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CONFIDENTIAL LW OCT 2009 LAW485

UNIVERSITI TEKNOLOGI M R

FIN L EX MIN TION

COURSE

COURSE CODE

EXAMINATION

TIME

CORPORATE L W

LAW485

OCTOBER 2009

3 HOURS

INSTRUCTIONS TO CANDIDATES

1 .

This ques tion paper consists

of

SEVEN

7)

questions.

2. Answer FOUR 4) questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the

invigilator.

4.

Please che ck

to

make sure that this examination pack consists

of:

(i) the Question Paper

(ii) an Ans we r Booklet

-

provided

by the

Faculty

DO NOT TURN

T IS

P GE

UNTIL

YOU RE TOLD TO

O SO

his examination paper c onsists

o

printed pages

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LW/OCT 2009/LAW485

PART A

QUESTION 1

Section 16(5) of the Companies Act 1965 provides for the creation of a company as a

separate legal entity upon incorporation. However, in certain circumstances the law will

ignore the separate legal personality of the company and will lift the veil of incorporation to

hold the m embers personally responsible for the actions of the company.

Explain the judicial exceptions to the separate legal entity doctrine.

(100 marks)

QUESTION 2

a) The doctrine of ultra vires played an important role in the deve lopment of corporate

powers.

With reference to the relevant provisions in the Companies Act 1965, discuss the

application and the effects of the doctrine in Malaysia.

(60 marks)

b) Distinguish the memora ndum of association from article of assoc iation and state

three (3) m atters governed by the respective docu ments.

(40 marks)

QUESTION 3

Matahari Sdn Bhd (the company) was incorporated in May 20 09 with the primary purpose of

manufacturing motor spare parts. The company appointed Mat, Syam and Alias as the

directors of the comp any.

On 15

th

Jun 2009, the company entered into a contract with Sinar Sdn. Bhd. to purchase

alloy for m anufacturing side mirrors to be distributed to the E uropean market. This was done

on Mat's recommendation. However, unknown to the company, Mat and Syam were also

directors of Sinar Sdn Bhd. Neither M at nor Syam disclosed this fact to the company.

On 3

rd

July 2 009, the company requested Alias to n egotiate a contract with Suharto Limited,

a company in Jakarta, for the setting up of a new factory there. In the course of negotiation,

Suharto Berhad informed Alias that it was interested in engaging him personally for the

project and has no interest in contracting with Matahari Sdn Bhd. Four weeks after the

negotiations, Alias resigned from Matahari using ill health as an excuse. The contract has

since been awarded to Alias by Suharto Ltd.

Matahari Sdn Bhd has now discovered the true facts and seeks to recover all profits that

Alias had made under his contract with Suharto Lim ited. At the sam e time, the company also

wishes to know whether it can successfully sue Mat and Syam for failure to disclose their

position in Sinar Sdn Bhd.

Advise Matahari Sdn Bhd.

(100 marks)

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LW OCT 2009 LAW485

QUESTION 4

a) Explain who may qualify as an auditor of a company and when must an auditor be

appointed?

(50 marks)

b) Luqman has been appointed as an auditor of Juzu Sdn Bhd. On 3

rd

April 2009,

Juliana purchased shares of the company worth RM30,000 from Ahmad, a

shareholder. The purchase was made based on the auditor's report which revealed

that the company had recorded increasing profits over the past seven yea rs. Juliana

has recently discovered that no such profits were made by the company and that it

was in fact operating at a loss. The value of her shares as a result are worth much

less than what she paid for.

Advise Juliana if she could sue Luqman for the loss she had suffered on the

purchase of the shares.

(50 marks)

QUESTION 5

In the context of company me etings,

a) Distinguish an Annua l General Meeting (AGM) from an Extraordinary General

Meeting (EGM).

(10 marks)

b) Explain whe n the Board of directors may convene an EGM and whether there are

any circumstances in which the members themselves may convene an EGM.

(40 marks)

c) Mr. Yuza inizam, a shareholder of a company is unable to attend its forthcoming

extraordinary general meeting which is scheduled to be held on 25

th

Nov 2009. He

seeks clarification pertaining to the appointment and rights of a proxy.

Advise Mr. Yuzainizam as to who may be appointed as a proxy, as well the rights of

a proxy under the Companies Act 1965.

(50 marks)

QUESTION 6

Merdeka Sdn. Bhd. has not been declaring dividends for the last 4 years due to poor

business and bad investment. However, through a sale of two of its factories, the company

has made a profit of RM5 million. The board of directors is contemplating declaring a

dividend using the who le gain from the sale.

Advise the board of directors on the rules pertaining to payment of dividends and in

particular, whether they may apply the gain from the sale for the payment of d ividends.

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(100 marks)

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QUESTION 7

Nazri and Apek hold 20 of the shares in Urat Besi Sdn Bhd . Fizah and Fahm i, who are

directors of the company, hold the remaining 80 of the shares. Nazri and Apek allege that

Fizah and Fahmi have managed the company as if it was their own without regard to the

interest of the minority shareholders. Dividends were not declared for the past seven years

even though the company made considerable profits. Instead, a huge portion of the profits

was used to pay exorbitant fees to the directors.

It was further alleged that Fizah and Fahmi have caused the company to sell its land at

Sepang for only RM300,000 to Nurul, the sister of Fahmi, when its actual value is RM2

million.

Nazri and Apek discovered recently that the company has made a bad investment when the

board purchased a land near a slum clearance programme in Ulu Yam for a price of RM5.5

million. The land was owned by Fizah's brother Din.

Com plaints were mad e to the directors regarding the above ma tters, but the com plaints have

gone unheeded.

Advise N azri and Apek on the following:

a) Whether they can bring an action against Fizah and Fahmi in the name of the

company.

(50 marks)

b) Whether they can seek a remedy on their own behalf in the above circumstances.

(50 marks)

END OF QUESTION PAPER

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LAW485 (1)