Faculty of Business, Economics & Accounting

Department of Accounting and Finance

HELP Bachelor of Business (Hons) Year 2

INTERNAL SUBJECT DETAILS

Semester 3, 2016

Subject: LAW 201

Company Law

Subject Lecturer/Tutor: Ms. Tharunika@Chitra Ramalingam

Telephone: 03-2716 2000
Fax: 03-2093 5311
Email: chithlr@help.edu.my

Consultation: By appointment
PRE-REQUISITE(S)

LAW101 BUSINESS LAW

SYNOPSIS

The syllabus on Company Law is designed to equip students with a strong knowledge of
the common law and statutory requirements pertaining to the formation, financing,
management and administration of a company. Also, to be well versed with the corporate
governance requirements such as the duties and responsibilities of the directors, company
secretaries and managers. Students are expected to be familiar with the provisions of the
Companies Act 1965 among others.

OBJECTIVES

Upon completion of this subject, students should be able to:

develop a sound knowledge and understanding of companies in Malaysia;

understand the complexity and intricacies of the various laws governing companies;

compare and contrast companies with other business organisations;

recognise the duties, powers and also the limitations on directors and company
secretaries powers, and

understand the growing importance of corporate governance in Malaysia.

LEARNING OUTCOMES

Upon completion of this subject, students should be able to:

Understand the effects of registration, the most important being the creation of a
separate legal person and what is meant by the corporate veil;

Discuss the duties of promoters to the company being formed and the companys
remedies for breach of those duties;

Understand what a company constitution may contain and its importance;

Know how power is divided between the board of directors and the company in
general meeting;

Know how company can be liable in contracts, tort and crime;

Explain how a person becomes a member and how a member ceases to be a member;

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 List the procedures for meetings of the board of directors and the types of members
meetings, their purposes, and when and how they are called;

Discuss the duties imposed on directors by common law and the Companies Act and
also the remedial consequences which result when directors breach these duties;

Appreciate the difficulties faced by members who are seeking to challenge actions or
decisions by a company, especially breaches of directors duty are involved and the
scope of remedies available to members.

Understand and explain the financial structure of a company

Discuss the options available when a company is in financial difficulty

TOPICS

Topic 1 Types of Companies

Topic 2 Promoters and Pre- registration Contracts

Topic 3 Registration and consequences of registration (Separate Legal Personality

Doctrine and its consequences)

Topic 4 Memorandum of Association

Topic 5 Articles of Association

Topic 6 Corporate Liability

Topic 7 Memberships and Meetings

Topic 8 Corporate Power (Powers and Duties of Directors and Other Officers)

Topic 9 Financial Structure1 (Share Capital and Dividends)

Topic 10 Financial Structure 2 (Debentures and Loan Capital)

Topic 11 Members Remedies

Topic 12 Corporate Collapse

PRESCRIBED TEXT

Pascoe, J. Joshi, A. Rachagan,S. (2010) Principles of Company Law in Malaysia,

Malayan Law Journal.

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SUPPLEMENTARY TEXTS

Pamela Hanrahan, Ian Ramsay, Geof Stapledon, Aiman Nariman Mohd Sulaiman and
Aishah Bidin Commerical (2008) Applications of Company Law in Malaysia (3rd Ed )
CCH Malaysia.

Chan & Koh (2006) on Malaysian Company Law, Principle and Practice, Sweet &
Maxwell Malaysia

Aiman, S. and Aishah, B. (2002) Commercial Applications of Company Law in Malaysia,

CCH Malaysia

Arjunan, K., Low, C.K., (1995) Lipton and Herzbergs Understanding Company Law in
Malaysia (Student Edition), LBC Information Services, Sydney.

Walter, W. (1997) Company Law (Student Edition), FT Law & Tax Asia Pacific,
Singapore.

RECOMMENDED REFERENCES

References:
Journals
Malayan Law Journal [MLJ] 1932 current;
Current Law Journal [CLJ] (launched in 1981 with digest of cases but
began reporting full judgments from 1983 current); and
All Malaysia Reports [AMR] 1992 current.

