Complete Assignment Law

8/10/2019 Complete Assignment Law

1/22

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


2/22

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 s 31 2 + ro/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

1+ Any alt'ration must not b' &ontrary to any o* th' (ro/isions in th' $om(ani's A&t 1965

n -'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 33 3 . (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 r' uir'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(any s shar' &a(ital or oth'r)is' to (ay mon'y to

th' &om(any + ,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' sub '&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' uir's th' &om(any to ma7' any. or any s('&i*i'd. alt'ration in th'

1 S''. A ra&ti&al A((roa&h to $om(any :a). 4 th +'d . by St'(h'n "+ Mayson. %'r'7 Fr'n&h ; $hristo(h'r


3/22

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' uir'm'nt )ithout th' &ourt s l'a/' 2+

A &om(any )hi&h omits th' )ord limit'd *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' uir'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 31 1 is '>(r'ssly stat'd to b' sub '&t to any &onditions

in th' &om(any s 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

+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' ma ority o* /ot's on th' oth'r+ ,h' &om(any s

&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 toin/alidat' th' d'&ision o* th' ma ority 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' ma ority a&t'd un*airly+ :atham $# )as o* th' o(inion that m'r'ly

b'&aus' an alt'ration (r' udi&ially a**'&t'd th' ri-hts o* som' shar'hold'rs. this did not m'an2 bid. (+=33 S''. 't'rs Am'ri&an %'li&a&y $o :td / !'ath 1939 61 $:< 45=. 4=9


4/22

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

+a*

,h' &om(any )hi&h is to a& uir' 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+ n 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 Symonds 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 in un&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'

in un&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- ma ority+

!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'rs

a-r''m'nt is /alid6

+ ,h' r'lat'd &as' is Russell v Northern Ban Develo!ment Cor!oration"

+a*

4 S''. $om(any :a). 2 nd +'d . by "alt'r "oon. (+1315 S''. unt / Symons ; $o :td 1903B $h 5066 S''. $om(any :a). 2 nd +'d . by "alt'r "oon. (+131= S''.


5/22

,yron' Cri&7 :td and its *our shar'hold'rs had 'nt'r'd into a shar'hold'rs 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.


6/22

o* th' *amily aros' as to )h'th'r '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+ !arold s 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 'r&y s 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 sub '&t to som' limitation on th' m'mb'r s /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' ona 'ide *or th' b'n'*it o* th' &om(any

as a )hol' + ,h' &om(any as a )hol' in this &ont'>t is not a r'*'r'n&' to th' *i&tional 'ntity but

is usually r'-ard'd as m'anin- th' m'mb'rs 11+ ,h' r'lat'd &as' is Allen v (old Ree's o' )est

A'rica Ltd 12

+a*

,h' &om(any s 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 6.000 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 'tt't. (+10512 S''. All'n / @old


7/22

Sir Nathani'l :indl'y M<

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(any s 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 sub '&t to thos' -'n'ral

(rin&i(l's o* la) and ' uity )hi&h ar' a((li&abl' to all (o)'rs &on*'rr'd on ma oriti's and

'nablin- th'm to bind minoriti's+ t must b' '>'r&is'd. not only in th' mann'r r' uir'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+

n &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+ t 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

sub '&t to th' (rin&i(l' that th' ma ority 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'

ma ority 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). 2 nd +'d . by "alt'r "oon. (+12914 S''. @r''nhal-h / Ard'rn' $in'mas :td 1951B $h 286 $ourt o* A(('al


8/22

Sir Cros ; $o Maid'nh'ad :td 192=B 2 KC 9 $ourt o* A(('al


9/22

+a*

,h' (lainti** )as a((oint'd a ('rman'nt dir'&tor o* th' &om(any und'r th' &om(any s

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 in uiry into th'

matt'r h' )as dismiss'd as )or7s mana-'r+ ,h' &om(any s arti&l's o* asso&iation )'r' th'n

alt'r'd by addin- an additional '/'nt to art 22 dis uali*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' u'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 in!late Co Ltd v Llanelly Steel Co$4

+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(any s 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+ n r's(ons' to this. th'

d'*'ndant tri'd to a& uir' th' (lainti** s 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' ma ority 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' ob '&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 190= :td 1920B 2 $h 124


10/22

,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' ma ority th' (o)'r to '>(ro(riat' any shar'hold'r at th'ir )ill and (l'asur'+

t 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 ssues nvestment rust Ltd v

Stylo Shoes Ltd 6%

+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& uir' 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 toin&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 ma ority+

,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

* 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' udi&' by th' ma ority. that arti&l' &annot b' alt'r'd )ithout th'a((ro/al o* th' &ourt 21+

19 S''. $om(any :a). 12 th +'d . by @'o**r'y Mors'. (+11120 S''.


11/22

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 bid. (+105


12/22

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 16 5 (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' 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 in uir' )hy th'

&om(any )as *orm'd or )ho r'ally &ontrols it 24+ t )as 'stablish'd in Salomon v. A Salomon &

Co. Ltd. 7$48"9 65

+a*

23 S'' rin&i(l's o* $om(any :a) in Malaysia. by Shanthy


13/22

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' A Salomon ; $o+ 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+ ,h'y troubl'd

m'. said Salomon. all th' )hil' + 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

li uidation+ ?nou-h &ould ha/' b''n r'aliz'd on th' ass'ts to (ay o** th' s'&ur'd &r'ditors

in&ludin- Salomon hims'l* as a d'b'ntur' hold'r . but th' uns'&ur'd &r'ditors )'r' l'*t out

in th' &old+ ,h' li uidator 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(any s 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' uir'm'nts and *ormaliti's+ $ourt )ill loo7 to th'm'mb'rs or th' &ontroll'rs o* th' &om(any+ t 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 li*tin- th' /'il + ,h' &as' r'lat'd to

this is Atlas 1aritime Co SA v. Avalon 1aritime Ltd 64

26 bid : at ( 31 :ord !alsbury :$2= S''. $om(any :a). 2nd 'd+ . by "alt'r "oon. ( 46+28 S''. '- Atlas 1aritime Co SA v Avalon 1aritime Ltd 1991B 4 A:: ?< =69+


