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ANSWERING SCHEME FOR

BUSINESS AND COMPANY LAW
MIAQE EXAMINATION QUESTION

SECTION A

QUESTION 1

(a) Explain the extent of the application of the English common law and the rules of equity
as applied in Malaysia today.

Answer:

Section 3(1) of the Civil Law Act, 1956 states that the courts in Peninsular Malaysia shall
apply the common law of England as well as equity as administered in England on April 7,
1956. In the states of Sabah and Sarawak, the common law of England and the rules of
equity together with the statutes of general application shall be applied. However, the
application of English law throughout Malaysia is subject to two limitations:

(i) It is applied only in the absence of local statutes on the particular subject. Local
law takes precedent over English law as the latter is meant to fill the gaps
(lacuna) in the local system.
(ii) Only that part of the English law that is suited to local circumstances will be
applied. The provision to section 3(1) of the Civil Law Act, 1956 is the authority
for this. It states that the common law, rules of equity and statutes of general
application shall be applied so far only as the circumstances of the states of
Malaysia and their respective inhabitants permit, and subject to such qualification
as local circumstances render necessary.

(b) In relation to the law of contract:

(i) Explain the meaning of the terms intention to create legal relations between the
parties
(3 marks)
Answer:

An agreement is not a contract in the strict sense unless it is the common intention of the
parties that it shall be legally enforceable.
Choo Tiong Hin & Ors v Choo Hock Swee.

Such intention is normally implied or presumed from the nature of the agreement.

(ii) Explain the implication of the element of certainty to a contract.

Answer:

Agreements, the meaning of which is not certain, or capable of being made certain, are
void.



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In the case of Karuppan Chetty v Suah Thian, where the parties agreed upon the
granting of a lease at RM35.00 per month for as long as he likes, the court held that the
requirement of certainty was not met.

(c) Briefly explain damages as one of the important remedies available for breach of
contract.

Answer:

Remedies for breach of contract:
Damages: Section 74 of the Contracts Act, 1950 provides damages to be granted to a
party as compensation for the damage, loss or injury he has suffered through a breach of
contract.

The illustrations to Section 74 clearly indicate that the party may recover damages for:

Other expenses incurred as a result of the breach;
The loss of profits arising out of the breach; and
The difference between the price of goods as contracted for and the actual price the
goods were sold for as a result of the breach.

The plaintiff is only allowed to recover a reasonable sum for breach of contract (Section
75, Contracts Act, 1950) and is required to prove the actual damage he has suffered.

(d) In sale of goods, the general rule is that, no one can give a better title than he has
himself:

(i) Explain the general rule above;

Answer:

The maxim, nemo dat quod non habet means that where goods are sold by a person
who is not the owner and without the consent of the original owner, the buyer acquires
no better title than the seller had.

(ii) State three exceptions under this rule.

Answer:

Estoppel the buyer will obtain good title if the owner is precluded by his conduct
from denying the sellers;
Sale by merchantile agent in the ordinary course of business, the buyer will obtain
good title;
Sale by joint-owner;
Sale under a voidable title the buyer will obtain a good title if he buys in good faith
and without notice of sellers defect of title;
Sale by a seller in possession after sale;
Sale by buyer in possession.




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QUESTION 2

(a) List six (6) exceptions to the general principle that an agent cannot delegate the authority
given to him by his principal.

Answer:

The six exceptions are:
Where the principal approves or consents to the delegation of the authority;
Where it is presumed from the conduct of the parties that the agent has the power to
delegate his authority;
Where the custom or practice of the trade or business permits delegation;
Where the nature of the agency is such that delegation of the authority to another
person is necessary to complete the business;
In case of necessity or an unforeseen emergency; or
Where the act to be done is purely ministerial or clerical and does not involve the
exercise of discretion.

(b) Amat, an agent was authorised by Chong to buy a consignment of rice at the price of
RM3.00 per kilogram. During the purchase, Amat came across a better quality rice which
was priced at RM3.50 per kilogram. Without further informing Chong, Amat decided to
purchase the better quality rice although the price is higher than that authorised by
Chong. His intentions were so that Chong would be able to resell the rice at a higher
price and make more profit. Amat made arrangements for the purchase under his own
name. Chong however, failed to take delivery of the rice and the seller sues Amat for
breach of contract.

Advise Amat whether he (as an agent) may claim from Chong with regards to the claims
made against him by the rice seller.

