Answers

Fundamentals Level – Skills Module, Paper F4 (MYS)

Corporate and Business Law (Malaysia) December 2009 Answers

1 This question tests the candidates’ knowledge on the difference between legislation and delegated legislation as well as the advantages
and disadvantages of delegated legislation. Candidates are required to explain any TWO advantages and TWO disadvantages only.

(a) Legislation refers to the laws which have been formally passed by the properly elected bodies, i.e. the Parliament (at the Federal
level) and the State Legislative Assemblies (at the State level). Legislation passed by Parliament is generally called an Act of
Parliament, while those passed by the State Legislative Assemblies are called Enactments (with the exception of Sabah and
Sarawak, where they are called Ordinances).
Delegated legislation (also known as subsidiary legislation) refers to the rules and regulations, which are passed by some
person or body under some enabling parent legislation. The Interpretation Act 1967 defines it as ‘any proclamation, rule,
regulation, order, bye-law or other instrument made under any Act, Enactment, Ordinance, or other lawful authority and having
legislative effect’.

(b) The advantages of delegated legislation are the following:

(i) Delegated legislation can be passed very quickly and is more flexible. This is because it does not have to undergo the
various stages of procedure which has to be followed in Parliament or the State Legislative Assemblies. Similarly, if the
need arises, delegated legislation can be just as speedily amended or even rescinded to meet the changing needs of
society.
(ii) Delegated legislation deals with the detailed rules necessary to implement the law. As Parliament does not have sufficient
time to deal with such minute details, delegated legislation is the more efficient way to fulfil this need.
(iii) Certain matters may require the special skill and knowledge of experts in that area. Parliament itself may not have
sufficient experts for this purpose. Thus, delegated legislation fulfils this need as well.
The disadvantages of delegated legislation are as follows:
(i) The growth of delegated legislation goes against the doctrine of separation of powers. This is because law is not being
passed by persons elected for that purpose (i.e. the legislature). Instead it is being passed by officers of government
departments.
(ii) Parliament is unable to effectively supervise the making of delegated legislation due to lack of time. As a consequence,
many rules and regulations may have been passed without proper consideration of some very important factors.
(iii) Too much law is passed through delegated legislation without sufficient Parliamentary control.

2 This question, on employment law, examines the candidates’ knowledge on the distinction between a contract of service and a
contract for services and the tests that have been developed by the courts to determine whether a contract of service has come into
existence.

(a) A contract of service is a contract between an employer and an employee under which the employee agrees to work for the
employer. The Employment Act 1955 defines a contract of service as, ‘any agreement whether oral or in writing and whether
express or implied, whereby one person agrees to employ another as his employee and that other agrees to serve his employer
as employee and includes an apprenticeship contract’. The Industrial Relations Act 1967 also defines such a contract but refers
to it as a ‘contract of employment’. Under this Act, a ‘contract of employment’ is defined as, ‘any agreement whether oral or in
writing and whether express or implied whereby one person agrees to employ another as a workman and that other agrees to
serve his employer as a workman’. It has generally been accepted that there is no distinction between the two phrases.
A contract for services, on the other hand, is essentially different from that of the contract of service or employment. It does
not create an employer–employee relationship and does not therefore come within the purview of the Employment Act and the
Industrial Relations Act. It merely creates a contractual relationship between an employer and an independent contractor.

(b) The courts have developed three tests to help determine if a contract of service has in fact arisen. These are (i) the control test,
(ii) the integration test and (iii) the multiple test.
(i) The control test.
This test relates to the extent of control which the employer had over the employee in relation to the manner in which the
employee was to do his work. The greater the control, the greater the possibility that there is a contract of service.
The control test has been seen as inadequate especially in occupations of a skilled or professional nature because the
employer may be unable to exercise such control.

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 (ii) The integration test.
This test relies on the extent to which a person can be considered as part and parcel of an organisation. The greater the
integration with the organisation the greater the possibility of a contract of service.
(iii) The multiple test.
This test, which is more relied upon nowadays, takes into account multiple considerations in order to determine whether
a contract of service exists. Among other things, the courts will take into consideration the extent of control, the power of
selection and appointment, the power to suspend and dismiss the employee, the intention of the parties and the nature
and contents of the agreement between them.

