(Malaysia)

PART 2
TUESDAY 5 DECEMBER 2006

QUESTION PAPER
Time allowed 3 hours
This paper is divided into two sections
Section A

SIX questions ONLY to be answered

Section B

TWO questions ONLY to be answered

Do not open this paper until instructed by the supervisor

This question paper must not be removed from the examination
hall

The Association of Chartered Certified Accountants

Paper 2.2(MYS)

Corporate and
Business Law

6DMYSPA
Paper 2.2MYS
6DMYSAA
Paper 2.2MYS

Section A SIX questions ONLY to be attempted

1

In relation to the Malaysian legal system, explain the following rules of statutory interpretation adopted by the
courts:
(a) The ejusdem generis rule;

(3 marks)

(b) The literal rule;

(3 marks)

(c) The mischief rule.

(4 marks)

6DMYSAB
Paper 2.2MYS

6DMYSAC
Paper 2.2MYS

(10 marks)

In relation to the law of agency, discuss the exceptions to the rule that an agent cannot enforce or be bound by
contracts made on behalf of the principal.
(10 marks)

In the context of partnership law:

(a) Define a partnership.

(2 marks)

(b) State SIX of the rules provided for in the Partnership Act 1961 to determine the interests of partners in
partnership property and their rights and duties in relation to the partnership.
(8 marks)

6DMYSAD
Paper 2.2MYS

6DMYSAE
Paper 2.2MYS

(10 marks)

State and briefly explain the main elements of a contract.

(10 marks)

In relation to the law of contract, explain the nature and effect of undue influence as a vitiating factor in a
contract.

6DMYSAF
Paper 2.2MYS

(10 marks)

In relation to a company:
(a) Define a promoter.

(2 marks)

(b) Explain the duties of a promoter and the remedies available to the company in the event of a breach of such
duties by the promoter.
(8 marks)

6DMYSAG
Paper 2.2MYS

(10 marks)

State the extent to which the Companies Act 1965 prohibits companies from giving financial assistance for the
purchase of their own shares.
(10 marks)

6DMYSAH
Paper 2.2MYS

In relation to employment law, explain the remedies available to an employee who has been unjustifiably
dismissed.
(10 marks)

[P.T.O.

6DMYSPB
Paper 2.2MYS
6DMYSBA
Paper 2.2MYS

Section B TWO questions ONLY to be attempted

9

(a) Ali entered into the following contracts with Bakar:

(i)

A contract to sell his house to Bakar for RM350,000, its market value.

(ii) A contract to buy Bakars motorcycle, a Suzuki Speedo, for RM10,000.

Last week Ali informed Bakar that he did not want to sell his house at all. In retaliation, Bakar informed Ali that
he would not sell his motorcycle to Ali. Both now want to sue each other for breach of contract.
Required:
Assuming for both (i) and (ii) below that the contract has been broken, advise Ali, who has sought your
advice:
(i) what is the most appropriate remedy for Bakar against him for breach of contract ; and
(ii) what is the most likely remedy the court would order against Bakar in favour of him (Ali) for breach of
contract.
(10 marks)
(b) Ah Chong, a motor mechanic, entered into a contract with Minyak Sdn Bhd, a manufacturer of motor oils, for
the purchase of 20 drums of First grade, high viscosity premium engine oil. When the drums of oil were
delivered Ah Chong found the oil to be of extremely low quality and highly unsuitable for motorcar engines. He
wishes to sue Minyak Sdn Bhd for breach of contract. However, Minyak Sdn Bhd denies liability relying on a
clause in the contract which states, Minyak Sdn Bhd does not give any warranty, express or implied, as to the
quality of the product contracted for.
Required:
Advise Ah Chong.

(5 marks)

(c) Al Tooney, a singer, wished to stage a solo performance. He entered into an agreement with Joe, the owner of a
theatre, to hire it for one day, at a cost of RM2,000. He paid the full amount in advance.
However, a day before the performance was due to be held, the theatre was destroyed by fire after being struck
by lightning.
Al Tooney wishes to sue Joe for a refund of the amount of RM2000.
Required:
Advise Al Tooney on his chances of success.

(5 marks)
(20 marks)

6DMYSBB
Paper 2.2MYS

10 (a) Buku Buku Sdn Bhd is a private limited company. Amin, Brad and Chong are its directors, each holding 20% of
the companys issued shares. The objects clause of the company states:
(1) The objects of the company shall be to sell books and stationery.
(2) The company may also carry on any other activity which, in the opinion of the directors, may be
advantageously carried on in conjunction with its business as stationers.
At a recent board meeting, the directors of the company decided to expand the companys business to include
the manufacture of soft toys. They intend to negotiate the purchase of a factory for this purpose.
Nono, a shareholder, has become aware of this and wishes to prevent the company and the directors from
implementing their plans on the ground that the manufacture of soft toys is outside the capacity of the company.
Required:
Advise Nono:
(i)

whether the manufacture of soft toys would be ultra vires the company;

(4 marks)