Specialist Law Reports

Malaysia & Singapore Company and Security Law Cases [MSCLC];
Judicial Decisions Affecting Bankers and Financiers edited by Dato Syed
Ahmad Idid (1st ed 1994, 2nd ed 2003);

Secondary sources

Precedents and Forms

Malaysian Precedents and Forms published by LexisNexis and its foreign equivalent
Butterworths Encyclopedia of Forms and Precedents contain a variety of precedents to
assist in the drafting of legal documents. Precedent books are also available for certain
special areas of the law.

Digests

Mallals Digest (MD), a multi-volume digest summarises local cases by subject and
allows finding of cases on specific issues or topics. As the cases are in summary form, a
greater number of cases can be consulted within a shorter period of time. Apart from
reissues and yearbooks, there is a monthly current service called Mallals Current Law
(MCL). This digest was originally published as Butterworths Law Digest (BLD) and
later as Mallals Monthly Digest (MMD).
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The library has the foreign equivalent in The Digest: Annotated British, Commonwealth,
and European Cases (known as the English Empire Digest until 1981) which
commenced in 1919.

Law Dictionaries

The library has a good collection of law dictionaries. There are many words and phrases
judicially considered which have been introduced into the legal vocabulary.
Besides Strouds Judicial Dictionary published by Sweet & Maxwell, we have the
Malaysian version Words, Phrases and Maxims: Legally and Judicially Defined by Dr
Anandan Krishnan published by LexisNexis.

Articles published in the following local law journals are indexed for ease of retrieval:
Law Review (LR) by Sweet & Maxwell;
Quarterly Law Review (QLR) by Malaysian Current Law Journal;
Articles in Malayan Law Journal (MLJ);

Companies Act 1965.

Companies Commission Act 2001.

Partnership Act 1961.

Kuala Lumpur Stock Exchange Listing Requirements.

Malaysian Code on Corporate Governance.

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Subject Outline / Teaching Plan

Department : Accounting & Finance Subject Code : LAW 201

Lecturer : Tharunika@Chitra Ramalingam Subject Title : Company Law

Week Topics References (Pascoe, J.

Joshi,A.Rachagan,S
(2010)
1 Topic 1 Types of Companies Chapter 1
2 Topic 2 Promoters and Pre- registration Chapter 6
Contracts
3 Topic 3 Registration and consequences of Chapter 2
registration (Separate Legal
Personality Doctrine and its
consequences)
4 Topic 4 Memorandum of Association Chapter 4
5 Topic 5 Articles of Association Chapter 4
6 Topic 6 Corporate Liability Chapter 5
7 Topic 7 Memberships and Meetings Chapter 9 & 14
8 Mid Term Break
9 Topic 8 Corporate Power (Powers and Duties Chapter 12 & 13
of Directors and Other Officers)
10 Topic 9 Financial Structure1 (Share Capital Chapter 8 & 10
and Dividends)
11 Topic 10 Financial Structure 2 (Debentures, Chapter 11
Loan Capital)
12 Topic 11 Members Remedies Chapter 17
13 Topic 12 Corporate Collapse Chapter 18,20,21,
22 & 23
14 15 Final Examination

Textbook: Pascoe, J. Joshi, A. Rachagan,S. (2010) Principles of Company Law in

Malaysia, Malayan Law Journal.

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ASSESSMENT:

There are 3 assessment items for this subject.

Assessment Items Value Due Date

1. Assignment 20% 30 September 2016

2. Mid Semester Test (Closed Book) 20% Week 8

3. Final Examination (Open Book) 60% Examination period: 26 November-

10 December 2016**

REQUIREMENTS:

To gain a pass in this subject, students must:

Achieve a passing grade in the final examination i.e. score a minimum of 30 marks
out of 60 marks if there is an examination for this subject.

Attempt ALL areas of assessment; and achieve a total result of 50% or better
overall.

** - Please check on the notice board and My Acel for the actual date. HELP
University reserves the right to make any changes to the above where appropriate.