3 This question on the law of contract tests the candidates’ knowledge on who are minors, as well as the exceptions to the general
rule that contracts entered into by minors are void. (Candidates are required to explain any FOUR exceptions only)

(a) A minor, in the context of the law of contract, is a person who has not attained that age of majority for the purposes of entering
into a valid contract. Section 11 Contracts Act 1950 states that only a person who is of sound mind and the age of majority is
competent to contract. Further, he must not be disqualified from contracting by any law to which he is subject. By virtue of the
Age of Majority Act 1971, the age of majority for purposes of contractual capacity is 18 years.

(b) The general rule under Malaysian law is that a contract entered into by a minor (i.e. person who has not attained the age of
18 years) is void – Mohori Bibee v Dhurmados Ghose (1903); Tan Hee Juan v Teh Boon Keat (1934). However, this general
rule that minors cannot validly enter into a contract is subject to a number of exceptions as follows:
(i) Marriage contracts
Minors have been held capable of entering into marriage contracts, and are therefore liable for breach of such a contract.
This is illustrated in the case of Rajeswary & Anor v Balakrishnan & Others (1958).
In this case, the parties to the action were Hindus. The first plaintiff was a minor and she had agreed to marry the first
defendant. Later the first defendant repudiated the contract. In an action for damages for breach of promise of marriage,
the first defendant pleaded that the first plaintiff did not have the capacity to contract and that, as a consequence, the
contract was void.
The court held that the contract was valid and that marriage contracts differed from other classes of contracts. Thus the
principle laid down in Mohori Bibee’s case was not applicable.
(ii) Contracts for necessaries
This exception provided for under s.69 Contracts Act 1950 states, ‘If a person, incapable of entering into a contract, or
anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life,
the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person’.
There is no statutory definition of what amounts to necessaries. While it certainly would include bare essentials such as
food, clothing, shelter and medical attention, what constitutes necessaries would vary from case to case depending on
the minor’s station in life. Education has also been held to be included in the term, ‘necessaries’ – Govt of Malaysia v
Gurcharan Singh (1971).
(iii) Scholarship agreements
By virtue of the Contracts (Amendment) Act 1976, scholarship agreements between a minor and an ‘appropriate
authority’ cannot be invalidated on the ground of his minority. Appropriate authority refers to the Federal Government,
State Government, statutory authority or an educational institution, e.g. university.
(iv) Contracts of insurance
By virtue of s.153(1) Insurance Act 1996, a minor may enter into a contract of insurance, if he is aged above 10 years.
However, if he is below 16 years, he has to have the consent of his parent or guardian.
(v) Contracts of Service (Apprenticeship)
Under the Children & Young Persons (Employment) Act 1966 minors are permitted to enter into contracts of service,
otherwise than as employers.

4 This question, on partnership law, tests the candidates’ knowledge on the liability of a retiring partner in respect of partnership debts
incurred both before and after his retirement.

(a) A partner who retires from the firm, is not thereby automatically freed of his liability for partnership debts whether incurred
before or after his retirement. This is made clear by virtue of ss.19(2) and 38(1) of the Partnership Act 1961.
By s.19(2), ‘a partner who retires from the firm, does not thereby cease to be liable for partnership debts or obligations incurred
before retirement’.

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 Further by s.38(1), ‘where a person deals with a firm after a change in its constitution, he is entitled to treat all apparent
members of the old firm as still being members of the firm, until he has had notice of the change’.
Thus, in the case of future debts, a partner may be liable unless he has given notice in the form prescribed by the Partnership
Act.

(b) A retiring partner may, by taking appropriate measures, be released from his liability from both existing as well as future debts
of the firm.
In the case of existing debts, he may not be liable if there is an agreement between himself, the new firm and the creditors to
the effect that he shall no longer be liable for such debts. Such an agreement may either be express or implied. The authority
for this is s.19(3), which states, ‘a retiring partner may be discharged from any existing liabilities by an agreement to that effect
between himself and the firm as newly constituted and the creditors, and this agreement may be either express or inferred as
a fact from a course of dealing between the creditors and the firm as newly constituted.’
In the case of future debts, the retiring partner may protect himself from liability towards new creditors by advertisement in the
Federal Gazette, Sabah Gazette, or Sarawak Gazette. See: s.38(2) Partnership Act 1961.
In so far as existing creditors are concerned actual notice is necessary. A case that illustrates this is Re Siew Inn Steamship
(1934). In this case a retired partner had placed a notice of his retirement in certain newspapers which were regularly read by
some old customers. Subsequent to his retirement these old customers lent money to the firm. They had not read the notice
in the newspapers. The court held that the retired partner was liable. The newspaper advertisement was insufficient. It was
held in Phillips Singapore Private Ltd v Han Jong Kwang & Anor (1989) that even a notice to the Registrar of Business, of the
retirement of a partner, is not sufficient notice towards old customers of the firm.
Thus, a retiring partner will be liable for the firm’s debts despite his retirement, except to the extent discussed above.