14/22

Stau-hton :# obs'r/'d

,h' &r'ation or (ur&has' o* a subsidiary &om(any )ith minimal liability. )hi&h )ill o('rat'

)ith th' (ar'nt s *unds and on th' (ar'nt s 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'+

n -'n'ral. th' &ourts )ill r's('&t th' &om(any s 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 usti*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' uir's

'/id'n&'+ * th' '/id'n&' do's not 'stablish that th' &om(any is run as a m'r' '>t'nsion o* its&ontroll'rs 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+ n 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)+ t &an b' s''n it th' &as' ;a! Sin* Hoc v. Pu lic Prosecutor 3%

n th' Su(r'm' $ourt 'h S)'' $hin S$#. said

Su&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- sub '&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+

,h'n. th'r' is as y't no sin-l' t'st *or li*tin- th' /'il o* in&or(oration+ i'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'

Salomon s &as'+ !'n&'. th' '>&'(tions *all into t)o &at'-ori's )hi&h is statutory '>&'(tions und'r

29 S''. $om(any :a). 2nd 'd+ . by "alt'r "oon. ( 52+

30 ;a! Sin* Hoc v Pu lic Prosecutor 1992B 2 M:# =14+


15/22

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' &ourt s 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

1+ S+6= 3 ma7's its o**i&'rs in d'*ault. and not th' &om(any. -uilty o* a &riminal o**'n&'+ n

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= 3 . a &om(any s o**i&'rs in d'*ault . and not th' &om(any. ar' liabl'*or a *in' o* &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 an Len* ec v Sar


16/22

d'*'ndant to a& uir' th' shar's )ill not amount to *inan&ial assistan&' )ithin th'

m'anin- o* S+6= 1 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'*'ndant s (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+ t )as not a transa&tion

)h'r'by th' *irst d'*'ndant a& uir'd anythin- )hi&h it -'nuin'ly n''d *or its

o)n (ur(os'+

2+ S+304 2 should b' r'ad in &on un&tion )ith S+303 3 )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+ n S+303 3 . 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' uir'd to (r'(ar' &onsolidat'd

a&&ounts &onsolidatin- th' *inan&ial (osition o* th' holdin- &om(any and its subsidiari's+ n

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+ t 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'' rin&i(l's o* $om(any :a) in Malaysia by Shanthy


17/22

)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'+ t 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'


18/22

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+ * 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+ * 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 sub '&t to t)o '>&'(tions *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- 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 u'stion 39+ t )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'rsar' 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* uasiDsur'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 not thos' )hos' )ithdra)al has l'd to th' *all

b'lo) th' minimum 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* li uidat'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+ t 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+304 1 is r'lat'd to th' &as' o* *raudul'nt tradin-+ * 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' li uidator. &r'ditor or &ontributory+ ,his s'&tion o/'rla(s )ith S+339 3 in that th'

38 bid. (+46039 S'' $om(any :a). 2 nd+'d . by "alt'r "oon. (+5340 S'' @o)'r s rin&i(l's o* Mod'rn $om(any :a). 4 th+'d . by :+$+C+ @o)'r. (+114


19/22

&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+

t &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' u'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' u' 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' u' or oth'r n'-otiabl' instrum'nt

unl'ss th' &om(any (ays th' amount 43+

n 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' u' 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+ n 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' u'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' in41 S'' $om(any :a). 2 nd+'d . by "alt'r "oon. (+5442 S'' @o)'r s rin&i(l's o* Mod'rn $om(any :a). 4 th+'d . by :+$+C+ @o)'r. (+11543 S'' rin&i(l's o* $om(any :a) in Malaysia by Shanthy


20/22

&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+ t 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'r s &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+ n 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 )ith &orr's(ondin- ri-hts . in &ontrast )ith th' (rimary liability im(os'd by th'

s'&tions (r'/iously &onsid'r'd+

,h' ob '&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 ust 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+ n -'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+140 1 o* th' n&om' ,a> A&t 196= allo)s th' %ir'&torD@'n'ral o* nland '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(any s in&om'

may. in '**'&t. b' tr'at'd *or ta> (ur(os's as that o* th' m'mb'rs+ n r'lation to &a(italtrans*'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+ n this *i'ld. th' l'-islatur' has ind''d &ra&7'd o('n

th' &or(orat' sh'll+

44 S'' @o)'r s rin&i(l's o* Mod'rn $om(any :a). 4 th+'d . by :+$+C+ @o)'r. (+116D11=45 S'' rin&i(l's o* $om(any :a) in Malaysia by Shanthy


21/22

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+365 2 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(any s 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+365 2 )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+365 2 +

-efere"*es :

1+ $on&is' rin&i(l's o* $om(any :a) in Malaysia by Shanthy isN'>is Malaysia Sdn Chd+

46 S'' @o)'r s rin&i(l's o* Mod'rn $om(any :a). 4 th+'d . by :+$+C+ @o)'r. (+120D1214= S'' rin&i(l's o* $om(any :a) in Malaysia by Shanthy


22/22

2+ rin&i(l' o* $om(any :a) in Malaysia Malaysia by Shanthy

Documents

Complete Assignment Law