Paper F4 (MYS)

Fundamentals Level – Skills Module

Corporate and
Business Law
(Malaysia)
Tuesday 2 December 2008

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

ALL TEN questions are compulsory and MUST be attempted.

Do NOT open this paper until instructed by the supervisor.

During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

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ALL TEN questions are compulsory and MUST be attempted

1 In relation to the Malaysian legal system:

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(a) Explain the structure of the court system. (8 marks)

(b) State TWO advantages of having a hierarchy of courts. (2 marks)

(10 marks)

2 In relation to employment law:

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(a) Explain what constitutes constructive dismissal. (4 marks)

(b) State the remedies available to an employee who has been unjustifiably dismissed. (6 marks)

(10 marks)

3 Explain, and illustrate with examples, FIVE grounds on which a court may order the dissolution of a partnership
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under the Partnership Act 1961.

(10 marks)

4 In relation to the law of contract, explain and distinguish the following terms of a contract:
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(a) Conditions; (3 marks)

(b) Warranties; (3 marks)

(c) Innominate terms. (4 marks)

(10 marks)

5 In relation to company law:

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(a) Explain and distinguish between a fixed charge and a floating charge. (4 marks)

(b) State FOUR DISADVANTAGES of a floating charge as a security to a lender. (6 marks)

(10 marks)

6 In the context of company law explain:

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(a) how a director of a public company may be removed from office before the expiry of his term of office and
the protection afforded by the Companies Act 1965 to such a director; and (7 marks)

(b) whether your answer would differ if the director was a director of a private company. (3 marks)

(10 marks)

2
 7 (a) Explain what is meant by ‘corporate governance’. (4 marks)
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(b) Part 1 of the Malaysian Code on Corporate Governance provides for broad principles of corporate governance.
State THREE principles stated in the Code, relevant to directors. (6 marks)

(10 marks)

8 Tanah Baru Sdn Bhd is a private limited company whose sole object is the manufacture of office furniture.
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Recently, the board of directors decided to expand its business to venture into ostrich farming. Pursuant to this
decision the company purchased and obtained delivery of 2,000 ostriches from Ostry Sdn Bhd at a cost of
RM 1 million. They are contemplating purchasing another 2,000 ostriches in two months’ time.
Madeline, a member of Tanah Baru Sdn Bhd, is completely opposed to the idea of ostrich farming as it is outside the
scope of the objects of the company.

Required:
Advise Madeline on the following:
(a) whether the contract of Tanah Baru Bhd to purchase ostriches from Ostry Sdn Bhd can be challenged on the
ground that it is outside the objects clause of the company and she could have the transaction set aside;
(4 marks)

(b) whether she could successfully obtain an injunction against any party to prevent the contemplated purchase
of another 2,000 ostriches in two months’ time; and (3 marks)

(c) whether she could take legal action against any person to make that person compensate the company for
any loss resulting from the purchase of the ostriches. (3 marks)

(10 marks)
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9 Arjun, Bongsu and Chan are the directors of Cahaya Sdn Bhd, a company dealing in the export of timber. Last month,
Arjun was sent to Japan on behalf of Cahaya Sdn Bhd to negotiate a contract with a Japanese company. Unfortunately
the negotiations were not successful, and it was made clear to Arjun that the Japanese company did not want to offer
any contract to Cahaya Sdn Bhd. Arjun reported this to the board of directors upon his return. Two weeks later he
resigned from the company and managed to secure the contract with the Japanese company in his own name. He
has made a very substantial profit from this contract.
Cahaya Sdn Bhd has now discovered this and wishes to sue Arjun for breach of fiduciary duty as a director and
recover the profit he has made.

Required:
Advise Cahaya Sdn Bhd on the legal position.

(10 marks)

3 [P.T.O.
 10 Last month, Oldo attended an antique exhibition, where he saw a rare rosewood rocking chair made in 1825. It was
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in an excellent condition considering its age. He offered to buy the chair from its owner, Mr Kah Yu, for RM 5,000.
Mr Kah Yu agreed to that price and said that it would be delivered to Oldo at his home in one week’s time, when the
exhibition ended. Oldo offered to pay him a deposit of RM 500 but Kah Yu refused saying that a deposit was not
necessary and that the full purchase price could be paid upon delivery. However, Oldo did not hear from Kah Yu and
therefore last week he telephoned Kah Yu to enquire about the delay in delivery. Kah Yu replied that he had made a
mistake as to the true value of the rocking chair. He said that the market value of the chair was RM 50,000 and that
the price offered by Oldo was too low. Further, he had already sold and delivered the chair to another person, Poh
Tong, who had offered RM 55,000 for it.

Required:
Advise Oldo:
(a) whether Kah Yu can avoid liability for breach of the contract for the sale and purchase of the rocking chair
on the ground that the consideration was inadequate; and (5 marks)

(b) whether the court is likely to grant an order of specific performance in favour of Oldo, presuming that there
has been a breach of contract by Kah Yu. (5 marks)

(10 marks)

End of Question Paper