Tuesday, March 30, 2010

Exercise On Business Law

Today, the tutorial class for business class was cancel. Unfortunately, the lecturer had provided a group homework for us. The most headache problem is i unable to form a group since there are no students attend the class and i do not have any friends that also take business class in this semester.

The only way for me to get a group is i try to contract those are same course with me but he or she is not so close with me.

Oh my God! No people want to do the homework.

My remained hope also destroyed. Now, i only can do the homework by myself.

This is my answer for the homework.

1.Explain the nature and function of each of Memorandum of Association and Articles of Association.
Memorandum of Association
Contain the necessary components of the formation of the company.
The essential contents needed are:
•The name of the company (which must end with the words “Sendirian Berhad” if it is a private company, or just “Berhad” if it is a public company)
•The situation of the company’s registered office
•The objects of the company, i.e the nature of business intended to be carried out;
•That the liability of the members is limited
•The amount of authorized capital (minimum RM 100,000) and its division into class of shares and its specific value
•Name, identity card (if Malaysian), passport (if foreigner),address and occupation of each subscriber
•Name, designation and address of the witness to the signature of each subscriber.
•The nominal amount of the authorized share capital with which it is proposed to register the company and the division of such capital into shares of a fixed amount
•The association clauses
Must be signed by at least two subscribers; duly dated.
The signature of each subscriber must be witnessed by a third person.
Each of the subscribers must undertake to subscribe for one or more shares of the company.

Articles of Association
Contain the internal rules of a company and clauses dealing with under-mentioned matters.
The essential contents needed are:
•The name of the company
•The name of each first director (minimum two)
•The name of the first company secretary
•The minimum and maximum number of directors
•The share qualifications of each director, if any
•Name, identity card number (if Malaysian), passport (if foreigner), address and occupation of each subscriber
•Name, designation and address of the witness to the signature of each subscriber
Includes a condition governing the use of a company seal on certain formal documents such as share certificates.

2.Sporty Sdn. Bhd. made a contract with ChinaSport Corp (a Chinese company) to supply gymnastic equipments to Kuala Lumpur. Unknown to Gary, Ben had made a prior back agreement with ChinaSport Corp to allocate some shares of ChinaSport Corp to Ben personally as a gift for his role in concluding the contract with Sporty Sdn. Bhd. Gary only knew this later and he asked if there is anything he could do against Ben. Please advise him and support your answer with relevant decided case law.
Sporty Sdn Bhd can sue Ben because Ben was defrauding Sporty Sdn Bhd. The court would generally lift the veil of incorporation when there are contain the element of fraud involved by Ben as subscriber of 2 companies. In this case, Ben also received gift from ChinaSport Corp. In this situation, the case should refer to Aspatra Sdn Bhd & 21 ors v. Bank Bumiputra Malaysia Bhd & Anor (1988) case.

3.In undertaking the promotion activities, Promo Sdn. Bhd. had received loan amounting to RM 1million, that is currently outstanding (overdue) and exceeds the assets of Promo Sdn. Bhd. Bank Putri Berhad (the creditor) seeks to claim for the repayment from all the company’s owners, i.e. Sporty Sdn. Bhd., Lim and Leong. Please explain to them the law on this and who should be liable to pay the debt in this situation. Please support your answer with relevant decided case law.
Promo Sdn Bhd should be liable to pay the debt in this situation based on separate legal entity. Promo Sdn Bhd is a legal independent company and its financial problem should not relate with Sporty Sdn Bhd. This situation can refer to case Salomon v. Salomon Co. Ltd.

4.Knowing that Promo has an outstanding debt amounting to RM 1million, Lim and Leong, who also acted as directors of Promo Sdn. Bhd. secured another business with a third party in which Promo has to finance the project with their money first, and therefore they applied for another loan at another bank. The loan of RM 500K was approved, but not long after that the loan was due and it was obvious that Promo Sdn. Bhd. could not pay as it already became insolvent in the first place. In the view of doctrine of separate legal entity, please discuss the liabilities of the directors (Lim and Leong) in this case. Please support your answer with relevant decided case law.
In this case, Lim and Leong would be personally liable for the debts due to they were defrauding another bank which is the debt of RM 500k. This is because they know they are unable to pay the debt. This case can refer to Lee William Leitch Bros Ltd case. For the debt RM1 million should be the liabilities of Promo Sdn Bhd due to separate legal entity. This situation can refer to Salomon v. Salomon Co Ltd case. Promo Sdn Bhd is a legal independent company, therefore the directors do not hold the responsibility of debt of the company.

5.Gary and Ben wanted to sell all their shares to Jojo and Cool respectively. What is the effect of these transactions to the status of the company Sporty Sdn. Bhd.? Please justify your answer with a case law.
The employees are still belongs with Sporty Sdn Bhd although there was some changing between the shareholders. Sporty Sdn Bhd is a legal independent company. Therefore the company has the entity by its own. There are no reasons for the employees to think that their employment is ended since the changes of the shareholders. This situation can refer to Abdul Aziz bin Atan v. Ladang Rengo Malay Estate case.

Prepared by,
Fong Yok Yan (1071120015)

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