Legal Cauldron issue 1 of 2010

  • View
    514

  • Download
    1

Embed Size (px)

DESCRIPTION

A bi-annual legal magazine published by Messrs Jayadeep Hari & Jamil (Malaysia)

Text of Legal Cauldron issue 1 of 2010

  • 1.No.KDN:PP15706/02/2011(028275)INTHISISSUE:THELEGALCAULDRONTEAMEDITOR AnOnerousDutyAndrewChee Cautionwhenbuyingauction LAYOUT&DESIGNproperty AdrianLow CanintellectualpropertyrightsconstitutethesubjectmatterofARTICLECONTRIBUTORSanIslamicContract?GanesherajSelvarajahStanleyGabriel Protectingthefuture BarvinaPunnusamyFrankAkpoviriVisitusatwww.jhj.com.my

2. LEGALCAULDRON.ISSUE1/2010.PAGE2While others employ an operation which seems to infinitelyMESSAGEFROMTHEEDITORloop its members in a dreary, supposedly desirable and effi cient,system,itisnottheJHJphilosophy.YouwouldbesurJurisprudence, legal academics make comparisonsprisedattheresult,whenhierarchysometimesgiveswaytobetweentheCapitalistandMarxistState.ToCapitalists,consensus.EgoandpridedoesnottakerooteasilyonJHJsoilMarxist epistemology fails because it would be absurdwhenallofusloveourworkandvaluethefirmholistically.ifadoctorispaidthesameasafarmer.TotheMarxisthowever,societymuststrivetopromoteandencourageThe Action Coach Team Award 2009 comes as recognitionits productive members to engage in the activity orand encouragement knowing that we are treading on, notprofession in which one is most apt and has the most necessarilythemostprofitable,butdefinitelythebetterpath.passion for without any attachment to ensuingcompensation.TheMarxistinallofuscontinuouslyask: ThequestionIposetoyounowbecomes:WouldyouratherWouldyouratherbetreatedbyadoctorwhoisonlyinhirealawyerthatsinitforthemoney?Oralawyerthatlovesitforthemoney?Orthedoctorwholoveshiswork? andbelievesinhiswork?ThejurisprudentialrelevanceofthisnotecomestolightaswewouldliketoannouncethatMessrsJayadeepHariANONEROUSDUTY&JamilhaswontheActionCoachTeamAwardfor2009. ByGanesherajSelvarajahIn its entire history of awards, the Action Coach organisation (which is established in more than 23 INTRODUCTIONcountries worldwide with over a million participants) deigned it most appropriate that JHJ be the first legalOver the years we have seen a growing number of companiesoutfitamongstitsstabletoliftaloftthiscovetedaward. beingestablishedinMalaysia.AverycommonreasonforestabJHJhasbeenundertheActionCoachprogramforoveralishmentofacompanyisLimitedLiability.Whatthismeansisyear now as our commitment to self and constant thattheshareholdersdonothavetheburdenofoverseeingtheimprovement. Before Action Coach, JHJ had sought and riskandprofitabilityofthecompanyasthesamefallwithintheengaged professionals in guiding and steering the responsibilityoftheBoardofDirectorsandwithsuchresponsimembers of the JHJ family in self development and bilitycomesaccountability.excellence in services. We are extremely elated to have our efforts recognised in this award. Companies were Thepurposeofthisarticleisnottodelveintothedetailsofthejudgedbasedon:duties and responsibilities of directors but generally just to serve as a guide on the substantial exposure placed on the di What the company is doing for the continuous rectorsinthedaytodayundertakingthisonerousduty.improvementoftheteam; The steps the company intends to take in the nearfuturetowardtheaboveaim;GENERALDEFINITIONOFADIRECTOR ThecompanysHRmanagementsystems;and Theprobabilityofemployeesatisfaction. For ease of reference, I have taken the liberty to state in verygeneraltermsthefollowing:Indeed, we are a firm that enjoys doing what we do. Committing to selfimprovement is not a chore to JHJ. 1. Anindividualcanbeadirectoraslongashe/she:Wemaynotbethebiggestbutweareperhapsoneofthe A) is18yearsold(forpubliccompaniesthegeneralrulemostpassionate.Itisraretofindanysortofcorporation isthatadirectormustbeunder70yearsold);where the clerks and secretaries are also thinking of B) isnotanundischargedbankrupt;suggestionsand strategiesto implement in the firm, be C) hasnotbeen convictedofcriminaloffenceinvolvingit to make existing systems more efficient or merely tomake the office more cheerful and comfortable. Every fraudordishonesty;employee gets to chair the rather important staffD) has not been imprisonedfor an offence under S132,meeting every month. And every month we get a S132AorunderS303ofCompaniesAct;and/ordifferent flavour meeting which yields different andE) hasconsentedtoactasdirector.otherwise unseen results. The osmosis of opinions andideasthatseepandexudefromeveryonekeepsusona 2. Section4oftheCompaniesAct1965(CA)definesdirectorconstant flux that prevents the firm from descendingas:intoroutinemonotony.Visitusatwww.jhj.com.my 3. LEGALCAULDRON.ISSUE1/2010.PAGE3 anypersonoccupyingthepositionofdirectorofacorpo most potential liabilities in shareholderrelated claims. Di rationbywhatevernamecalledandincludesapersonin rectors may be able to justify a wrongful act, such as any accordance with whose directions or instructions theactualorallegedbreachofdutyandbreachoftrusttomi directors of a corporation are accustomed to act and annority shareholders or place the burden on the manage