5 This question tests the candidates’ knowledge on the ultra vires doctrine in company law. The candidate is required to explain how
the common law position has been modified in Malaysia in the light of the provisions of s.20 of the Companies Act 1965.

Ultra vires means ‘beyond the power’. In the context of company law, a company is said to be acting ultra vires when it goes beyond
its capacity as contained in its objects clause.
At common law any ultra vires act or transaction of a company was held to be totally void. Neither the company nor the third party
could enforce such a transaction. This principle is known as the doctrine of ultra vires.
The purpose of the doctrine was to protect the investors of the company i.e. its members as well as its creditors, who could rest
assured that their money would be applied only for the purposes stipulated in the objects clause. However, the doctrine had the
tendency of creating hardship especially upon third parties who had dealt with a company without being aware that the transaction
was outside the capacity of the company, i.e. ultra vires. It was also capable of causing difficulty to the company itself, which could
not venture into new activities without altering the objects clause.
The common law position of the ultra vires doctrine has been modified in Malaysia as a result of s.20 of the Companies Act
1965.
By s.20(1), no act or purported act of a company, and no conveyance or transfer of property to, or by, a company shall be invalid
by reason only that it is ultra vires. As a result of this section, ultra vires transactions are valid and binding upon the company and
the third party. However, this does not mean that the ultra vires doctrine has been totally abolished in Malaysia. Companies are still
expected to act within the scope of the objects clause.
Section 20(2)(a) states that any member of the company or debenture holder secured by a floating charge on the company’s
property or the trustees for such debenture holders may take proceedings against the company to restrain the company from doing
any ultra vires act, or conveyance or transfer of any property to, or by, the company. Section 20(3) provides that the court may allow
compensation to the company or other party for loss suffered as a result of granting the injunction.
Further, by s.20(2)(b) the issue of ultra vires may be relied upon by the company or any member in proceedings against the present
or former officers of the company.
In addition, by s.20(2)(c), the issue of ultra vires may be relied upon in any petition by the minister to wind up the company.
The modifications of the doctrine in Malaysia may be summarised as follows:
(i) A completed ultra vires transaction remains valid as between the company and the third party and either party may sue the
other upon it. However, as mentioned above, uncompleted transactions may be restrained on grounds of ultra vires.
(ii) Further, the present and former officers of the company may be made liable to the company for the ultra vires transaction. In
addition the issue of ultra vires may be relied upon by the minister to wind up the company.

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6 This question tests the candidates’ knowledge on the prohibition in the Companies Act 1965 on companies giving financial assistance
for the purchase of its own shares and the exceptions to the said prohibition.

(a) It has been a long established principle at common law that a company cannot purchase its own shares. This rule is found
in the case of Trevor v Whitworth (1887). The purpose of the rule was to ensure that a company’s share capital is properly
maintained. In addition to this, companies’ legislation has prohibited companies from giving financial assistance for the
purchase of its own shares.
In Malaysia the prohibition on purchase by a company of its own shares as well as the prohibition on the giving of financial
assistance for the purchase of its own shares is embodied in s.67 of the Companies Act 1965.
By s.67(1), a company cannot give, whether directly or indirectly, and by means of a loan, guarantee or the provision of
security or otherwise, any financial assistance for the purpose of, or in connection with a purchase, or subscription, made or
to be made by any person of, or for any shares in the company or, where the company is a subsidiary, in its holding company,
or in any way purchase, deal in or lend money on its own shares.
Thus, by the section, a company cannot purchase its own shares and, it cannot give a loan to any person to enable that person
to purchase its shares, or give a guarantee or provide security in respect of a loan made by some other party to enable a person
to purchase its shares. Many cases illustrate this prohibition, e.g. Selangor United Rubber Estate Ltd v Craddock (1968);
Chung Khiaw Bank v Hotel Rasa Sayang (M) Sdn Bhd (1988); Kidurong Land Sdn Bhd v Lim Gaik Hua & others (1990).

