Company acts 1965

S131(1)
(1) Subject to this section every director of a company who is in any way, whether directly or
indirectly, interested in a contract or proposed contract with the company shall, as soon as
practicable after the relevant facts have come to his knowledge, declare the nature of his interest
at a meeting of the directors of the company.

Section 132. As to the duty and liability of officers.

(1) A director of a company shall at all times exercise his powers for a proper purpose and in good faith
in the best interest of the company.
[Subs. Act A1299:s.7]
(1A) A director of a company shall exercise reasonable care, skill and diligence with
(a) the knowledge, skill and experience which may reasonably be expected of a director having
the same responsibilities; and
(b) any additional knowledge, skill and experience which the director in fact has.
Business judgment
(1B) A director who makes a business judgment is deemed to meet the requirements of the duty under
subsection (1A) and the equivalent duties under the common law and in equity if the director
(a) makes the business judgment in good faith for a proper purpose;
(b) does not have a material personal interest in the subject matter of the business judgment;
(c) is informed about the subject matter of the business judgment to the extent the director
reasonably believes to be appropriate under the circumstances; and
(d) reasonably believes that the business judgment is in the best interest of the company.
Reliance on information provided by others
(1C) A director, in exercising his duties as a director may rely on information, professional or expert
advice, opinions, reports or statements including financial statements and other financial data, prepared,
presented or made by
(a) any officer of the company whom the director believes on reasonable grounds to be reliable
and competent in relation to matters concerned;
(b) any other person retained by the company as to matters involving skills or expertise in relation
to matters that the director believes on reasonable grounds to be within the person's professional
or expert competence;
(c) another director in relation to matters within the director's authority; or

(d) any committee to the board of directors on which the director did not serve in relation to
matters within the committee's authority.
(1D) The director's reliance made under subsection
(1C) is deemed to be made on reasonable grounds if it was made
(a) in good faith; and
(b) after making an independent assessment of the information or advice, opinions, reports or
statements, including financial statements and other financial data, having regard to the director's
knowledge of the company and the complexity of the structure and operation of the company.
Responsibility of a nominee director
(1E) A director, who was appointed by virtue of his position as an employee of a company, or who was
appointed by or as a representative of a shareholder, employer or debenture holder, shall act in the best
interest of the company and in the event of any conflict between his duty to act in the best interest of the
company and his duty to his nominator, he shall not subordinate his duty to act in the best interest of the
company to his duty to his nominator.
Responsibility for actions of delegatee
(1F) Except as is otherwise provided by this Act, the memorandum or articles of association of the
company or any resolution of the board of directors or shareholders of the company, the directors may
delegate any power of the board of directors to any committee to the board of directors, director, officer,
employee, expert or any other person and where the directors have delegated any power, the directors
are responsible for the exercise of such power by the delegatee as if such power had been exercised by
the directors themselves.
(1G) The directors are not responsible under subsection (1F) if
(a) the directors believed on reasonable grounds at all times that the delegatee would exercise
the power in conformity with the duties imposed on the directors under this Act and the
memorandum and articles of association of the company (if any); and
(b) the directors believed on reasonable grounds, in good faith and after making a proper inquiry
if the circumstances indicated the need for the inquiry, that the delegatee was reliable and
competent in relation to the power delegated.
[ (1A) - (1G)) Ins. Act A1299:s.7]

Prohibition against improper use of company's property, position, corporate opportunity or

competing with the company
(2) A director or officer of a company shall not, without the consent or ratification of a general meeting
(a) use the property of the company;
(b) use any information acquired by virtue of his position as a director or officer of the company;
(c) use his position as such director or officer;

