APPLICABLE LAW
COMPANIES ACT 1965
SECURITIES COMMISSION ACT 1993
COMPANIES COMMISSION ACT 2001
WHAT IS A COMPANY
Company means a company incorporated pursuant to the Company Act or pursuant to any corresponding previous enactment.
Re Stanley
‘the word company … involves two ideas ( a ) the association so numerous as not to be aptly described as a firm; ( b ) the consent of the other members is not required to the transfer of a member’s interest.
Association of persons – not less than two person. Person – include a body of persons, corporate or incorporated (sec 3 Interpretation Act 1948)
LEGAL ENTITY OF A COMPANY
Once incorporate, a company is vested with a corporate personality i.e. the company is treated as a legal person (has personality and status).
The company is distinct from its share holder.
In contrast with a partnership, where the partners and the partnership is consider as a single entity.
sec. 16(5) Companies Act – a company once incorporate has the following effect:
may sue and be sue in its own name
Has perpetual succession
May own land
Liability of its members may be limited
SALOMON vs. SALOMON & CO.LTD
Held: the company was not an agent for the member. The members will not liable in respect of the company’s obligation.
LEE vs LEE’S AIR FARMING LTD
LlFTING OF THE CORPORATE VEIL
Where the court will look behind the corporate entity and take action as if no entity separate from the members existed. The court will make the company, director or manager liable for debts and obligations.
The exception to lifting the veil arise in the following situations:
Number of member reduced to below 2. A person who is the member and is aware of the this, is liable for all the debts after those 6 months.
Fraudulent Trading.
In the course of winding up, the court finds that the company’s business has been carrying out with the intention to defraud creditors, the court will hold any person who has the knowledge be liable for the debts – sec 304 (1) CA .
Re William C Leitch Brs Ltd
Publication of Name
The issuing of bill of exchange, cheque, other negotiable instruments without the company’s name is mention, that person will be liable to the holder of the instrument.
4. Holding and subsidiary companies
Hotel Jaya Puri Bhd. VS National Union of Hotels, Bar & Restaurant Workers & Anor.
TYPES OF COMPANIES
Companies limited by share
Liability of a member’s contribution to the company’s assets is limited to the amount unpaid of his share.
BORLAND’S TRUSTEE vs STEEL BROS. & CO. LTD
A Share is the interest of the share holder in the company measured by a sum of money…
Companies Limited by Guarantee
Liability of members is limited to such amount as the member have undertaken to contribute to the asset in the event of being wound-up.
Companies form to incorporate research association, charitable organization or non profit making organizations.
Private and Public Companies
Private companies:
Restrict the right to transfer its share
Members not more than 50
No invitation to public to subscribe its share
No invitation to public to deposit money with the company.
MEMORANDUM AND ARTICLE OF ASSOCIATION
Memorandum of association (MA) states the essential components of the company ie the object of which the company is form. The MA provides information to those who do business
with the company.
Article of Association (AA) is a set of regulations for management of the company
MA and AA must be registered with the Registrar of Companies prior to its incorporation. Failure to register the AA, the Registrar will adopted Table A of the Fourth Schedule of Companies Act.
Provision in the MA may be altered or deleted by a special resolution if the MA does not prohibited such act.
MA and AA once registered binds the company and the member and both parties must observed all the provisions on the MA and AA.
HICKMAN Vs Kent
If a shareholder seeks to enforce a term in the AA in a capacity not as a shareholder (profession services) he/she cannot enforced the provisions in the MA and AA. - Eley vs. Positive Government Security Life Assurance
MA and AA operates as a contract between member and member - Rayfileld vs. Hands.
DIRECTORS
Vested with the responsibility of the management of the company’s affairs.
Malaysia law required each company must have at least 2 directors who have its principle residence within Malaysia.
Director stand fiduciary relationship with the company – relationship of trust and confidence. DUTIES OF A DIRECTOR UNDER THE COMMON LAW:
To act in bona fide in the interest of the company
Act in good faith in the interest of the company and not personnel interest .
Re W & M Roith
To exercise power for proper purpose
Should not carry out duties not authorized to do so even for the benefit of the company. Example – reduced another member voting power
Re Micropack Industries Sdn Bhd
Duty to retain discretion
Should not exercise rigid policy in running the company.
Duty to avoid conflict of interest
Should not allow the interest of the company and their personal interest in conflict.
To put the interest of the co. above their personal interest.
To declare to the company the interest the director had in the contract/project
Sec 131(1) CA – to declare its interest to BOD
Sec 132( 2 ) – without consent from the general meting, director is prohibited from using the company’s property, sensitive information of the company, used his position as director to gain benefit for himself.
Types of conflict of interest:
Contract involves director.
Director should not enter into a contract with the company, directly or indirectly.
Arbedeen Ry vs Blaikie
Make secret profit.
Accountable to the company for any secret profit made by him.
IDC vs COOLEY
Not to compete with the company
Duties to act with care, skill and diligence
To act carefully and exercise reasonable degree of care, skill and diligence
guilty for gross negligence.
To act diligently, honestly and within the power conferred on them
Re City Equitable Fire Insurance Co. Ltd
Dorchester Finance Co. vs Stebbing
Duty not to delegate
Only day to day activities and does not involves decision making
Allow by the AA and BOD
No delegation on laying down the company policy
LIQUIDATION/WINDING -UP
Can be dissolved by the Registrar of Companies or by the court or by voluntary liquidation.
By the court order –an application can be applied by the company, creditor, contributor, liquidator, Minister
Ground to wind-up a company- 218 CA
Company, by special dissolution, resolved it be wound- up.
Failure to lodge statutory report or holding statutort meeting.
Failed to commence business within 1 year from incorporation.
Member reduced to below 2.
Director acted in the affair of the company in their own interest.
An inspector reported the company be wound up.
Upon expiration of the period stated in the MA .
Just and equitable for the co to wind-up revocation of the banking licence.
Revocation of the insurance licence.
Operating unlawful purposes.
