Describe the contents of articles of association of a company

State the relevant section and punishment when the directors breach of the following duties. Support your answer with the decided cases.

Case 1:

Ceilone is a director in Miles Ltd. He also has a partnership company namely Mutie & Co. Miles Ltd. Miles Ltd wants to sell equipment to the Mutie & Co. Ceilone does not inform that he is a partner in Mutie & Co. Advise

Case 2:

Alan is a director of Sham Ltd. He has the power to use the funds for the benefit of the co. He used the fund to buy a car for his beloved wife Linda. Advise.

Case 3:

Cindy has 2 subsidiaries company Linda Co. & Man Co. Cindy Ltd unable to pat 10% dividend to the shareholder. Cindy Ltd. took the profit from Linda & Co. and gave dividend to shareholder of Cindy Ltd. Advise.

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QUESTION 2 – t/f but NEED EXPLANATION AND JUSTIFICATION FOR ANSWER

1) Preference shares do not carry any priority in payment of divend and the dividend is not fixed. (True/False)

Explanation & justification:

2) Judge Farewell defined shares as the interest of shareholder in the company measure by a sum of money, for the purpose of interest in the first and liability in the second. (trues/False)

Explanation & justification:

3) The authorized share capital can be increased by ordinary resolution to amend the memorandum of association or articles of association (True/False)

Explanation & justification:

4) Share capital is more important than loan capital (True/false)

explanation & justification:

5) There is no need to have a liquidator in the process of liquidation. (true/False)

Explanation & justification:

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QUESTION 3

Bank Ltd raised RM1 million by the issue of a debenture to Ahmed, the loan having been secured by a floating charge, which was prperly registered under the provisions of the Companie Act 1965. The terms of the debenture and the charge prohibited the creation of any further changes which might rank in priority to or pari passu with that charge.

6 months later the company borrowed further sums of money:

(a) from Brata the sum of RM1 million secured by a charge over the building in which the company carried on business and of which it was the owner, and

(b) From Masita the sum of RM50,00 secured by floating charge ver the company’s undertaking. Both these further changers were duly registered in accordance with the provisions of the Companies Act.

The company then prospered for many years during which all interests payments was promptly paid. last year, however, the company defaulted with its interest payment to Ahmed, who thereupon appointed a receiver under the terms of his charge. the receivership lasted 3 months during which time the receiver paid over to Ahmed all the money received by the company RM100,000 in discharge of arrears of interst.

The receivership ended when an order for the compulory liquidation of the company was granted on the petition of Rain, one of the company’s employees. the company had a workforce of 25 whose total monthly salary was RM100,000. Duringt he 6 months prior to liquidation, however, every employee was paid only half of his or her salary.

Advise liquidator how to deal with the claims presented by Ahmed, Brata and Masita and all the employees (who are collectively owed RM300,000). The total of the company’s assets (excluding the building in which it carries on business) is RM1 million.

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QUESTION 4

Shamil Kids Ltd is a company which is entirely directed by a board of trustees who are the directors of the company. the objects of the company include:

i) to educate handicapped children

ii) to give money to handicapped children to enable them to proceed to higher education;

iii) to do all things the trustees cosider desirable.

Nurul, Deejay and Lyn are members of the board of trustees and consequently directors of the company. nurul who is responsible for pormoting the good name of the school arranges the company to donate RM50,000 to research in cancer. without refeferring to her fellow directors, she aranges for the company to create a covenant to this efffect.

A scholarship was also awarded to Meng whose legs were paralysed, to further his studies in business school at LUCT. The trusteees also authorized a gift in a form of scholarship to Nuru;’s nephew who has been accepted in an IT school in LUCT.

Nurul and Deejay agreed with the majority of the directors that 10 droporout students from other schools should be admitted as pupils at the school. their parents paid a deposit of RM4,000. one of the parents changed their minds and asks for a return of the deposit.

Advise all the relevant parties as to their rights and liabilited in the light of the doctrine ‘ultra vires’.

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QUESTION 5

1. Describe the contents of Articles of Association of a company

2. Discuss the legal position of Articles of Association of a company to its members. Support your answer with relevant statutory provision/s and decided case/s (if any)

3. Explain both Memorandum and Articles of Association and their purpose.

4. Discuss why it is important for Success Sdn Bhd to obtain a copy of the Memorandum and Article of Association.

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