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ASSIGNMENT Question:
https://www.ssm.com.my/sites/default/files/acts/D.R.30_2015%20Companies%20Bill
%20(eng).pdf
http://www.ssm.com.my/en/services_acts_regulations
http://www.zicolaw.com/major-reform-as-new-companies-bill-2015-passed/
http://www.wongpartners.com/files/Uploads/Documents/Type%202/WP/al_wp_newco
mpaniesbill_feb14.pdf
http://www.lexology.com/library/detail.aspx?g=dd1ffb1d-3793-4159-bb6c-
8b0ee8628496
http://www.maicsa.org.my/download/technical/technical_clr_final_report.pdf
http://docs.business.auckland.ac.nz/Doc/Corporate-governance-symposium-paper-
Corporate-law-reform-in-Malaysia.pdf

Read the above links and critically analyse whether the latest company law reforms seen
through the Companies Bill 2015 recently passed in Malaysia has effectively identified
the weakness left by the previous Company Act 1965
General Expectations:
The student should explain the Company Act 1965 and the Latest Reforms in the
Companies Bills 2015.
Identifying the pertinent issues in this area.
Students should expand on the legal and statutory exceptions on the international
case studies for the purpose of this assignment.

Specific Expectations:
The assignment should display original and extensive sources which would be the
evidence of wide reading.
The student should display independent ideas and critical thought
The student should have clear grasp of material and ideas expressed in it
Analysis of the cases in this area must be undertaken

INSTRUCTIONS:

The above piece of work contributes to twenty (20) percent of the final marks for the
subject of Company Law. The answer must be in no more than 2000 words in length and
must be word processed. All work must include footnotes (sidenotes or endnotes) and
a bibliography. Special attention is drawn to the following:

1. All coursework must be submitted by due date mentioned above. Any

coursework SUBMITTED AFTER THIS TIME WILL NOT BE
ACCEPTED FOR ASSESSMENT PURPOSES (see student handbook
for further details).

2. The TURNITIN CLASS ID AND PASSWORD ARE: 8414662 and

slp 123 respectively.

3. All answers must clearly state students name and students number.

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 4. ANY ATTEMPT TO PLAGIARISE WILL BE PENALISED. (please
read student handbook for guidance).

5. The word limit for this assignment will be strictly enforced.

GRADING SCHEME

Mark Range GRADE GRADE DEGREE MARKING RUBRICS

POINT CLASSIFICATI
ON
Comprehensive and excellent grasp of
85 - 100 HD 1 4.00 key concepts
Excellent use of analytical means and
logical arguments
Excellent synthesis of arguments and
FIRST CLASS excellent use of relevant examples
Balanced discussions and excellent
80 84 HD 2 3.75 flow of ideas
Excellent command of language with
no errors
Excellent and consistent referencing
Comprehensive and excellent grasp of
75 - 79 DI 1 3.50 key concepts
Excellent use of analytical means and
logical arguments
Good synthesis of arguments and
SECOND excellent use of relevant examples
UPPER CLASS Balanced discussions and good flow of
70 74 DI 2 3.25 ideas
Excellent command of language with
no errors
Excellent and consistent referencing
Competent grasp of key concepts
65 69 CR 1 3.00 Competent use of analytical means
and logical arguments, albeit with
some errors
SECOND Fair synthesis of arguments and
LOWER CLASS moderate use of relevant examples
60 64 CR 2 2.75 Fairly balanced discussions and fairly
clear flow of ideas
Competent command of language and
limited amount of errors
Satisfactorily is referencing
Basic grasp of key concepts
55 - 59 PS 1 2.50 Less than satisfactory use of analytical
means and logical arguments
Little synthesis of arguments and
hardly any relevant examples
Some evidence of balanced
THIRD CLASS discussions and poor organisation
50 - 54 PS 2 2.00 PASS Satisfactorily command of language
and considerable amount of errors
Relatively flawed referencing
Shows ignorance of key concepts
0 - 49 FL 0.00 Less than satisfactory use of analytical
means and logical arguments
Little synthesis of arguments no
relevant examples
Little or no balanced discussions and
poor organisation
Relatively poor command of language
and unable to expressed ideas clearly
No referencing or poor referencing

