LEGAL ENVIRONMENT IN

BUSINESS
SECTION 2 (AA102)

GROUP MEMBERS :
1. ADAM ARIFF BIN ROSLI
2. FITRI ISKANDAR BIN REDWAN
3. KU NAZALINA BINTI KU SHAHIRI
4. NURUL SYAZWANI BINTI ISKANDAR
5. PUTERI IMAN NATASHA BINTI MOHD NAZAR
 QUESTION 2
Adif was appointed as agent to help form a company. Upon formation of the
company, Adif was approached by Akif. Akif wanted to invest in the company
that Adif helped to form. Adif know Akif has a bad history and also known
among the corporate world as a bad and problematic shareholder. Akif promised
if Adif signed a contract with him, he will be given a house. Akif was delighted
with the promise and signed the contract with him. Upon formation of the
company, Adif get a house from Akif. The subject matter of the agreement has
been given to Akif.

As a legal officer of the company, you manage to found out about this deal.
Present your advice to your board of director including the actions that the
company can take against Adif.
 ISSUE
Whether the Board of Director of the company can take action against Adif or
not regarding his breach of duties
 LAW
- Promoter have a duty to act in the good faith of the company

- Promoter need to make full and honest disclosure of the transactions he had entered into
on behalf of the company

- The duty is fulfilled upon disclosure of the entire truth done before the board of
directors

- Disclosure must full, frank and explicit, and contain all the information relevant to the
transactions

- Promoter also have a legal duty not to make any form of secret profit at the expense

- Case : Erlanger v New Sombrero Phosphate Co.

 APPLICATION
- Promoter cannot make secret profit or obtain any form of benefit from third party

- Adif has clearly broken this as he has received a house

- The company has a way to recover this by using the constructive trust

- Another duty of being agent is, agent has an obligation to act in the good faith

- Adif has clearly breach this as he knows for fact that Akif is notorious in the corporate
world as a bad and problematic shareholders

- The company can sue the agent for his obvious breach of duties as the recission of the
contract is not possible

- The company can legally sue Adif for his breach of duties due to recission is not possible in
this scenario
 CONCLUSION
The company has every legal right to take action against Adif as he had breached
his fiduciary duties as a promoter by not acting in the good faith of the company
and obtaining secret profit at the expense of the company.

The company can sue Adif for breaching his duties and compelled Adif to hand
over the property to the company as a remedy for his breach.