criticism of any
improper conduct of any of the directors. This morning he received a letter from the
chairman of the board of directors to the effect that he had been removed as a director with
immediate effect, pursuant to a resolution of the board of directors. He wishes to know
whether he could challenge the legality of his removal as director.

Required:
Advise Lawrence that whether he could challenge the legality of his removal as director.
[12 Marks]

Question 2
Rasa Sayng Bhd, whose registered office is in Kota Kinabalu, held a members’ meeting on
10 September 2020. The meeting was held at the Popular Hotel in Kuching. The notice
calling for the meeting was sent out by the company on 1 September 2020 to all the members.
During the members’ meeting on 10 September 2020, a resolution was passed to appoint
Petunia as a new director of the company. This resolution was passed by a 60% majority.

Your advice is required on the following matters, which have arisen:

a) A member, Rose, who holds 10% of the issued shares claims that she had not received
notice of the meeting. She has threatened to institute legal proceedings to invalidate all
decisions taken at the meeting. Advise the board of directors as to the legality of the
meeting. (7 marks)

b) Whether the resolution to appoint Petunia as a new director could be challenged on any
ground, presuming that the members’ meeting had been validly convened. (7 marks)
[14 Marks]

Question 3
Ah Seng has been appointed as a trusted person that is responsible in forming a company that
shall be called Cemerlang Sdn Bhd. He is to undertake all the necessary documents and do
all other significant works related to the company. In the course of forming the company, Ah
Seng purchased a shop for RM900,000. Subsequently, the company was formed and he sold
the shop to the company for RM1,000,000. As a result of the transaction, he earned
RM100,000 in secret. The company has now discovered the true facts and wishes to take
legal action against Ah Seng for breach of fiduciary duty.

Required:
Advise Cemerlang Sdn Bhd that whether Cemerlang Sdn Bhd can take legal action against
Ah Seng for breach of fiduciary duty.
[10 Marks]

END OF QUESTION PAPER

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August Sem, 2020 End Semester Examination ACCT 3223 Company
Law
August Sem, 2020 End Semester Examination ACCT 3223 Company
Law