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 HELP UNIVERSITY

ASSIGNMENT FEEDBACK/MARKING SHEET

LAW201
Company Law

1. Student ID:_______________________________________

Assessment Criteria Mark Maximum

Achieved Mark

Introduction 20%
Content: Critical Analysis, Evidence of Wide 80%
reading, Research, Grammar and Language
Conclusion 20%
Total Mark 100

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 Assignment No.: __

Assignment Cover Sheet

Student Information (For group assignment, please state names of
Grade/Marks
all members)
Name ID

Office
Module/Subject Information
Acknowledgement
Module/Subject Code

Module/Subject Name

Lecturer/Tutor/Facilitator

Due Date
Assignment Title/Topic

Intake (where applicable)

Word Count Date/Time

Declaration

. I/We have read and understood the Programme Handbook that explains on plagiarism, and I/we testify
that, unless otherwise acknowledged, the work submitted herein is entirely my/our own.
. I/We declare that no part of this assignment has been written for me/us by any other person(s) except
where such collaboration has been authorized by the lecturer concerned.
. I/We authorize the University to test any work submitted by me/us, using text comparison software, for
instances of plagiarism. I/We understand this will involve the University or its contractors copying my/our
work and storing it on a database to be used in future to test work submitted by others.

Note:1) The attachment of this statement on any electronically submitted assignments will be deemed
to have the same authority as a signed statement.
2) The Group Leader signs the declaration on behalf of all members.

Signature: Date:

mail:

11
 Feedback/Comments*
Main Strengths

Main Weaknesses

Suggestions for improvement

Student acknowledge feedback/comments

Graders signature Students signature:

Date: Date:
Note:
1)A soft and hard copy of the assignment shall be submitted.
2)The signed copy of the assignment cover sheet shall be retained by the marker.
3)If the Turnitin report is required, students have to submit it with the assignment. However, departments may allow
students up to THREE (3) working days after submission of the assignment to submit the Turnitin report. The
assignment shall only be marked upon the submission of the Turnitin report.
*Use additional sheets if required.

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 Department of Accounting & Finance

ACADEMIC INTEGRITY

Honesty and Responsibility

Academic integrity is an important tenet for HELP University. In pursuit of the highest
standards of academic integrity, the Department of Accounting & Finance holds it
students to the highest ethical standards defined by the Rules and Regulations section of
the Academic Handbook. All students at the Department of Accounting & Finance are
subjected to and are bound by the Student Academic Misconduct Rule to assure academic
honesty. Students are required to sign a pledge on the assignment cover sheet before
submitting your assignments to the Administration Office of the Faculty of Business,
Economics & Accounting.

What is Plagiarism?
Plagiarism is academic dishonesty or academic theft, and it is a serious academic offence.
Plagiarism includes, but is not limited to, the followings:
1. quote, paraphrase or summarize someone elses ideas, theories or data, in whole
or in part, without appropriate acknowledgement
2. borrow ideas, opinion or words, in whole or in part, from other sources without
properly crediting the author(s)
3. use any facts, statistics, diagrams or graphs, in whole or in part, without
acknowledging the source clearly
4. claim or imply original authorship of someone elses ideas, theories or data, in
whole or in part, as your own
5. employ or allow someone to help to revise, amend or write your work and pass
off as your own original work
6. collaborate with or allow other students to copy your work
7. draw on sources more than what you have acknowledged by citations

While a student is not discouraged to discuss an assignment with his/her friends or

classmates, the work he/she submits must be done by the student alone. If a student shares
his/her assignment with other students and they plagiarize it, the student is as guilty as
those students who plagiarized his/her assignment. All parties to plagiarism are
considered equally guilty. Under no circumstances should a student be involved in
collusion with other students unless he/she is permitted to work on an assignment jointly
by the lecturer/tutor. If a student is unsure what constitutes plagiarism, he/she is obliged
to consult the lecturer/tutor on the matter before submission of his/her assignment.