(ii) whether he is likely to be successful in seeking an injunction to prevent the company from purchasing
the factory for the manufacture of toys, assuming that the manufacture of toys is ultra vires the
company;
(4 marks)
(iii) whether the answer to (ii) above would differ if the company has already bought the factory; and,
(3 marks)
(iv) whether, in the event an injunction cannot be obtained, he could take legal action against anyone to
make such person compensate the company for any loss resulting from the ultra vires transaction.
(3 marks)
(b) Tirai Sdn Bhd (the company) has gone into insolvent liquidation. Its liabilities far exceed its assets.
Required:
Advise the liquidator in respect of each of the situations below:
(i)

The company had been formed in 2001 with two members, Asri and Badrul. In January 2006 Badrul sold
his shares to Asri and left the company. Since then the company had been managed solely by Asri and
continued to incur heavy debts.
State whether Asri can be held personally liable for all or any part of the debts of the company.
(3 marks)

(ii) In January 2006, Berle, the office manager of the company, issued a cheque on behalf of the company in
favour of Juval, a supplier of goods, as payment for goods sold to the company. Unfortunately, the name of
the company was not correctly stated on the cheque and the bank refuses to honour it.
State whether Berle can be made personally liable for the amount owed to Juval.

(3 marks)
(20 marks)

[P.T.O.

6DMYSBC
Paper 2.2MYS

11 McApple Sdn Bhd is a company dealing in computers and software. Its directors are Arvind, Banjo and Cindy. Each
of them holds 15% of the companys issued shares. Arvind is the chairman of the board of directors.
The companys Articles of Association are in the form of Table A of the Fourth Schedule of the Companies Act 1965.
Recently, the board of directors decided to alter the objects clause to include other related businesses. In order to effect
the necessary alteration as well as to transact several other matters, the directors decided to call an extraordinary
general meeting. Due notice in the proper form was sent by the company to all the shareholders by post.
Your advice is required on the following matters, which have arisen:
(a) A member, Rubiah, who holds 5% of the issued shares claims that she had not received notice of the meeting.
She has threatened to institute legal proceedings to invalidate all decisions taken at the meeting.
Required:
Advise the board of directors as to the legality of the meeting.

(4 marks)

(b) Janu who also holds 5% of the shares was unable to attend the meeting and appointed Kang Foo (a nonmember) as his proxy. Some of the members object to his appointment as proxy as he is a non-member.
Required:
Advise Kang Foo as to the validity of his appointment as proxy.

(3 marks)

(c) The chairman of the board, Arvind, was ten minutes late for the meeting. Meanwhile Cindy was elected to preside
as chairman of the meeting. Arvind believes that he has the legal right to preside as the chairman of the meeting.
Required:
Advise Arvind as to the legal position.

(3 marks)

(d) During the meeting, the chairman proposed that voting on the matters to be transacted be done by a show of
hands.
Required:
Advise the chairman as to whether:
(i) Kang Foo may vote on the show of hands.
(ii) Assuming the matter was decided by a show of hands, Kang Foo may subsequently demand a poll.
(6 marks)
(e) The resolution to alter the objects clause was approved by a majority of 70% of the votes of those present and
voting. The chairman declared that the resolution was valid. However, Kang Foo contends that the resolution is
invalid and cannot be relied on to proceed with the alteration of the objects clause.
Required:
Advise the chairman.

(4 marks)
(20 marks)

6DMYSBD
Paper 2.2MYS

12 (a) Amanda and Shah Rukh are shareholders of a company, Aman Shah Sdn Bhd. Together they hold 40% of the
issued shares of the company. The directors of the company are Olive, Priya, Raju and Sam who are also
shareholders, each holding 15% of the companys shares. The issued share capital of the company as at January
2006 was RM1 million divided into 1 million one-ringgit shares.
In February 2006 the directors decided to increase the capital of the company. Pursuant to a resolution at a board
meeting they issued 500,000 one-ringgit 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 favour of the directors
when the need arose.
In March 2006, the company entered into a contract with Jojo & Co (a firm) for the purchase from them of
RM500,000 worth of office furniture. It has recently been discovered that Olive and Priya are partners in Jojo &
Co together with two others.
Two months ago, Raju and Sam negotiated on behalf of the company a contract with the government of Zululand
under which Aman Shah Sdn Bhd would get a profit of RM5 million. Last month the directors diverted the benefit
of the contract to another company, Treyter Sdn Bhd, a company which was set up by the directors themselves
and the shareholders of which are also themselves. When Amanda and Shah Rukh protested over this, the
directors called up a general meeting at which this matter was ratified by the directors as majority shareholders.
Required:
Discuss whether there has been any breach of duty to the company by any or all of the directors in respect
of the above three matters and any remedies that may avail the company.
(15 marks)
(b) Karim, who holds 5000 shares in ABC Sdn Bhd, wishes to sell his shares to Lan. However, the directors of the
company have refused to approve such transfer, relying on an article in the companys articles of association
which states, the directors may in their absolute and uncontrolled discretion, refuse to register a transfer of
shares.
Karim seeks your advice on the legality of the said article and whether he can challenge the exercise of the
discretion of the directors on any grounds whatsoever.
Required:
Advise Karim.

(5 marks)
(20 marks)

End of Question Paper