Answer:

In this situation, Amat has actually exceeded his authority when he decided to purchase
the rice at a price higher than that authorised by his principal (Chong). It is noted that he
made this decision without notifying his principal. This situation may be ratified had
Chong agreed to proceed with the purchase at the said price. The contract of agency
cannot be said to have been ratified even though Amats intentions were in the interest of
Chong.

An agency by ratification may arise in any one of the following situations:

o An agent who was duly appointed has exceeded his authority; or
o A person who has no authority to act for the principal has acted as if he has the
authority.

When any one of the above situation arises, the principal can either reject the contract or
accept the contract so made: Section 149, Contracts Act, 1950.



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When the principal accepts and confirms such a contract, the acceptance is called
ratification and it may be expressed or implied. Section 150, Contracts Act,1950.
In this situation, Amat has exceeded his authority but Chong never affirmed his actions in
this respect when Chong did not take delivery of the goods. The fact that Amat made the
arrangements under his own name had also absolved Chong from any liability under the
circumstances.

In conclusion, Amat could not claim against Chong for any losses that he may incur in
relation to the above situation.

Cases: Keighley Maxsted & Co. V Durrant [1901] AC 240
S.R.M. Meyappa Chettiar v Lim Lian Koo [1954] 20 MLJ 246

(c) Man engages a forwarding agent by the name of Parjo, to transport a consignment of
some fabric from Bandung to Malaysia. Arrangements were made so that the
consignment is to be carried by sea and to be landed at a place in Tanjung Kupang,
Malaysia. This is not an official commercial port of entry into Malaysia. The reason for
this is so that Man could avoid paying import tax to the Malaysian government. Parjo was
instructed to unload the consignment at a certain secluded place near Tanjung Kupang.
Upon arrival at the Malaysian shores, Parjo proceeded to unload the consignment. While
he was at it, Parjo was arrested by the Malaysian authorities and the consignment was
confiscated. Parjo was charged with illegally bringing in taxable items into Malaysia and
evading import taxes. Parjo was found guilty and paid a hefty fine for the offence.

Parjo seeks your advise whether he may claim any indemnity from Man in relation to the
losses he suffered since he had acted as Mans agent.

Advise Parjo.

Answer:

This case involves the principles on agency. When Man engages Parjo to do something,
Man is the principal and Parjo is his agent. In the absence of an express contract, the
employer of an agent is bound to indemnify the agent against the consequences of all
lawful acts done by the agent in exercise of the authority conferred upon him: Section
175, Contracts Act, 1950.

Parjo is advised that he cannot recover the losses he had suffered since the act which
he was employed to do, is a criminal act (i.e. evading import duties and bringing in goods
into Malaysia without permission of the authorities). By virtue of Section 177 of the
Contracts Act, 1950: where one person employs another to do an act which is criminal,
the employer is not liable to the agent, either upon an express or an implied promise, to
indemnify him against the consequences of that act.

Section 176 of the Act however, does provide for situations where agents may be
indemnified against consequences of acts done in good faith, although it cause injury to
the rights of third persons. In this situation, had Parjo not known that the act of which he
was arrested for was against the law, he may claim to have done the act in good faith or
out of innocence. This was not the case, however, since Parjo should have been aware
of the transgression of law that he is committing, being a forwarding agent himself.



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Therefore, Man is not liable to indemnify Parjo due to the fact that the act done by Parjo
was unlawful. In this situation, Parjo will have to bear the losses on his own.


QUESTION 3

(a) (i) Liabilities of partners for wrongful acts or omissions in the course of business:

Section 12, Partnership Act, 1961:

Where any wrongful act or omission of any partner acting in the ordinary course of the
business of the firm or with the authority of his co-partners, loss or injury is caused to any
person not being a partner in the firm, or any penalty is incurred, the firm is liable
thereafter to the same extent as the partner so acting or omitting the act.

In this situation, Amin as a lawyer was negligent and had incurred a penalty to be paid by
their client. This incident happened in the course of the partnership business.
Conveyancing transactions which includes the sale and purchase of properties is indeed
within the business scope of a legal firm. Since Amin is a partner of the firm, the
partnership may most probably be liable for the extra cost incurred by the client as a
result of Amins negligence.

(ii) On the 1
st
of November, 2012 the accounting firm of Jessup & Associates entered into an
agreement with a building contractor to renovate their office. On the 1
st
of January 2013,
Ali joined the firm as a partner. He signed a partnership agreement which among others,
states that he agrees to be liable for the existing debts of the partnership at the time of
his admission. Ali however, never read the agreement prior to signing it. The firm later
faces some financial difficulties and failed to pay the building contractor. The contractor
sues the partnership as a whole as well as the individual partners, including Ali.