When and How to Reference?

Knowing when and how to cite is a students responsibility. If he/she is in doubt or need
more help on this matter, the student may consult the lecturer/tutor. The following list
comprises some of the sources a student will need to reference. The list is by no means
exhaustive, but simply consists of the most common sources used by students to complete
their work.
1. Books
2. Chapters in books
3. Journal articles
4. Conference papers

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 5. Newspaper articles
6. Magazines
7. Websites
8. Study guide

Students are advised to cite in the following cases [1]:

1. When he/she quotes two or more words verbatim, or even one word if it is used
in a way that is unique to the source
2. When he/she introduce facts that he/she have found in a source
3. When he/she paraphrase or summarize ideas, interpretations, or conclusions that
he/she find in a source
4. When he/she introduce information that is not common knowledge or that may
be considered common knowledge in your field, but the reader may not know it
5. When he/she borrow the plan or structure of a larger section of a sources
argument (for example, using a theory from a source and analyzing the same
three case studies that the source uses)
6. When he/she build on anothers method found either in a source or from
collaborative work in a lab
7. When he/she build on anothers program in writing computer code or on a not-
commonly-known algorithm
8. When he/she collaborate with others in producing knowledge

In general, a referencing system requires two parts:

1. In-text citations
This is information about a source within the text of an assignment.
2. List of references
This is a list of all sources a student has used to research his/her assignment. It is
alphabetically arranged by author surname and appears immediately after the last
page of an assignment.

Different faculties or departments may have different requirement on how referencing

for an assignment should be done. The various formats used for in-text citations and list
of references are available in the following websites:
1. Harvard System (http://www.adelaide.edu.au/library/guide/gen/harvard.html)
2. Chicago Style (http://www.chicagomanualofstyle.org/index.html)
3. American Psychological Association or APA Style (http://www.apastyle.org)
4. Modern Language Association of America or MLA Style (http://www.mla.org)

Once a student has selected a referencing style for his/her assignment, he/she must follow
the same style consistently throughout the assignment. We strongly suggest that the
student consults the lecturer/tutor about which method to use before submission of
his/her assignment.

What are the Procedures and Penalties for Plagiarism?

1
http://www.yale.edu/bass/writing/sources/plagiarism/warning.html, accessed May 18, 2008.

14
When a lecturer/tutor encounters a possible case of plagiarism, the lecturer/tutor shall
report the matter to the Head of the Department, who then initiates an investigation on
the matter. The following procedures would be carried out:
1. The lecturer/tutor shall provide evidence that substantiates an academic offence
has occurred. The following documentations must be ready prior to reporting of
alleged plagiarism:
a. Copy of the alleged plagiarized assignment
b. Copy of the source material (e.g. articles, websites, newspaper, etc.)
c. Report of plagiarism
d. Any other information that would support the claim of plagiarism
2. If the evidence warrants an accusation of academic offence, the Head of
Department shall establish a Board of Inquiry comprising 3 academic staff. The
Department shall provide all necessary documentations, including report on prior
academic offences if applicable, to the Board of Inquiry.
3. The Board of Inquiry shall put the matter to the student in writing and give
him/her an opportunity to respond to the accusation within 3 working days.
4. The student will be required to attend a meeting with the Board of Inquiry. After
meeting the student, the Board of Inquiry shall decide whether or not the alleged
plagiarism has occurred. The following documentations shall be submitted to the
Head of Department at the end of the meeting:
a. Findings of the investigation
b. Recommended action(s) to be taken or imposed
5. The Head of Department shall review the Board of Inquirys report with
supporting evidence and shall decide on an appropriate action(s) based on the
recommendation of the Board of Inquiry.
6. The decision of the Head of Department shall be put in writing to the student.
Copies of all documentations will be retained in the Department.
7. If the student feels that he/she has been unfairly accused or treated, the student
may appeal to the Head of Department within 5 working days.
8. The Head of Department shall review the appeal and the final decision will be
communicated to the student in writing and a copy will be kept with the
Department. Once a determination of plagiarism and penalty has been made by
the Head of Department, the investigative process will be deemed to have ended
and the student will not be allowed to appeal.