(d) use any opportunity of the company which he became aware of, in the performance of his
functions as the director or officer of the company; or
(e) engage in business which is in competition with the company,
to gain directly or indirectly, a benefit for himself or any other person, or cause detriment to the company.
[ (2) Subs. Act A1299:s.7]
(3) An officer or agent or officer of the Stock Exchange who commits a breach of this section shall be
(a) liable to the company for any profit made by him or for any damage suffered by the company
as a result of the breach; and
(b) guilty of an offence against this Act.
Penalty: Imprisonment for five years or thirty thousand ringgit.
(4) (Deleted by Act A616).
(5) This section is in addition to and not in derogation of any other written law or rule of law relating to the
duty or liability of directors or officers of a company.
(6) In this section
"agent" includes a banker, advocate and solicitor, auditor, accountant or stockbroker of the corporation
and any person who is or at any time in the preceding six months has been knowingly connected with the
corporation and has information which
(a) he holds by virtue of being connected with the corporation;
(b) it would be reasonable to expect a person so connected and in the position by virtue he is so
connected not to disclose except for the proper performance of the functions attaching to that
position; and
(c) he knows is unpublished price sensitive information in relation to the securities of the
corporation;
business judgment" means any decision on whether or not to take action in respect of a matter relevant to
the business of the company;
[ Ins. Act A1299:s.7]
"director" includes the chief executive officer, the chief operating officer, the chief financial controller or
any other person primarily responsible for the operations or financial management of a company, by
whatever name called;
[Ins. Act A1299:s.7]
"officer" includes a person who at any time has been an officer of the company.

Section 304. Responsibility for fraudulent trading.

(1) If in the course of the winding up of a company or in any proceedings against a company it appears
that any business of the company has been carried on with intent to defraud creditors of the company or
creditors of any other person or for any fraudulent purpose, the Court on the application of the liquidator
or any creditor or contributory of the company, may, if it thinks proper so to do declare that any person
who was knowingly a party to the carrying on of the business in that manner shall be personally
responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company
as the Court directs.
(2) Where a person has been convicted of an offence under subsection 303(3) in relation to the
contracting of such a debt as is referred to in that section the Court, on the application of the liquidator or
any creditor or contributory of the company, may, if it thinks proper so to do, declare that the person shall
be personally responsible without any limitation of liability for the payment of the whole or any part of that
debt.
(3) When the Court makes any declaration pursuant to subsection (1) or (2), it may give such further
directions as it thinks proper for the purpose of giving effect to that declaration, and in particular may
make provision for making the liability of any person under the declaration a charge on any debt or
obligation due from the company to him, or on any charge or any interest in any charge on any assets of
the company held by or vested in him or any corporation or person on his behalf, or any person claiming
as assignee from or through the person liable or any corporation or person acting on his behalf, and may
from time to time make such further order as is necessary for the purpose of enforcing any charge
imposed under this subsection.
(4) For the purpose of subsection (3) "assignee" includes any person to whom or in whose favour by the
directions of the person liable the debt, obligation, or charge was created, issued or transferred or the
interest created, but does not include an assignee for valuable consideration, not including consideration
by way of marriage, given in good faith and without notice of any of the matters on the ground of which
the declaration is made. (5) Where any business of a company is carried on with the intent or for the
purpose mentioned in subsection (1) every person who was knowingly a party to the carrying on the
business with that intent or purpose shall be guilty of an offence against this Act.
Penalty: Imprisonment for three years or ten thousand ringgit.
(6) This section shall have effect notwithstanding that the person concerned is criminally liable apart from
this section in respect of the matters on the ground of which the declaration is made.
(7) On the hearing of an application under subsection (1) or (2) the liquidator may himself give evidence
or call witnesses.

Siow Yoon Keong v. H Rosen Engineering BV

SIOW YOON KEONG v. H ROSEN ENGINEERING BV [2003]. The case stated that, an
amount of RM423000 that Ventura failed to pay to Rosen and used of it to invest in the
share market under his own name. When the investments realized to be incur losses,
Ventura cause a resolution to pass by the Board of Directors to escape his responsibility
by using the companys money.