Advise Ali, whether he is liable for this particular debt of the firm.

Answer:

Section 19(1), Partnership Act, 1961:- A new partner who has just been admitted into a
firm is not liable for the debts incurred prior to his admission. However, if the new partner
agrees to be liable for the existing debts of the partnership at the time of his admission,
he would be liable.

Under this circumstances, it is clear that the firm had incurred the debts against the
building contractor prior to Ali becoming a partner of the firm. Based on this observation,
Ali may not be liable for the debts of the firm, as per the provision of Section 19(1) of the
act. However, Ali did sign a partnership agreement upon his admission to the partnership
which entails his agreement to be bound and liable for the firms existing debts. Although
Ali never read the relevant terms of the agreement, he would still be bound by the terms
of the agreement. This in turn, invokes the second limb of Section 19(1) which states that
the partner would be rendered liable for the firms existing debts prior to his admission if
he had agreed to be so bound.

Therefore, due to the agreement signed by Ali, he shall be liable for the debt owing to the
building contractor as a partner of the firm as well as individually.


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(b) State two (2) methods where a partnership may be dissolved by operation of law (unless
otherwise agreed by the partners).

Answer:

(i) Section 34(1) (a) of the Partnership Act, 1961:

If the partnership was entered into for a fixed term and the term expires, then the
partnership is deemed to have come to an end at the expiry of the specified term.
This however, may not take effect if the partners decide to carry on with the
partnership business and activities after the expiry of the fixed term.

(ii) Section 34(1)(b) of the Partnership Act, 1961:

If the partnership was entered into for a single adventure or undertaking, upon
the completion of such adventure or undertaking, the partnership expires; or

(iii) Section 34(1)(c) of the Partnership Act, 1961:

If the partnership was entered into for an undefined time, by any partner giving
notice to the other partner(s) of his intention to determine (or end) the
partnership.

(c) John had engaged Bakri, an advocate and solicitor to act for him in the purchase of land
from one Chan Po Po for RM30,000. Bakri had prepared a sale and purchase agreement
on 12 June 2012 and the sale was completed on 6 July 2012. In a Gazette Notification
no, 13 dated 15 March 2011, the land had been gazetted for acquisition by the
government, under Section 8 of the Land Acquisition Act, 1960.

Evidence revealed that Bakri did not make a search enquiry with the Collector of Land
Revenue in the Land Office concerned and thus was not aware of the gazette
notification.

On 3 January 2013, John was paid RM15,000 by the government for the acquisition of
the said land. John claims damages amounting to RM15,000 being the difference
between the purchase price and the compensation.

Advise John.

Answer:

Duty of care may arise in contract, tort or by reason of a statute and may be owed by the
professional to a client or a third party.

The duty of care of a professional depends very much on what the professional is
employed to do for the client. Lamphier v Phipos [1838] 8 C&P 475



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In this situation, Bakri as a professional was employed to execute the purchase of a land
by John. Under the circumstances Bakri was duty bound to ensure that the transaction
can be carried out in accordance with his clients request. In this situation, he has a duty
to ensure that his client would eventually acquire title and ownership of the land so
purchased or advise accordingly if such a transaction could not be effected due to
whatsoever reason(s).
Bakri had failed in his duty to take reasonable care and skill in giving his advise as
demanded of a normally competent and careful practitioner. His failure to conduct the
search enquiry was blatantly negligent. Bakri is liable, as a professional man professing
special skill who gives assistance to another. He also owes a duty of care to John whom
he knows had relied on his skill as a professional.

Therefore, John may succeed in claiming the RM15,000 in damages for the loss he had
suffered in the above transaction.

Cases: Neogh Soo Oh & Ors v G. Rethinasamy [1984] 1 MLJ 126
Manjit Singh s/o Gurdial Singh v R.K. Nathan [1984] 2 CLJ 113
Bank Bumiputra Malaysia Berhad v Yeoh Ho Huat [1979] 1 MLJ 30


SECTION B
QUESTION 4
(a) See Section 20 (1), no act or purported act of a company, and no conveyance or transfer
of property to re by a company shall be invalid by reason only that it is ultra vires.

In Malaysia doctrine of ultra vires is much diminished because of s.20 (1) CA. However
companies are still expected to act within the scope of the objects clause.

