Students Online Tutorial Cl c5

8/21/2019 Students Online Tutorial Cl c5

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Who is a promoter?

Sec 4(1) CA – in relation to a prospectus

issued by or in connection with a

corporation, means a promoter of the

corporation who was a party to thepreparation of the prospectus or of any

relevant portion thereof; but does not

include any person by reason only of hisactin in a professional capacity


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Who is a promoter?

!"romoters# include controllin

shareholders, persons connected to

controllin shareholders and e$ecutive

directors who are substantial shareholdersof the issuer

(Prospectus Guidelines – issued by SC)


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Promoters Duties

%uties in relation to submission proposals

and prospectus – C&SA

%uty in relation to submission of proposal

and to refrain from ma'in false and

misleadin statements


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Pre-incorporation Contracts

At common law, a company is not bound bypreincorporation contracts since a principalwho was not in e$istence at the time the

contract was sined cannot be bound by apurported aent

Sec *+ CA however allows preincorporation

contracts and other transactions entered intobefore the company came into e$istence tobe ratified by the company in order to bind thecompany


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Any contract or transaction purported to beentered into by a company before itsincorporation may be ratified by the

company after its formation and thereuponthe company shall become bound by it –Sec *+(1)

he ratification shall cause the contract tobe effective as from the date of the contractwas sined or entered into Sec *+(1)


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-efore the ratification, the person who

purported to sin or enter into the

transaction on behalf of the company shall

be personally bound by the transaction orcontract


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Form of Contracts

Sec *+ (4)

Contracts on behalf of the company may

be made as follows –

&ay be made on behalf of the company in

writin under the common seal of the

company

&ay be made on behalf of the companysined by any person actin under its

authority e$press or implied


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Corporate Seal

.very company must have a common seal

– Sec 1/(+)

he company number and name will

appear on the seal

he seal shall only be used by authority of

the directors or of a committee of the

directors authori0ed by the directors


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Corporate Seal

he articles usually provide that every

instrument to which the seal is affi$ed

shall be sined by a director and

countersined by the secretary or asecond director or by some other persons

appointed by the director for the purpose

Affi$ation of the common seal must bedone in accordance with the articles


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Questions and Answers


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Promoter and Pre-

incorporation Contracts

Ali is the brother of -a'ar who has a controllinshare in -i &ac -erhad Ali is an accountantand assisted in the preparation of theprospectus durin the flotation process of -i&ac hile preparin the prospectus, Alineliently made some mista'es and omitted toma'e some disclosures

hat are the offences Ali is uilty of2


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Promoter and Pre-


Answer

!"romoters# include controllin shareholders,

persons connected to controllin shareholders ande$ecutive directors who are substantialshareholders of the issuer 3n this case, Ali is aperson connected to a controllin shareholder of-i &ac -erhad

%uties in relation to submission proposals andprospectus – Sec */ C&SA

%uty in relation to submission of proposal and torefrain from ma'in false and misleadinstatements Sec 4/ C&SA


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Promoter and Pre-


Ali, a promoter of A-C -erhad entered into acontract with 567 -erhad on 1 8ebruary 99:before A-C was incorporated 567 -erhadsouht to sue Ali for the amounts owin underthe contract he contract was ratified by A-C-erhad on 1 une 99: 3s the contract enteredinto prior to the incorporation of A-C valid2

Answer


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End of

Chapter 5 @ MAICSA All !i"hts !eser#ed

www.maicsa.org.my

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Students Online Tutorial Cl c5