(b) Section 67(2) provides the following exceptions to the general prohibition:
(i) where the lending of money is part of the ordinary business of a company, the company may lend money in the ordinary
course of its business. Thus, banks, financial institutions and other money lending institutions are exempted from this
prohibition, provided that they act in the ordinary course of their business.
(ii) The provision of money for the purchase of, or subscription for, fully paid shares in the company or its holding company, if
the purchase or subscription is by trustees for the benefit of employees, including directors holding a salaried employment.
Thus companies which have an employee share scheme set up for the benefit of their employees may give financial
assistance to the trustees of that scheme to enable those trustees to purchase fully paid shares in the company to be held
by them for the benefit of employees.
(iii) The giving of financial assistance to employees (excluding directors) to enable them to purchase fully paid shares in the
company or its holding company. This exception allows companies to assist employees by directly providing financial
assistance to them to enable them to purchase the company’s shares. However, this exemption does not apply to
directors. As such, even if the directors are employees because they have service contracts with the company, they cannot
take advantage of this exception.

7 This question on company law contains two parts. Part (a) tests the candidates’ knowledge on the appointment of company
secretaries while part (b) tests them on appointment of auditors.

(a) The qualifications of a company secretary are governed by ss.139 and 139A of the Companies Act 1965.
Section 139(1) requires every company to have at least one secretary. Each secretary must be a natural person of full age. He
must have his principal or only place of residence in Malaysia.
Section 139A states that a person may be qualified to act as secretary of a company only if he is (1) licensed by the Registrar
for that purpose or (2) is a member of a professional body prescribed by the Minister by notification published in the Gazette.
The professional bodies which have been prescribed include the Malaysian Institute of Accountants, the Malaysian Association
of the Institute of Chartered Secretaries and Administrators and the Malaysian Bar.
Section 139B states that a licence may be granted by the Registrar only if, after considering the character, qualification and
experience of the applicant as well as the interest of the public, he is of the opinion that the applicant is a fit and proper person
to hold a licence.

(b) (i) By s.8 of the Companies Act 1965 (the Act), an approved company auditor is a person who has been approved by the
Minister of Finance as a company auditor for the purposes of the Act.
The Minister of Finance may approve an applicant as a company auditor if he is satisfied that the applicant is a person of
good character and competent to perform the duties of an auditor under the Act and upon payment of a prescribed fee.
(ii) The persons who are empowered to appoint the auditors of the company are stated in s.172 of the Companies Act 1965.
By s.172(1), the directors of the company may appoint the auditors at any time before the first annual general meeting
of the company to hold office until the conclusion of the first annual general meeting. If they fail to do so, the company at
a general meeting may appoint the auditors to hold office until the end of the first annual general meeting.
By s.172 (2), the company shall appoint the auditors at each annual general meeting of the company to hold office until
the end of the next annual general meeting.
By s.172(3) the directors may appoint an approved company auditor to fill any casual vacancy in the office of auditor of
the company.

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 By s.172(10), the Registrar may make the appointment of the auditor on the application in writing of any member of the
company, if the company does not appoint the auditors as required by the section.

8 This question, on the law of obligations, tests the candidates’ knowledge on the main elements of the tort of negligence and their
ability to apply the law to a given fact situation affecting professionals.

(a) Ali may be advised that in order to succeed in an action in the tort of negligence, a plaintiff is required to prove the following:
(i) that the defendant owed the plaintiff a duty of care;
(ii) that the defendant breached that duty of care; and
(iii) that the plaintiff suffered damages as a consequence of that breach.
These three requirements may be further explained as follows:
Duty of care
This means that a person has a duty to take reasonable steps to avoid acts or omissions which he can reasonably foresee
are likely to injure his neighbour. The term ‘neighbour’ refers to any person who is so closely and directly affected by the
defendant’s act or omission that the defendant must have him in mind when he does the act or omission in question (see:
Donoghue v Stevenson (1932)). For example, a road user owes other road users a duty of care. He has the duty to avoid acts
or omissions which he can reasonably foresee will cause injury to other road users.
Breach of the duty of care
In addition to proving that the defendant owed the plaintiff a duty of care, it has to be shown that the defendant has breached
that duty. A breach of the duty of care is said to occur when the defendant has failed to do what a reasonable person would
have done, or has done something which a reasonable person would not have done. The test is one of reasonableness. Whether
or not the defendant has breached that duty is a matter of fact to be determined by the court, in the particular circumstances.
See: Bourhill v Young (1943).
Resultant damage
The plaintiff has to further prove that it was because of the breach of duty by the defendant that he (plaintiff) has suffered
damages. The damages must also be reasonably foreseeable and not too remote. See: The Wagon Mound (No 1) (1961).

