(Malaysia)

PART 2
TUESDAY 2 DECEMBER 2003

QUESTION PAPER
Time allowed 3 hours
This paper is divided into two sections
Section A

SIX questions ONLY to be answered

Section B

TWO questions ONLY to be answered

Paper 2.2(MYS)

Corporate and
Business Law

Section A SIX questions ONLY to be attempted

1

The company is at law a different person altogether from the subscribers to the memorandum Salomon v Salomon
& Co Ltd.
Explain this statement and describe, with reference to the Companies Act 1965 and decided cases, any six
instances in which the principle may be disregarded.
(10 marks)

The rule established in Ooregum Gold Mining Co of India Ltd v Roper is that a company may not issue shares at a
discount.
(a) Explain what is meant by issuing shares at a discount and the purpose of the above rule.

(3 marks)

(b) State whether, and if so to what extent, the above rule is applicable in Malaysia under the Companies Act
1965, giving explanations for your answers.
(7 marks)
(10 marks)

Describe the structure of the Malaysian court system and explain the advantages of having a hierarchy of courts.
(10 marks)

(a) What is a proposal (offer) in relation to the law of contract?

(2 marks)

(b) When and how may a proposal (offer) be revoked under the Contracts Act 1950?

(8 marks)
(10 marks)

Explain, with the aid of relevant examples and decided cases, the meaning and effect of the following terms of a
contract:
(a) conditions;
(b) warranties;
(c) intermediate terms.
(10 marks)

(a) Define wages within the context of the Employment Act 1955.

(4 marks)

(b) For what purposes, if any, can an employer make advances on wages in favour of an employee under the
Employment Act 1955?
(6 marks)
(10 marks)

(a) In relation to the law of agency explain what is meant by:

(i)

named principal;

(ii) disclosed principal;

(iii) undisclosed principal.

(3 marks)

(b) In what situations may an agent be personally liable to the third party for acts done on behalf of the principal?
(7 marks)
(10 marks)

By s.3(1) of the Partnership Act 1961, a partnership is the relation which subsists between persons carrying on
business in common with a view of profit.
Briefly explain the main elements of a partnership as stated in the definition above.
(10 marks)

[P.T.O.

Section B TWO questions ONLY to be attempted

9

(a) Zam Zam Sdn Bhd is a company dealing in the manufacture and sale of aromatic oils. Its directors are Nazam
and Kazam each holding 30% of the companys issued shares. The other shareholders are Ambi, Bambi, Cindy
and Din, who hold the remaining 40% of the shares equally among themselves. The articles of association state,
among other things, the following:
Clause 555 The holders of 60% or more of the issued shares of the company may, by notice in writing, require
any other member to sell his shares to him at a fair price.
Last week the company held an Extraordinary General Meeting (E.G.M) at which a special resolution was passed
altering the articles of association to include the following clause:
The board of directors may, at any time, by notice in writing require all members to increase their shareholding
in the company.
Cindy and Din voted against the resolution.
Three days ago, Kazam bought Nazams shares. Kazam has now sent a notice to Cindy and Din requiring them
to sell their shares to him at a fair price. Cindy and Din do not wish to sell their shares.
Required:
Advise Cindy and Din:
(i)

whether they must comply with the notice sent by Kazam;

(4 marks)

(ii) whether they can challenge the validity of the alteration of the articles of association on any ground or
alternatively refuse to comply with any request that may be made by the board of directors requiring
them to increase their shareholding in the company.
(6 marks)
(b) The directors of Zam Zam Sdn Bhd are contemplating appointing Khatijah (the sister of one of the directors) as
the company secretary.
Required:
Advise the directors;
(i)

on the requirements for the appointment, qualifications and disqualification of a company secretary
under the Companies Act 1965, explaining whether Khatijah could take up the appointment of company
secretary of Zam Zam Sdn Bhd.
(7 marks)

(ii) of the main duties of a company secretary.