alternateorsubstitutedirector menttoensurecompliance. CertainothersectionswithintheCompaniesActhavegoneon However, they would not be covered for acts which areto include the CEO, COO, CFO or any other person primarily deemed criminal acts where their behaviour and misconresponsible for the operations or financial management of aductareconstruedtobewillful,fraudulentandintentional.company,bywhatevernamecalled. POSSIBLEPENALTIESWHYTHESPOTLIGHT? ItwouldnotbepossibletostateinverydetailorevenlistAfewyearsago,directorsdidnotshoulderthesameconcernsoutallthepotentialliabilitiesinonesimplearticlelikethisastheydotoday.Rightfullyso,thesituationhaschangeddra but more often than not the items below are some of thematically in line with factors such globalization on corporate examplesofmorecommonpenalties/sanctionsimposedonfinance and management, the growing impact of computers Directors.andcommunicationinformation,thegrowingdemandofinsti tutional investors and international institution, complex capi 1.Breachoftheirfiduciarydutytal controls and corporate reform as a whole, just to name afew.A) director sets up another firm to compete forcontractswiththecompany:AvelConsultantsCoupled with the establishment of watchdog groups and the Sdn Bhd & Anor v Mohamed Zain Yusof &greater need for good corporate governance, a renewed emOrs[1985]2MLJ209phasis has been placed on the responsibilities of directors. A substantialchangeismoreevidentinpubliclistedcompanies B) directordivertsabusinessopportunityforhisbutitwillonlybeamatteroftimewhenitbecomescommon own profit: Hytech Builders Pte Ltd v Tanexpectationorarequirementforallcompaniestoelectquality EngLeong&Anor[1995]2SLR795directors. Obviously the increased responsibilities, leading to furtheraccountability,wouldmostdefinitelycallonallparties2.Failuretocomplywithstatutoryrequirements:to take into serious consideration any invitation to a Board, considering the director will most evidently be exposed toA) obligationtokeepregisters;greaterriskandliability.B) to make documents available for inspection;AlthoughMalaysiahasonlyseenalimitednumberofdirectorsC) tokeepminutesofmeetings;liability cases, several factors are now combining in effect toD) tokeepaccountingrecordsandbooks;makethisarealpossibilityinthefuture.TheseincludethereE) toholdAGM;centcorporateandsecuritieslawreformstolessentheburdenF) tolodgechangesinparticularsofthecomofproofforoffences,whistleblowingprovisions,theshiftfrom panydirectorsandsecretaries;and/ora meritbased to disclosurebased regime for full and appro priatedisclosure,duediligenceandincreasingactivismamongG) torecordandnoteinterestsofanddisclominorityshareholders.Thereisagrowingmultitudeofstatut surebydirectorsorchiefexecutives,theirory liabilities under the Securities Commission Act 1993 and spouses,childrenorparentsoftheirintertheCapitalMarketandServicesAct,2007thatwillexposedi estinsecuritiesofacompany.rectorstoagreatervarietyofriskfactorsthanbefore. 3.FailuretocomplywiththerequirementsofmakingInadequate,inappropriateorincompletedisclosures,accountemploymentprovidentfundpayments:ing irregularities, erroneous announcements, false and mis leadingstatementsorcompanylawviolationslieattherootof Wecare 4. LEGALCAULDRON.ISSUE1/2010.PAGE4This is a strict liability issue. What this means is CONCLUSIONthatsolongasthecompanyfailstomaketherequiredemploymentProvidentFund(EPF)contri butions,thedirectorswouldbepersonallyliable. Inconclusion,thepowersuits,theglamourofcorporatedealingsandtheconsiderablepowersynonymwiththepostofaThecourtshaveevengonefurtherandtoholdthe director come at a price. The price, shouldering the onerousdirectors personally liable even where the comduty of ensuring the interest of the company is safeguardedpanyhasbeenwoundupstatingthatatthemate andupheldatalltimes,evenifitisagainstthewishesoftherialtimewhenthecontributionsfailedtobepaid stakeholders of the company itself. Taking a look at internathe individual was the named Director. OnKimChuan & Anor V. Lembaga Kumpulan Wang tional corporate structures and precedents, the regulationsSimpanan Pekerja [2009] 6 CLJ 586 [2009] 1 andenforcementofregulationswillmostcertainlybeanareaLNS576.thatwillcontinuetodevelop.Assuch,dueandproperconsideration of the roles, duties and exposures of a director must4. Failure to comply with the requirements of the be given andjust as anycomplex decision, due research andAuthorities: adviseshouldbesoughtbeforemakingadecision. (a)Stock Market manipulation and submis sion of false statement to the Securities Commission. A director was fined RM150,000.00 and in default would beGanesherajSelvarajah liableto3monthsimprisonment;Partnerganesh@jhj.com.my(b) Directors conspiring to withdraw money from trust account. Two directors were fined RM200,000.00 each and in default wouldbeliableto1yearimprisonment;CAUTIONWHENBUYINGAUCTIONPROPERTY ByStanleyGabriel(c)An operating officer engaged in an act Siti noticed in the local newspapers, that a large number of whichoperatedasadeceit(InitialPublicpropertiesarebeingauctionedoffeveryday.Shealsorealised Offering exercise). Th