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LW/OCT 2010/LAW485

UNIVERSITI TEKNOLOGI MARA FINAL EXAMINATION

COURSE COURSE CODE EXAMINATION TIME

: CORPORATE LAW : LAW485 : OCTOBER 2010 : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. 2. 3. 4.

This question paper consists of seven (7) questions. Answer FOUR (4) questions in the Answer Booklet. Start each answer on a new page. Do not bring any material into the examination room unless permission is given by the invigilator. 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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QUESTION 1

LW/OCT 2010/LAW485

Section 16(5) of the Companies Act 1965 states that On and from the date of incorporation specified in the certificate of incorporation, the subscribers to the memorandum together with such other persons as from time to time become members of the company shall be a body corporate by the name set out in the memorandum. With reference to the above provision, discuss the effects of incorporation. (100 marks) QUESTION 2 Notwithstanding the general principle laid down in Foss v Harbottle (1843) 2 Hare 461 which states where the companys interests are infringed, only the company may sue to protect these interests, the court does in certain circumstances allow minority shareholders to bring actions to protect the company's interest by way of exceptions to the above rule. Discuss. (100 marks) QUESTION 3 a) With reference to case law, explain the doctrine of ultra vires at common law. (30 marks) b) Suria Sdn Bhd was formed on 25 July 2010 with the sole object of manufacturing and marketing health foods and health supplements. With the increasing competition in the health food business, Suria Sdn Bhd decided to diversify its business by setting up health spas and traditional treatment centres. In pursuance of this, the company purchased two premises to set up the said centre at Kota Damai. Amirul, a minority shareholder is opposed to the above decision of the company. He is concerned that the new business would lead to a failure which could affect the companys reputation. He wishes to know whether the company can legally proceed with this new business and whether he can take legal action to prevent the company from setting up the centre as it is not within the object of the company. Advise Amirul. (70 marks) QUESTION 4 Section 365 of the Companies Act 1965 provides that dividends shall only be paid out of available profits. With reference to the above provision, discuss the rules governing the payment of dividends. (100 marks)

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QUESTION 5

LW/OCT 2010/LAW485

Azlan, Juliana and Solihin form the board of directors of Sihat Sdn Bhd, each holding 50 of its shares. The companys business is the building and operating of sports enterprises such as golf courses and bowling centres. On t April 2010, the company entered into a contract with Sihat Sdn Bhd to purchase sports equipment for a bowling centre. This was done on Azlans recommendation. However, unknown to the company, Azlan and Solihin were also directors of Sihat Sdn Bhd. Neither Azlan nor Solihin disclosed this fact to the company. On 15 Mac 2010, the directors decided to increase the capital of the company. Pursuant to a resolution at a board meeting, they issued 600,000 one-ringgit ordinary shares to the senior management staff of the company at par value. This was done on the understanding that those senior management staff would vote in support of the directors when the need arose. On 22 Jun 2010, the company requested Juliana to negotiate a joint venture contract with Cergas Berhad for setting up a golf course at Miri, Sarawak. In the course of the negotiations, Cergas Berhad informed Juliana that it was interested in engaging her personally for the project and has no interest in contracting with Sihat Sdn Bhd. Two months after the negotiations, Juliana resigned from Sihat Sdn Bhd using ill health as an excuse. The contract has since been awarded to Juliana by Cergas Berhad. Sihat Sdn Bhd has now discovered the true facts and wishes to know whether the conduct of the directors in the above matters constitute a breach of their duties to the company and if so, what remedies are available to the company. Advise Sihat Sdn Bhd. (100 marks)

QUESTION 6 a) Hayatis share certificate was stolen by a thief, who then used a forged transfer form to trick Firdaus into buying those shares. The shares were then registered in Firdauss name. The forgery has now been discovered and both Hayati and Firdaus are claiming to be legally entitled to the shares. Advise the respective parties on their legal position (60 marks) b) Explain what is meant by a deferred share, ordinary share and preference share. (40 marks)

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QUESTION 7 a)

LW/OCT 2010/LAW485

Man, Su and Siti are the directors of Kajang Sdn Bhd. They own all its shares. The company is starting to make losses and owes RM65.000 to its creditors. Man, Su and Siti are keen to put the company into liquidation because they feel unable to make the company profitable again. The valuation of the companys premises and fixed assets prepared two weeks ago suggest that RM98,000 would be realized on a sale. Advise them on the easiest way to achieve their intention and the procedure required. (50 marks)

b)

What are the effects of voluntary winding up on the company, creditors and employees? (50 marks)

END OF QUESTION PAPER

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