Ultra vires concept:
any act by a company which is not specified by its objects and powers regarded as
ultra vires, and under common law regarded as null and void.
cannot be ratified. However, under s.20 (1) CA, the transaction although beyond
companys capacity can still be valid.
S.20(2) the common law doctrine is not entirely abolished, it can be relied on:
by a member to restrain an executory ultra vires transaction -S.20(2)(a)
by company/member against present/former directors for permitting company to
enter into ultra vires transaction - S.20(2)(b)
by the Minister to wind up the company - S.20 (2)(c)

To avoid complexities of ultra vires act/transaction, could alter objects to provide for
the new activity.

(b) Section 4 of the Companies Act 1965 defines a company limited by shares as "a
company formed on the principle of having liability of its members limited by the
memorandum to the amount, if any, unpaid on the shares respectively held by them.






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Advantages

The liability protection to its shareholders, limited their exposures to the amount of
share capital that they subscribed for. Once the shares are fully paid there is no
further liability.

The simplicity to transfer existing shares or issue additional shares to new investors.
Existing member can transfer his shareholding, wholly or partially, through selling of
his shares.

An entrepreneur is more likely to start a business if he/she knows the potential
liability is limited.

Disadvantages

Many administrative requirement are imposed, for example in preparing and keeping
the financial statements (which must be audited).The companys financial affairs will
be accessible by the public.

At least one company secretary is required to manage its statutory submissions and
returns as well as attending and preparing minutes for board and shareholders
meetings.

Incorporation cost is high, and there are yearly recurring fees to be paid such as
audit, accounting, company secretarial and tax fees.


(c) Decisions at shareholders' meetings are taken by resolutions upon which members can
vote. There are different sorts of resolution.

Ordinary resolution

An ordinary resolution is can be passed by simple majority ("bare majority") of the votes
cast in meeting. The length of notice will depend on the length of notice of the type of
meeting at which it is to be passed.

Special resolution

The requirements of a special resolution are dealt with section 152 (1).
A special resolution can only be passed by a three- quarters majority of votes (in
person or by proxy) cast in a general meeting who are entitled to vote at general
meeting at which not less than twenty one days notice was given. The notice of the
meeting at which it is to be tabled must state the intention of the proposers to propose
the resolution as a special resolution. A printed copy of special resolution shall be loadge
with ROC within one month of its passing (section 154(2). Failure to comply is an
offence carrying a default penalty (section 154(3)).






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Written or "circular" resolution

The law enables shareholders of private companies to pass resolutions without having
to attend a meeting by way of written resolutions by using the procedures under section
152A. A resolution passed by using this procedure is deemed to have been passed at
the registered office on the date on which the last member signed the relevant document
(section 152A (2)).
(4 marks)

(d) (i) The content of the articles of association create a contract between the company and
its members. Nonetheless, provisions in the articles which confer rights on outsiders are
not enforceable by the outsider. Thus Mr. William will not succed in suing Fastmode Bhd
in failling to continue his service.

However if there is a separate contract between Fastmode Berhad and Mr William and
the contract contains the same terms as contained in the articles, Fastmode Berhad
cannot avoid its contractual obligations under the separate contract by altering its
articles of association. Hence Mr William can sue Fastmode Bhd for damages for
breach of contract. See: Southern Foundries (1926) Ltd v Shirlaw (1940). The House of
Lords held that the company was in breach of the separate contract it made and liable to
pay damages.

(ii) According to section 31(2) CA 1965, the alteration of an article will take effect on the
day the special resolution is passed or a later date mentioned in the resolution itself. Its
effectiveness does not depend on the lodgement of the resolution with the ROC. Once
the alteration is effective, the new article will bind all members of the company, including
those who voted against the resolution.
(2 marks)

(e) A Pre-incorporation contract simply is a contract purpotedly entered into on behalf
of a company before its incorporation. It must be noted that before incorporation, a
company has no contractual capacity.

Prior to Songket Sutera Sdn Bhd registration in 2010, a company as a legal entity
does not exist. At this stage, neither Songket Sutera Sdn Bhd can enter into
contracts nor can it appoint any person (Amira) to enter contract on its behalf. Hence,
contract made between Amira and Bakri on 15 May 2009 its called pre-incorporation
contract.
Therefore, at common law, a company is not bound to any contract made prior to its
incorporation Newborne v Sensolid (Great Britain) Ltd. At common law, a company
is also not capable to ratify any pre-incorporation contract Kelner v Baxter.
The common law position discussed above have been modified by Section 35(1) and
(2) of Comapnies Act 1965.
Section 35(1) outsiders (Bakri) may enforce the pre-incorporation contract against
the company (Songket Sutera) after it is registered, but only if the company has
ratified the contract after its registration.
Section 35(2) outsider (Bakri) may enforce the pre-incorporation contract against
the person (Amira) who executed the contract on behalf of the non-existent company
and that person (Amira) shall be personally liable if the company fail to ratify the
contract after its registration.


