Question One

Nik, Raju and Lan incorporated a company known as 4season Sdn. Bhd. (4season) in February 2020. The
company involved in retail bakery supplies including bakery tools and equipment as well as bakery
ingredients. In March 2020, the company was informed by Rich Finance that its loan application has been
approved. The loan was guaranteed by Raju and Nik and the loan is now in arrears. Lan, on behalf of the
company had entered into a contract with Brothers Trading to supply dairy products to 4season. Since
July 2020 the company failed to pay for the goods supplied by Brothers Trading. In June 2020, 4season
incorporated a subsidiary company known as Bake Sweet Sdn Bhd to produce cakes mixes and cookie
mixes. Raju and Lan are the directors of Bake Sweet. Bake Sweet had applied a loan from Bank Kaya to
run its business and was successful. Bake Sweet’s loan payment to Bank Kaya is now outstanding for three
months. Advise:

i. Whether 4season Sdn. Bhd. or/and the directors would be liable to Rich Finance and Brothers
Trading.
ii. Whether Bank Kaya can sue both 4Season and Bake Sweet Sdn. Bhd. for the repayment of the
loan because they have common directors and the same registered address.

Question Two

Faiz and Halim has agreed to incorporate a company which will be involved in digital printing business.
Earlier Halim had bought a specialised design software at a discounted price. Halim informed Faiz that
he will sell the software to the company after its incorporation. In August 2018, Faiz ordered printing
machines and printer from a supplier, ZA Tech Sdn Bhd. He mentioned to ZA tech Sdn Bhd that the
machines and printer will be used by a new company which will be incorporated and ZA Tech Sdn Bhd
can bill the payment to the new company.

In October 2018, Digital Printing Sdn Bhd was successfully set up and Halim transferred the software
that he bought to Digital Printing Sdn Bhd at market price. Halim and Faiz were the directors and the
shareholders of the company. Halim agreed to share the profit made from the sale with Faiz.

The business has been successful, Faiz and Halim incorporated a subsidiary company to sell and supply
stationeries known as ABC Sdn Bhd. The subsidiary was operating in premises belong to Digital Printing
Sdn Bhd. In fact, both companies share the same directors and the profits of the new company were
treated as profits of the parent company. In January 2019, the local authority issued a notice to ABC Sdn
Bhd, to compulsorily acquire the building. Digital Printing claimed compensation from the local
authority. However, the local authority argued that the proper claimants should be ABC Sdn Bhd since
the company (ABC Sdn Bhd) is occupying the premises and is separate legal entity.

Meanwhile the new shareholders of the company were not satisfied when they found out that Halim
gained some profit from the sale of the software to Digital Printing Sdn. Bhd.
Advise whether:

a) Digital Printing Sdn Bhd or ABC Sdn Bhd can claim the compensation from the local authority

b) Halim had breached any promoter’s duties?

c) ZA Tech Sdn Bhd can claim the payment for the printing machines and printer from Digital Printing
Sdn Bhd.

Question 3

Faris, Lee and Din incorporated New Biz Sdn Bhd (New Biz). The business operates at premises belonged
to Faris . Faris had sold the premises to New Biz during its incorporation at RM300 000 whilst its market
price range between RM200 000 - 280 000. The sale of the premises and the profit made by Faris was
known to Lee and Din. New Biz’s constitution includes the following provisions:

Article 20: The object of the company is to be involved in clothing business.

Article 37: The Managing Director shall not be removed from office until the expiration of his period of
service.

Recently the board of directors of New Biz decided that the company should venture in producing
sanitizers, gloves and face mask due to an airborne pandemic. The company had ordered raw materials
from MK Supply Sdn Bhd to manufacture the new products. Some of the shareholders in the company
did not agree with the company’s new business as it was against the constitution of the company.
Shukri has been appointed as the Managing Director of New Biz for a period of two years. His service of
employment had adopted Article 37 of the company’s constitution. After one year of service, the
company was not satisfied with his performance and decided to terminate Shukri’s employment. Shukri
believed that his termination contravened New Biz’s constitution.

Advise:
a) The board of New Biz, regarding the validity of the new business and the contract with MK Supply Sdn
Bhd .
b) Shukri, regarding his termination .
c) Faris, whether there has been a breach of promoter’s duties in the transfer of the premises to New
Biz.

Question 4

In 2017, Mimi , Jenny and Rahman incorporated a company known as Zartech Sdn. Bhd.(Zartech) they
are directors and majority shareholders of the company. Priya was appointed as the company secretary
to Zartech. The object clause of Zartech as stated in the company’s constitution is to carry on “business
of buying and selling medical equipment”.

The company’s constitution also provides:

Article 21A: The company secretary shall be duly appointed for a period of 3 years, renewable subject to
passing of a special resolution.

Article 21B: the company secretary may be removed by ordinary resolution or written resolution of
member

Due to the growing demand for electronic health fitness band the board decided that the company
should be involved in such business. Subsequently Zartech entered into a distributor agreement with
Ziaomi Sdn Bhd, a manufacturer of fitness band based in Petaling Jaya. Some of the shareholders were
not satisfied when they learned about the contract entered by Zartech and Ziaomi Sdn. Bhd.

Recently the board of directors decided to remove Priya as the company secretary. Priya is very upset
since the contract of employment provides that her term is for three years and there is no mention
about the removal. Therefore , Priya seeks to challenge her removal.

Advise:

(a) The shareholders, on the effect of the contract between Zartech and Ziaomi Sdn Bhd and what would
be the appropriate action for the shareholders?

(b) The board and Priya, regarding her removal as the company secretary

(c) The board and shareholders whether the company can delete articles 21A and 21B.