Lecture 15:

Company Law

Ms Nurul Atikah Rosli/Stephen Sesaiah

 9.1 Introduction

 The Companies Act 2016 is the principal legislation governing the

formation and operation of companies in Malaysia
 The Act enables an association of persons to form various types of
corporate organizations known as registered companies
 This Act also provides facilities for the incorporation of
companies, its constitution, its relation with members and
creditors, management and winding-up
 Registrar Of Companies under the Companies Commission of
Malaysia (CCM) enforces and administers the CA 2016
 Every company must register with ROC before conducting any
business activity
 9.2 Separate Legal Entity

Section20(a)
A company incorporated under this Act is a body of corporate and shall have legal personality separate
from that of its members

Landmark case:
Salomon v A Salomon & Co Ltd [1897] AC 22
 9.2 Separate Legal Entity
Salomon v A Salomon & Co Ltd [1897] AC 22
Facts:
Salomon was a successful boot and shoe manufacturer. He ran the business as a sole
proprietor under the name “A Salomon & Co.” After some time, Salomon incorporated his
business as a limited liability company. He gave 1 share each to his wife and 5 of his children
and took 20,001 shares. The business was transferred to the company and he continued to run
the business as before. The company soon fell into trouble and was put to liquidation. The
assets of the company were not enough to pay off each creditor of the company, and so an
action was taken against Salomon personally.
Judgement:
The House of Lords held that the incorporation of the company created a separate person.
Even though the business of the company was the same as before and the same persons
managed and received profits from the business, the members were not liable in respect of the
company’s obligations.
Although operationally the business was managed solely by Salomon, in law he and the
company were separate persons.
9.4 Effect of Legal Entity

S.21
S.21 S.20(b)
S.20 S.21(1)(a)
Unlimited
Perpetual Can sue
capacity,
succession and be
limited
sued
liability

Own
business Contractua
property l capacity

S.21(1)(b) S.21(1)(c)
 9.4 Veil of Incorporation

General principle
Once a company is incorporated, the courts usually
do not look behind the veil to inquire why the
company was formed or who really controls it.

Exception : Lifting the veil

In certain situations, the court will ignore the
separate legal personality of a company & look to
the members/controllers of the company
 9.4 Lifting the veil

STATUTORY EXCEPTIONS JUDICIAL EXCEPTIONS

Based on laws Based on courts’ decision

S.123
S.131 To a v o i d l e g a l
Financial
Dividend
not from
obligation
Assistance k Jones v Lipman [1962] 1 WLR
profit
832
Commit fraud
S.140 Aspatra Sdn Bhd v Bank
S.540 Failure to Bumiputra Malaysia Bhd [1988]
Fraudulent pay 1 MLJ 97
income tax
One economic unit
Hotel Jaya Puri Bhd v National
Union [1980] 1 MLJ 109
 9.4 Lifting the veil

Company used to avoid legal obligations

Jones v Lipman [1962] 1 WLR 832

Lipman had agreed to sell a house to Jones but subsequently changed his mind. He
incorporated a company, Alamed Ltd and transferred the house to it. Alamed Ltd was
wholly-owned and controlled by Lipman. Jones sought an order to have Alamed Ltd
transfer the house to him. The defence raised by Lipman was that Alamed Ltd was not
a party against whom the order could be made.

The court held that such a defence failed because Lipman had created Alamed Ltd in
an attempt to avoid his obligation. Thus, in this case, the court lifted the veil of
incorporation to see who was behind Alamed Ltd, and ordered Lipman and Alamed
Ltd to perform the contract to sell the house to Jones.
 9.4 Lifting the veil

Company used to commit fraud

Aspatra Sdn Bhd v Bank Bumiputra Malaysia Bhd

[1988] 1 MLJ 97

Fraud committed by Lorrain Osman as a director of the Respondent, he had

made secret profits amounted RM27million. He was using Aspatra Sdn Bhd and
other companies to hide his assets.

The court lifted corporate veil by looking at the said company whether it was
really owned by Lorrain.
One Economic Entity
Hotel Jaya Puri Bhd v National Union of Hotel, Bar & Restaurant
Workers [1980] 1 MLJ 109

Jaya Puri Restaurant Sdn Bhd was a wholly-owned subsidiary of Hotel Jaya Puri Bhd
(“Hotel Co.”). There were 56 workers employed by the Restaurant which later insolvent.
A dispute arose between the Union, which represented the workers and the Restaurant Co.
The Industrial Court made an order directing the Hotel Co. to be joined as a party to the
dispute. One of the findings was that the employees whose services were terminated were
in fact employees of the Hotel Co. The plaintiff disputed this finding and referred the case
to the High Court.

The High Court upheld the Industrial Court’s findings. Although technically the
Restaurant Co. and the Hotel Co. were separate legal entities, in reality the 2 companies
were functionally one and therefore the workers were in fact employees of the hotel. The
High Court was prepared to ignore the separate identities of the Restaurant Co. and the
Hotel Co. and treat them as one single entity.
 Public Interest

 Dailmer v Continental Tyers ( 1916).

 Cw – 2

 - Introduction on what is IP
 -Types of IP ---1) Copyrights 2) Trademark 3) Patent 4) Trade secret
 Why it important?