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The Act is silent on how ratification of pre-incorporation contract should be made.
However, in Ahmad Bin Salleh v Rawang Hills Resort Sdn Bhd, it is suggested that a
board resolution that has the effect confirming that the company has adopted the pre-
incorporation contract will suffice.
Section 35(2)
This provision indirectly ensures that the promoter shall cause the company to ratify
the contract. If not, he will be personally liable unless there is an express agreement
to the contrary.



As for Hamzah, a contract entered on 17 December 2012 between him and Amira on
behalf of the Songket Sutera Sdn Bhd was made after the company's incorporation
on 16 November 2012. Hence Hamzah's claim against Amira Sutera Sdn Bhd might
be successful.
(5 marks)
(Total: 20 marks)

QUESTION 5

(i) Assets subject to fixed charges as opposed to floating charges cannot be dealt with
while subject to the charge, except with the consent of the creditor holding the charge. The
assets subject to a fixed charge cannot be dealt freely in the course of business. Venture Bhd is
not free to sell, lease or in anyway deal with the land without Zest Bank Bhd express permission.
Assets subject to fixed charge are identified at the time of creation of the charge, and the assets
subject to the charge will not flactuate over time unlike a floating charge.

(3 marks)

(ii) Disadvantages of a floating charge under the Companies Act 1965.
The assets subject to a floating charge may be utilised to pay off certain preferential
creditors, if the company does not have sufficient funds to pay them. See: ss.191 and
292(4) Companies Act 1965. Floating charges created within six months of the
commencement of a winding up will be invalid except to the amount of cash paid to the
company at the time of, or subsequent to, the creation of the charge, unless the
company was solvent immediately after the creation of the charge. See: s.294
Companies Act 1965.
(3 marks)

(b) In the exercise of their powers, the Act provides that a director must act honestly and
use reasonable diligence at all times [section 132(1)]. If something is done honestly, it
is considered to be done in good faith. As a director Maria owes a statutory duty to the
company not to place herself in a conflict of interest and duty situation. As a result she is
required to formally declare he interest to the board. In addittion, the shareholders must
approve the sale by passing an ordinary resolution which requires a simple majority to
vote in favour.

The duty toact honestly includes the duty to act in the best interest of the company
and to avoid conflict of interest. The director must not put himself in a position where
his duty and interest conflict. There must be total absence of any intention to seek an


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unfair advantage for herself or persons connected to him or to defraud the company.

Apart from the above, a director is also obliged to disclose the interest he has in any
transaction involving the company to the board of directors and the shareholders at
general meeting. Failure to disclose to the board is an offence under the Companies
Act 1965. Failure to disclose to the shareholders at general meeting will enable the
company to set aside the contract or to obtain an account of profit from the director.
(4 marks)

(c) (i) Section 167 of the Companies Act 1965
- Every company and the directors and managers must keep such accounting
and other records that would enable true and fair profit and loss accounts and
balance sheet to be prepared from time to time. This obligation is applicable to all types
of companies.These accounts must be prepared in accordance with Malaysian
Accounting Standards. The responsibility of the Board is to ensure that the accounts
are laid or tabled before shareholders at the annual general meeting. The accounts
must be laid before the company at its annual general meeting, in case of the first
account, within eighteen (18) months after the company's incorporation, and
subsequently once in every calendar year at intervals of not more than fifteen months.

The accounts must be made up for the period since the preceding account to a date
not more than six months before the date of annual general meeting.
(3 marks)

(ii) Details that should be incorporated in the accounts:

A profit and loss account; and
A balance sheet as at the date to which the profit and loss account is made-up;
A directors' report;
An auditor's report;
Notes to the accounts; and
Group accounts (if applicable)
(2 marks)

(iii) A company must lodge an annual return for each year. This annual return must be in
accordance with the Eighth Schedule of the Companies Act 1965. The annual return
must be lodged within one month after the annual general meeting of the company.