(3 marks)
(20 marks)

10 Golden Fortune Sdn Bhd, a small family company has four directors, Arjun, Benny, Choo and Danny. Together they
hold 40% of the companys issued shares. Arjun is the managing director. The company has been profitable but no
dividends have been declared for the past three years. A large part of the profits has been used on huge increases in
the directors salaries and allowances. Last year alone the company made a net profit of RM10 million. Of this amount
RM5 million was spent on bonuses, allowances and increases in salaries of the directors. RM3 million was used to
purchase a luxury yacht from Bintang Krooze Sdn Bhd. A further RM2 million was spent on the purchase of a
dilapidated bungalow from Jenny, the sister of Benny. The market value of the property is only around RM700,000.
More recently, the directors diverted a valuable contract accruing to the company, to another company ABCD Sdn
Bhd, in which they are the only shareholders.
Required:
Advise Susie and Laily, who each hold 10% of the issued shares of Golden Fortune Sdn Bhd:
(a) whether they have the right to demand that dividends be declared and paid.

(3 marks)

(b) whether the contracts for the purchases of the luxury yacht from Bintang Krooze Sdn Bhd and the bungalow
from Jenny can be invalidated on any grounds under the Companies Act 1965.
(7 marks)
(c) what legal obstacles, if any, would they face should they wish to institute an action against the directors to
make them liable for the loss suffered by the company as a result of diverting the contract to ABCD Sdn Bhd.
(You are NOT required to discuss any statutory remedy available to a minority shareholder).
(10 marks)
(20 marks)

11 Reno Sdn Bhd, a company specializing in the construction and renovation of commercial buildings, has been put into
receivership. The receiver, Mr Wong, was appointed by the court on the application of a creditor, Gudd Bank Bhd,
which is owed RM30 million. This amount had been lent to Reno Sdn Bhd on the strength of a fixed charge on its
office building as well as a floating charge over all its other assets and undertakings. The receiver finds that Gudd
Bank Bhd is the only secured creditor of Reno Sdn Bhd. The office building is worth only RM10 million and the value
of all its other assets amount to RM2 million. Employees have not been paid wages for the last three months. The
total amount owing to them is RM1 million.
Required:
Advise Mr Wong, who has not previously acted as a receiver for any other company, on the following queries:
(a) State the persons who are disqualified from appointment as receiver of the property of a company, under the
Companies Act 1965.
(5 marks)
(b) State whether the receiver, may manage the business of the company for a period of time in order to facilitate
a more favourable realization of the companys assets.
(3 marks)
(c) State the main duties of the receiver under the Companies Act 1965.

(7 marks)

(d) State what the Companies Act 1965 provides if a receiver is unsure of any matter arising in connection with
the performance of his duties.
(2 marks)
(e) State whether the employees have any priority over Gudd Bank Bhd with respect to the arrears of wages due
to them.
(3 marks)
(20 marks)

[P.T.O.

12 (a) Muthu, a student aged 19, agreed to give his electronic calculator worth RM500 to his best friend Alice. In
consideration Alice agreed to give Muthu her favourite story book, Ali Baba and the Forty Thieves, which she
had bought for RM10, more than five years ago.
Muthu has now decided not to give the calculator to Alice on the ground that the consideration was inadequate.
Required:
Advise Alice whether she could successfully sue Muthu for breach of contract.

(5 marks)

(b) In 1995 Termizi lent RM10,000 to Jumboo who promised to repay the money within one month. However, he
failed to pay. Termizi went off to London to pursue his studies and returned only last month. He demanded
repayment of the debt from Jumboo but Jumboo refuses to pay.
Required:
(i)

Advise Termizi whether he could successfully sue Jumboo to recover the debt.

(ii) State whether your answer would differ if Termizi had written to Jumboo demanding repayment and
Jumboo had given a written reply promising to repay but had failed to do so.
(5 marks)
(c) While walking along the shopping Mall at Bukit Bintang, Janet was attracted by a display of an evening gown in
a shop window. A large card beside the display contained the following words: Special new year offer. RM100
only. While stocks last.
Janet went into the shop and chose a gown that fitted her. When she took it to the payment counter to pay for
it, the salesgirl told her that the price was RM150.
Janet wishes to know whether she could sue the shop owner to enforce the sale of the gown at RM100.
Required:
Advise Janet.

(5 marks)

(d) Sitis pet cat strayed into her neighbours garden and accidentally knocked into and broke an expensive
ornamental vase. The angry neighbour caught the cat and refused to return it to Siti unless Siti paid him
RM1,000. Siti promptly paid him that amount. The cat was then returned to Siti unharmed. Siti is now unhappy
about making the payment and wishes to know whether there are any grounds under the law of contract on
which she could recover the amount of RM1,000 from the neighbour.
Required:
Advise Siti.

(5 marks)
(20 marks)

End of Question Paper