Frodd Sdn Bhd is a firm that deal with the manufacturing of aluminium. Last week, Frodd went into
insolvency liquidation. Study shows that it has been take on losses in the past 2 years and is hopelessly
insolvent. Fred as managing director of the company, and Mr. Chin Chai as general manager, has been advised
that they should take an action to end up the firm into consideration. However, Mr. Chin Chai and Fred, despite
the advices, and proceed to ordered on credit raw material that worth RM2 million from Besi Sdn Bhd. The
liquidator is now willing to sue or charge any of the directors to make them personally liable for all or any part
of the RM 2 million debt.
In companies act 1965 section 304(1), it stated that any directors of a firm can be held to be personally liable if
the directors of the firm with knowledge on the company will be running on a business with an intention to
deceive the creditors as it will eventually results in bad financial affairs to the company Applying to this case,
Fred, the managing director of the company, and Chin Chai, the general manager may be sued under sections
304(1) for fraudulent trading and held to be personally liable because they were advised to winding up the
company as yet he still proceed with the order on credit raw material that worth RM 2 million from Besi Sdn
Bhd. In other words, a debt that worth RM2 million is proceeded when Fred and Chin Chai understand that the
company was not able to pay the debt. In other words, the company is in a act to running a business with the
intent to defraud.
An example that related to this section refers to the case of SIOW YOON KEONG v. H ROSEN
ENGINEERING BV [2003]. The case stated that, an amount of RM423000 that Ventura failed to pay to Rosen
and used of it to invest in the share market under his own name. When the investments realized to be incur
losses, Ventura cause a resolution to pass by the Board of Directors to escape his responsibility by using the
companys money. In result, he is charged under the section 304(1) of CA 1965 as it was done for a fraudulent
purpose.
Further by s 304(5), anyone that with the purpose that mentioned in subsection (1) can be charged due to the
business is to be continued in a dishonesty way. Thus, Fred and Mr. Chin Chai can be charged and shall be
guilty of an offence against this act as parties to the decision of carrying forward on the business with such
intention.
Section 303(3) also stated that any officers that recognized as parties shall be guilty of an offence that
contracted at the time was unreasonable or probable ground of expectation by company that the company was
able to pay the debt and results in winding up the company. Therefore, both and Mr. Chin Chai being officers
of the company who was knowingly a party to the contracting of the debt by knowing that the company was
not able to pay that debt will eventually results on both the officers to be guilty of an offence in this section.
Applied in section 304(2), where Fred and Mr. Chin Chai has been convicted of an offence under subsection
303(3) in relation to the contracting of such a debt as is referred to in that section the Court, on the application
of the liquidator of the company may declare that the person, who are Fred and Mr. Chin Chai shall carry the
responsible of personally liable to the debt of RM 2 million without any limitation.
Next, there are some situation where corporate veil can be lifted which the company will not be separated from
its members hence the members or directors remain liable for the companys wrong. There are two ways of
lifting the veil, by court or by statute.

Situations that corporate veil can be lifted by court are when it is in the public interest to hold the members or
directors responsible, the company was established for a fraudulent purpose, a company that has been used to
avoid legal obligations of an individual or both entities are within a single group enterprise. One of the case
that corporate veil lifted by court is Jones v Lipman , Lipman had sold the land to Jones but he changed his
mind into achieve specific performance. Lipman and the company were one single personality because Lipman
had used the corporate form as a device and sham, a mask, to hide his obligations to Jones while Lipman
must perform the contract with Jones.
However, by statute, corporate veil can be lifted by Sec.36 , Sec. 304(1) , Sec. 365(2), and Sec.121. Applying it
to the case, although Frodd was registered under private limited company, Fred is the person who has been a
party of the business shall be personally liable because they have been with the intention to defraud creditors
or for any fraudulent purpose. Therefore, Fred and can be charged under Sec.304(1) as corporate veil can be
lifted. The other two directors, Ali and Rodney can bring a separate action against Fred in order to lift the
corporate veil as they may pull Fred as individual personal liable.
Ultra vires defined as any activities that gone beyond the power of a company. According to Section 20(2)(a)
once a company is intend to sell companys property without the knowledge of members, the party can apply
to stop them. Further by Section 20(2)(b) of, an ultra vires act is defined when an action is to bring against the
former or present officers. Section 20(2)(c) stated that the act that petition by a minister to end up a company
business is recognised as ultra vires. In result, Section 20(2)(b) is one of these applies in the case of Frodd.
Thus, the contract is not binding as it is considered as ultra vires.
In example, one of the case of ultra vires is Introductions Ltd v National Provincial Bank Ltd 1968. The
company, Introductions Ltd, was with the main purpose of providing accommodation for overseas students but
the company end up doing business on pig breeding with the loan from bank. In result, the bank loan was
recognized as ultra vires and void.
As a result, liquidator can actually take action into sue Fred as the managing director in the court for the debt
of RM2 million from Besi Sdn Bhd that was contracted unreasonable nor improbable ground of expectation
that leads a bad financial affairs to the company purposely under Section 303(3) and also charge Fred with
intent to defraud creditors by any carry on any act for any fraudulent purpose under section 304(1) CA 1965.