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LW/OCT 2009/LAW485

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

CORPORATE LAW

COURSE CODE

LAW485

EXAMINATION

OCTOBER 2009

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES

1.

This question paper consists of SEVEN (7) questions.

2.

Answer FOUR (4) questions in the Answer Booklet. Start each answer on a new page.

3.

Do not bring any material into the examination room unless permission is given by the
invigilator.

4.

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/OCT 2009/LAW485

PART A
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 will lift the veil of incorporation to
hold the members personally responsible for the actions of the company.
Explain the judicial exceptions to the separate legal entity doctrine.
(100 marks)

QUESTION 2
a)

The doctrine of ultra vires played an important role in the development of corporate
powers.
With reference to the relevant provisions in the Companies Act 1965, discuss the
application and the effects of the doctrine in Malaysia.
(60 marks)

b)

Distinguish the memorandum of association from article of association and state

three (3) matters governed by the respective documents.
(40 marks)

QUESTION 3
Matahari Sdn Bhd (the company) was incorporated in May 2009 with the primary purpose of
manufacturing motor spare parts. The company appointed Mat, Syam and Alias as the
directors of the company.
On 15th Jun 2009, the company entered into a contract with Sinar Sdn. Bhd. to purchase
alloy for manufacturing side mirrors to be distributed to the European market. This was done
on Mat's recommendation. However, unknown to the company, Mat and Syam were also
directors of Sinar Sdn Bhd. Neither Mat nor Syam disclosed this fact to the company.
On 3rd July 2009, the company requested Alias to negotiate a contract with Suharto Limited,
a company in Jakarta, for the setting up of a new factory there. In the course of negotiation,
Suharto Berhad informed Alias that it was interested in engaging him personally for the
project and has no interest in contracting with Matahari Sdn Bhd. Four weeks after the
negotiations, Alias resigned from Matahari using ill health as an excuse. The contract has
since been awarded to Alias by Suharto Ltd.
Matahari Sdn Bhd has now discovered the true facts and seeks to recover all profits that
Alias had made under his contract with Suharto Limited. At the same time, the company also
wishes to know whether it can successfully sue Mat and Syam for failure to disclose their
position in Sinar Sdn Bhd.
Advise Matahari Sdn Bhd.
(100 marks)
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LW/OCT 2009/LAW485

QUESTION 4
a)

Explain who may qualify as an auditor of a company and when must an auditor be
appointed?
(50 marks)

b)

Luqman has been appointed as an auditor of Juzu Sdn Bhd. On 3rd April 2009,
Juliana purchased shares of the company worth RM30,000 from Ahmad, a
shareholder. The purchase was made based on the auditor's report which revealed
that the company had recorded increasing profits over the past seven years. Juliana
has recently discovered that no such profits were made by the company and that it
was in fact operating at a loss. The value of her shares as a result are worth much
less than what she paid for.
Advise Juliana if she could sue Luqman for the loss she had suffered on the
purchase of the shares.
(50 marks)

QUESTION 5
In the context of company meetings,
a)
Distinguish an Annual General Meeting (AGM) from an Extraordinary General
Meeting (EGM).
(10 marks)
b)

Explain when 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)

c)

Mr. Yuzainizam, a shareholder of a company is unable to attend its forthcoming

extraordinary general meeting which is scheduled to be held on 25th Nov 2009. He
seeks clarification pertaining to the appointment and rights of a proxy.
Advise Mr. Yuzainizam as to who may be appointed as a proxy, as well the rights of
a proxy under the Companies Act 1965.
(50 marks)

QUESTION 6
Merdeka Sdn. Bhd. has not been declaring dividends for the last 4 years due to poor
business and bad investment. However, through a sale of two of its factories, the company
has made a profit of RM5 million. The board of directors is contemplating declaring a
dividend using the whole gain from the sale.
Advise the board of directors on the rules pertaining to payment of dividends and in
particular, whether they may apply the gain from the sale for the payment of dividends.

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(100 marks)
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LW/OCT 2009/LAW485

QUESTION 7
Nazri and Apek hold 20% of the shares in Urat Besi Sdn Bhd. Fizah and Fahmi, who are
directors of the company, hold the remaining 80% of the shares. Nazri and Apek allege that
Fizah and Fahmi have managed the company as if it was their own without regard to the
interest of the minority shareholders. Dividends were not declared for the past seven years
even though the company made considerable profits. Instead, a huge portion of the profits
was used to pay exorbitant fees to the directors.
It was further alleged that Fizah and Fahmi have caused the company to sell its land at
Sepang for only RM300,000 to Nurul, the sister of Fahmi, when its actual value is RM2
million.
Nazri and Apek discovered recently that the company has made a bad investment when the
board purchased a land near a slum clearance programme in Ulu Yam for a price of RM5.5
million. The land was owned by Fizah's brother Din.
Complaints were made to the directors regarding the above matters, but the complaints have
gone unheeded.
Advise Nazri and Apek on the following:
a)

Whether they can bring an action against Fizah and Fahmi in the name of the
company.
(50 marks)

b)

Whether they can seek a remedy on their own behalf in the above circumstances.
(50 marks)

END OF QUESTION PAPER

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