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LW/APR 2011/LAW485

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

: CORPORATE LAW : LAW485 : APRIL 2011 : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. 2. 3. 4.

This question paper consists of seven (7) questions. Answer FOUR (4) questions in the Answer Booklet. Start each answer on a new page. Do not bring any material into the examination room unless permission is given by the invigilator. Please check to make sure that this examination pack consists of: (i) the Question Paper (ii) an Answer Booklet - provided by the Faculty

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO This examination paper consists of 4 printed pages
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LW/APR 2011/LAW485

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 lift the veil of incorporation to hold the members personally responsible for the actions of the company. In view of the above statement, consider the judicial exceptions and the statutory provisions under the Companies Act 1965 where the separate entity of a company is disregarded. (100 marks) QUESTION 2 Section 33(1) of the Companies Act 1965 provides that subject to this Act the memorandum and articles when registered bind the company and the member thereof to the same extent as if they respectively had been signed and sealed by each member and contained covenants on the part of each member to observe all the provisions of the memorandum and articles' To what extent does this section create rights as between the company and its members, members inter se and the rights between the company and persons named in the articles. (100 marks) QUESTION 3

a)

Extraordinary General Meetings (EGM) are general meetings of a company other than the Annual General Meeting (AGM) which are convened to transact special business which are too urgent to wait until the next Annual General Meeting. Explain the circumstances when, under the provision of the Companies Act 1965, 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)

b)

Distinguish between a statutory meeting and an Annual General Meeting (AGM) (60 marks)

QUESTION 4 a) A company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities -per Lord Denning MR in Panorama Developments (Guilford) Ltd v. Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711-716. State the qualifications required of a Company Secretary and explain his responsibilities. (50 marks)

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LW/APR 2011/LAW485

b)

Shima was appointed as an auditor of REACH Sdn Bhd. On 1 April 2010, Wani purchased shares of the company worth RM 28,000 from Lily, a shareholder. The purchase was made based on the auditors report which revealed that the company had recorded increasing profits over the past five years. Wani has recently discovered that no such profits were made by the company and that it was in fact operating at a loss. As a result, the value of her shares is worth much less than what she paid for them. Advise Wani whether she could sue Shima for the loss she has suffered on the purchase of the shares. (50 marks)

QUESTION 5 Nazri Satria Sdn Bhd (the company) was incorporated in July 2009 with the primary purpose of manufacturing motor spare parts. On 2 February 2010, the company created a floating charge over its assets in favour of Mr Yuzai as security for a loan of RM 28,000 which was duly granted by Mr Yuzai. The charge was not registered under the Companies Act 1965. On 27 March 2010, the company created a second floating charge over its assets in favour of Matahari Bank as security for an existing overdraft of RM 65,000. The charge prohibited the company from creating charges of any kind which would rank in priority to Matahari Banks charge. The charge was duly registered. On 1 April 2010, the company purchased a business premise from Mr Hisham at a price of RM 250,000 and made a part payment of only RM 80,000. A fixed charge was created over all of its assets in favour of Mr Hisham to secure the balance outstanding and the charge was duly registered. Nazri Satria Sdn Bhd is now in financial difficulties and has to be put into liquidation. Discuss the position of the above creditors in relation to the effectiveness and priority of the above charges. (100 marks) QUESTION 6 a) Section 218(1)(i) of the Companies Act 1965 provides that a company may be wound up on the ground that it is just and equitable to do so. With reference to decided cases, state the fact situations in which the courts have considered it just and equitable to wind up a company. (80 marks) Section 217(1) of Companies Act 1965 has specified the persons who can petition to the court to have a company wound up. State four persons listed under this section. (20 marks)

b)

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QUESTION 7 a)

LW/APR 2011/LAW485

An important exception to the rule in Foss v Harbottle is when a member is permitted to bring a derivative action when the controlling shareholders commit fraud on the minority. With the aid of case law, explain the concept of fraud on the minority'. (40 marks)

b)

Jack and his children, Alvin and Simon, are the directors of Chipmunk Bhd. Jack is the managing director. He owns 60% of the issued share capital of the company while Alvin and Simon each own 10%. The remaining 20% of the shares are owned by Sid, Manny and Diego. The following matters have come to light: i) In 2009, Jack arranged for a piece of land owned by the company to be sold to Alvin for RM30.000. The shareholders, as a whole, were not asked to approve the proposed sale, which the minority believes is at a price which is well below the market price. The directors salaries have increased considerably over recent years, despite the falling profitability of the company. This has resulted in the company being unable to pay dividends for the past five years. Jack and his children have treated the company as their own, taking money from the company for their own use and ignoring the wishes of the minority shareholders. Advise Sid, Manny and Diego whether they would be able to obtain relief for oppression under the Companies Act 1965. (60 marks)

ii)

iii)

END OF QUESTION PAPER

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