Possible penalties for plagiarism range from mark reduction for the assignment to
expulsion from the University. The student will not be allowed to make up the
assignment. If plagiarism has been found to have occurred, the Department will take
action(s) as determined by the forms of plagiarism implicated:

1. Complete plagiarism
Verbatim copying another persons work without acknowledgement
1st offence : A grade of F in the subject and a warning letter will be
issued
2nd offence : Expulsion from the University at the discretion of the Head
of Department
2. Substantial plagiarism
Near-verbatim copying another persons work by simply altering the order of the
sentences or the format of presentation or by changing a few words or phrases
without acknowledgement.
1st offence : Zero mark on the assignment and a warning letter will be
issued

15
 2nd offence : A grade of F in the subject and a warning letter will be
issued
3rd offence : Expulsion from the University at the discretion of the Head
of Department
3. Minimal plagiarism
Acknowledgement is made but paraphrasing by changing and/or eliminating
some words
1st offence : Deduction of 50% of available marks on the assignment and
a warning letter will be issued
nd
2 offence : A grade of F in the subject and a warning letter will be
issued
3rd offence : Expulsion from the University at the discretion of the Head
of Department
4. Unintentional plagiarism
Insufficient acknowledgement by not applying citation or quotation marks
correctly
1st offence : Deduction of up to 50% of available marks on the assignment
and a warning letter will be issued
nd
2 offence : A grade of F in the subject and a warning letter will be
issued
3rd offence : Expulsion from the University at the discretion of the Head
of Department
Pleading ignorance or unintentional plagiarism does not constitute valid reasons for
plagiarism and will not avoid the penalties from being imposed. Excuses for acts of
plagiarism such as the following, but not limited to, will not be entertained:
1. I dont have time to do the assignment
2. I have too many assignments due on the same day
3. I dont know, I really didnt do it
4. I am not aware
5. I dont understand what plagiarism means
6. I have no intention to plagiarize
7. I forgot to cite the reference
8. I forgot to include the bibliography
9. My English is not good
10. My lecturer/tutor did not explain to me
11. In my country, it is alright to copy someone elses work
12. My friend copied my assignment when I let him/her to look at my assignment
13. My friend copied my assignment when I allow him/her to use my laptop
14. I did my assignment in the computer lab, someone must have copied my work
15. I asked my friend to submit my assignment and he/she copied my work
16. I discussed my assignment with my friends, so our answers are the same/similar
17. Even though I do not have in-text citation but I have bibliography/reference list
Students should be reminded that it is their responsibilities to take due care throughout
their written work to effectively reference or cite when they use others ideas from any
source.

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 DEPARTMENT OF ACCOUNTING & FINANCE

SEMESTER X, 20XX

SAMPLE FINAL EXAMINATION

Subject Code : LAW201

Subject Name : COMPANY LAW

This examination carries 60% of the total assessment for this subject.

Examiner(s) Moderator(s)

MR ABC MR XYZ

Day :
Time :
Date :

Time allowed : Reading 10 MINUTES

Writing 3 HOURS

INSTRUCTION(S):

1. This examination consists of FOUR (4) questions.

Answer ALL questions in the answer book provided.

2. Writing on the examination answer book is NOT permitted during reading time.

3. This is an OPEN BOOK examination. Only items, listed below are allowed into the examination hall.
(A) PRESCRIBED TEXT (Any Edition)
(i) Pascoe, J. Joshi, A. Rachagan, S. (2010) Principles of Company Law in Malaysia, Malayan Law Journal.
(ii) Aiman, S. And Aishah, B. (2002) Commercial Applications of Company Law in Malaysia, CCH Malaysia
(iii) Arjunan, K., Low, C.K., (1995) Lipton and Herzbergs Understanding Company Law in Malaysia (Student
Edition), LBC Information Services, Sydney.
(iv) Walter, W. (1997) Company Law (Student Edition), FT Law & Tax Asia Pacific, Singapore.
(v) Chan & Koh (2006) on Malaysian Company Law, Principle and Practice, Sweet & Maxwell Malaysia
(B) RECOMMENDED REFERENCES Companies Act 1965
(C) LECTURER HANDOUTS Only Lecture handouts are allowed and NO tutorial questions.

