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LEGAL OPINION

Company Law 2 (LAW 3211)


INSTRUCTIONS.
A written answer must be submitted on or before 12 noon 30th October 2017 to the Civil
Law Department, AIKOL.
This is an individual assessment and the written answer must be prepared individually; this
assessment provides 15% of the 60% CAM for this course.
Please be advised that any cheating or plagiarisms will result in disciplinary action including
but not limited to deduction of marks or a mark of 0.

QUESTION
Kamil, Khoo and Jamilah incorporated a company known as Tee Sdn Bhd in 2012, producing
and selling their own brand of T-shirt and jeans. They are the majority shareholders holding
60% shares as well as the directors of the company. Lee joined the company in 2013 as a
minority shareholder holding 15% of the issued shares and was appointed subsequently as
the fourth director of the company.

In early 2017, the majority of the board of directors, Kamil, Khoo and Jamilah proposed the
payment of dividends of 3% to the shareholders of the company since the company has made
profit for the financial year of 2017. Lee however was not satisfied with the proposal and
argued that the company should pay higher dividends since this was the first time the
company decided to declare and pay dividends to the shareholders after 5 years in operation.
The board of directors argued that the amount is reasonable as the company also wanted to
pay a bonus of three –month salary to clerical and non-clerical staff of the company in
appreciation for their hard work and loyalty to the company. Lee objected to the company’s
proposal to pay bonus to the employees as clerical and non-clerical staff were only entitled to
a bonus of two-month salary as per their contract of employment. The board of directors
however convened a general meeting to approve the resolutions regarding the payment of 3%
dividends and payment of three - months salary as a bonus to the employees.

At the time the resolution was passed at the general meeting, Lee was not present in the
meeting as he was travelling overseas. Lee argued that the company had issued a very short
notice to inform him about the meeting. However, according to Kamil, Khoo and Jamilah,
Lee did not really pay attention to the company’s affairs and left the management of the
company entirely to the three of them. Throughout the 5 years of business, Lee only attended
one board of directors’ meeting and one shareholders’ meeting. He had never requested to
have meetings through tele-conference whenever he was overseas. However, Lee was not
satisfied with the manner the company’s affairs were conducted and believed that this was a
deliberate omission to exclude him from voicing his concerns at the general meeting.

Lee came to know that the board of directors had used the company’s funds to sponsor
students’ activities in public universities. He believes that this was a misuse of funds by the
directors to promote themselves as philanthropists. The other directors responded to the
allegation by stating that the sponsorships given to the students formed part of the marketing
strategies of the company to promote the company’s product brand amongst the students.

Lee intended to sell his shares and wants to know the financial status of the company as well
as the value of the company’s assets. He requested the company to provide him access to the
company’s information, books and documents. At first, the company refused to entertain his
request as the documents were too many. However, after a series of negotiations, the board of
directors instructed the Company’s Secretary to furnish all information required by Lee for a
proper evaluation of the current value of his shares. Lee was not satisfied with information
and requested access to all other financial documents. The board however responded that as a
member of the board he has been given all financial statements and audited accounts but
since he never attended board meetings, he had never viewed the documents. While going
through the information provided, Lee discovered that the company had failed to table an
audited account for the year of 2015. He also discovered that in the same year there was a
delay in paying tax which had caused the company to pay additional assessment rates and a
tax penalty.

Based on the facts state above, advise Lee whether:

(a) He can bring a legal action against the directors of Tee Sdn Bhd under section 346,
Companies Act 2016 and
(b) He could get the majority shareholder to buy out his shares or to wind the company
under section 346, Companies Act 2016