This return must include:

. A copy, certified by a director, manager or secretary of the company, to be a true copy of
the accounts which have been audited by the company's auditors; and A certified copy of
the report of the auditors;
.
Companies with an "exempt-private" status at the date of the return, may include with the
annual return a certificate of an exempt private company signed by the director, the
secretary and the auditor of the company, instead of the copy of accounts of the
company. Directors may be prosecuted for not filing these documents or for late filing of
these documents. If convicted, directors may be liable to a fine. If there has been
conviction, directors may also be disqualified from being directors or taking part in the


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management of a company. If the accounts and/or annual returns are delivered late the
company will be charged with penalty for late filing.
(3 marks)

(d) Based on Part VI CMSA 2007, prospectus means a notice, circular, advertisement or
document inviting applications or offers to subscribe for or purchase securities or
offering any securities for subscription or purchase and unless expressly specified,
includes a supplementary prospectus, replacement prospectus, shelf prospectus, short
form prospectus, profile statement, supplementary shelf prospectus and abridged
prospectus. (Part VI CMSA, Section 226 of the Capital Markets and Services Act
2007). Section 226 CMSA explains the invitation or offer to suscribe or purchase share
or securities is prospectus. Based on the case of Edgington v Fitzmaurice (1885), a
company issued a prospectus which means a document inviting subscriptions for
debentures.
(3 marks)
(Total: 20 marks)

QUESTION 6

(a) A promoter undertakes the incorporation of a company and sets it going. His duties are
fiduciary in nature and he is under an obligation to act bona fide for the benefit of the
proposed company. He should not put himself in a position where his personal
interests will conflict with his duty to the proposed company. Thus he is not allowed to
make secret profits.

A promotermay enter into pre-incorporation contracts. These are contracts which are
entered into prior to the company's formation. Such contracts shouldbe made in the
company's interest and a promoter should not make any secret profits out of such
contracts. Section 35(1) of the Companies Act 1965 states that such contracts may be
ratified by the company after its formation. Uponratification, the company shall be bound
and entitled to the benefits thereof as if it had been in existence at the date of the
contract. Prior to its ratification, section 35(2) provides that the promoter will be
personally liable unless his personal liability is specifically and clearly excluded.

At common law, a company is not bound to any contract made prior to its incorporation
Newborne v Sensolid (Great Britain) Ltd. At common law, a company is also not capable
to ratify any pre-incorporation contract Kelner v Baxter. The common law position
discussed above have been modified by Section 35(1) and (2) of Comapnies Act
1965.Section 35(1) outsiders may enforce the pre-incorporation contract against the
company after it is registered, but only if the company has ratified the contract after
its registration. Section 35(2) outsider may enforce the pre-incorporation contract
against the person who executed the contract on behalf of the non-existent company and
that person shall be personally liable if the company fail to ratify the contract after
its registration.The Act is silent on how ratification of pre-incorporation contract should
be made.
(7 marks)

b) The appointment of receivers on new contracts of the company depends on how the
receiver is appointed. Receivers appointed by the court are personally liable on contracts
entered into in the course of carrying on the company's business because, as
independent officers of the court, they are not agents of either the company or the


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debenture holder but contract as principals. However, if a person is appointed under the
debenture, the instrument under which he is appointed will normally provide that he is
the agent of the company and as such he would not normally be personally liable for
the new contracts.

The appointment of the receiver does not automatically terminate all employment
contracts which the company has entered into with its employees until and unless
one of the following qualifications as set out in Griffiths v Secretary of State arise: Where
the receiver enters into a new contract of employment with the employee; Where the
business of the company is sold; or.Where the continued services of a particular
employee is inconsistent with the role and functions of the receiver.
(6 marks)
(c) Conditions for restraining order include the following: -

Refer to s.176 (10A) read with s.176 (10).

Where Court is satisfied there is genuine proposal for compromise or a scheme of
arrangement between the Company and its creditors representing at least one half
(1/2) in value of all creditors.
Restraining order necessary to enable Company and creditors to formalize scheme
for approval of creditors.
Statement of Companys affairs made up to a date not more than 3 days before to
application is lodged.
A person nominated by a majority of creditors must be made in the application to act
as a director.

Once restraining order granted s.176 (10C) any disposition of the Companys
property, other than those made in the ordinary course of business would be void.
(5 marks)
(d) Refer to s.150 CA

Possible to hold general meeting in the absence of all directors subject to Court
Order.

S.150 empowers the court a meeting to be called, held and concluded in such
manner as court thinks fit. Court can act on its own motion or on the application of
any director or of any member of the Company.
(2 marks)
(Total: 20 marks)