4. Students are NOT permitted to retain this examination paper.

5. Students MUST pass this examination in order to pass the subject.

(This examination paper consists of 4 questions in XX printed pages, including cover page)

17
Answer ALL questions. Each question carries 25 marks.

Question 1

Mytec Sdn. Bhd. (the company) designs and installs computer software. At a recent
board meeting, the following resolutions were passed:
(a) To purchase a plot of land from Stuart, the husband of Mary, one of the companys
directors, for 200,000. Mary did not disclose that the land is owned by her
husband.

(b) To reject a proposed contract with Intelli University to install a new computer
system in its library. The board did not feel that there was enough profit in the
contract to make it commercially viable. After the meeting, Derek, a director of the
company, approached Intelli University and has been offered the contract in his
personal capacity which he intends to accept.

(c) To purchase some new computer equipment from ITech Sdn. Bhd. This contract
was negotiated by Ian, one of the companys directors, who, unknown to Mytec
Sdn. Bhd., has been paid a 5,000 commission for recommending ITech Sdn. Bhd.
to the company.

(d) To award Edward, a director of the company, 100,000 compensation for loss of
office.

Required:
Advise the company on any potential breaches of directors duties.
[25 marks]

Question 2

Ernie runs a small rendering plant, which produces tallow from organic waste such as
used chip oil. Tallow is a key ingredient for making biodiesel. Two years ago, Ernie was
approached by Biodiesel Co Bhd., (BCL) a large company with a government grant to
produce significant amounts of Biodiesel. BCL wanted to purchase tallow from Ernie.
The deal struck between Ernie and BCL was for Ernie to be issued with 5% of the shares
in BCL and a position as a director on the board of BCL. In return, Ernie would supply
his tallow to BCL. The other 95% of BCL shares are owned by a sole wealthy overseas
investor.
It is now two years down the track and Bernie is not happy. He is concerned that BCL is
not yet producing any fuel and he suspects BCL is running out of money to get the project
off the ground. He cant verify this as BCL management refuse to give him access to the
company accounts or minute books of meetings of members.
Board meetings have increasingly been called on shorter and shorter notice (the last one
only on 1 days notice), making it difficult for him to attend. At the meetings, rarely is
any documentary support for any business propositions provided by management and
most BCL decisions appear to be made without reference to the board at all.
To cap it all off, a special general meeting of BCL has been called for next month to
discuss the following resolution: That the constitution of the company be amended to
require persons holding fewer than ten percent of issued shares to sell their shares for
150% of their market value to the other shareholders of the company.
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Obviously, the proposed change, if passed, would see Ernie compulsorily excluded from
BCL. The CEO of BCL has told Ernie the change is required to satisfy a new condition
of the government funding BCL needs to get the project off the ground.

Required:
Advise Ernie as to his statutory remedies as a shareholder of BCL.
[25 marks]

Question 3

In the case of Trevor v Whitworth it was stated that creditors and shareholders are
entitled to assume that no part of the capital which has been paid into the coffers of the
company has been subsequently paid out, except in the legitimate course of its business.

Required:
Discuss the above statement and to what extent does this strict application of the doctrine
of capital maintenance has been gradually modified by the Companies Act 1965?
[25 marks]

Question 4

A Company stops existing when the company goes into liquidation (dissolved). The
process of dissolving a company is known as winding up or liquidation. There are many
reasons why a company may be wound up but insolvency is the most common one.

Required:
Discuss and explain the types of winding up, the grounds for winding up and the duties
and powers of a liquidator.
[25 marks]

*** END OF EXAMINATION PAPER ***

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