(b) The given problem concerns the liability of auditors for negligence towards persons who may have bought shares in a company
relying on the audited accounts of a company which later turn out to be inaccurate and misleading resulting in loss to those
persons. Such a situation arose in the case of Caparo Industries Plc v Dickman (1990). In this case, some shareholders of a
public company bought more shares in the company and later made a successful takeover of the company in reliance on the
audited accounts, which showed substantial profits for the company. However, in fact the company had suffered substantial
loss. They brought an action against the auditors alleging that the auditors had been negligent in auditing the accounts and
that the auditors owed them a duty of care either as potential bidders or as existing shareholders of the company. The House
of Lords held, inter alia, that the auditors did not owe any duty of care to a member of the public who relied on the audited
accounts to buy shares in the company. Further, the auditors also did not owe any duty of care to an individual shareholder
who wished to buy more shares in the company. The auditor’s duty was to the body of shareholders as a whole.
Applying the law to the current problem, Ali may be advised that he is unlikely to be successful in his claim against the auditors
in the tort of negligence.

9 This problem-based question on company law tests the candidates on their knowledge as well as ability to identify and apply two
aspects of duties of directors as imposed by the Companies Act 1965, as amended by the Companies (Amendment) Act 2007.

(a) It has been long established under common law that directors occupy a fiduciary position in relation to their company. Thus
they owe fiduciary duties to the company. This includes, among other things, the duty to act bona fide in the best interests
of the company, the duty to exercise their powers for a proper purpose and the duty not to put themselves in a position of
conflict between their duty to the company and their personal interest. Following the recommendations of the High Level
Finance Committee on Corporate Governance, the Companies Act 1965 was amended in 2007 by virtue of the Companies
(Amendment) Act 2007, which has now given statutory force to many of the fiduciary duties of directors.
By s.132(1) of the Companies Act 1965 (as amended), a director of a company must at all times exercise his powers for a
proper purpose and in good faith in the best interests of the company. Further, in particular, by s.132(2)(e), a director or officer
of a company shall not, without the consent or ratification of a general meeting, engage in business which is in competition
with the company. The consequences of a breach of s.132 is that, the officer shall be liable to the company for any profit made
by him, or for any damage suffered by the company as a result of the breach. In addition, the officer shall be guilty of an offence
and can be imprisoned for five years or fined RM 30,000.
Applying the law to the given problem, it can be seen that Jack has set up a business which is clearly in competition with
the business of J-J Sdn Bhd of which he is a director. Thus, unless he had obtained the consent or ratification of the general
meeting of the company, he is in breach of s.132 and will face the consequences stated above. Snowyte may be advised
accordingly.

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 (b) In relation to the purchase by Jack and Jill of a piece of land for J-J Sdn Bhd from Jenny, the sister-in-law of the director, Jill,
Snowyte may be advised that there may have been a breach of s.132E of the Companies Act 1965. This section states, inter
alia, that a company cannot carry into effect any arrangement or transaction where the director or substantial shareholder of
the company or its holding company, or a person connected with such director or substantial shareholder acquires from, or
disposes to the company, any shares or non-cash assets of the ‘requisite value’ unless there is prior approval by a resolution of
the company at a general meeting, or a resolution of the holding company if it relates to the director, substantial shareholder
or connected person of the holding company.
What amounts to ‘requisite value’ is defined in s.132E(7). In the case of companies other than those whose shares are listed
on a Stock Exchange, e.g. private companies such as J-J Sdn Bhd and unlisted public companies, requisite value means any
value above RM 250,000 or if it does not exceed RM 250,000 but exceeds 10% of the company’s asset value, provided it is
not less than RM 10,000.
Failure to comply with the requirements of the section will result in the transaction being void. Further, by s.132E(4), where
there has been a contravention of the above requirement, the director, substantial shareholder or connected person concerned,
and any director who knowingly authorised the arrangement or transaction, will be liable to account to the company for any
gain made by such arrangement or transaction. Further he will be jointly and severally liable with any other person to indemnify
the company for any resulting loss or damage.
In the given problem, the value of the transaction is RM 300,000. The transaction is between the company and Jenny, who
is the sister-in-law of the director, Jill. By virtue of s.122A of the Companies Act 1965, she is regarded as a member of Jill’s
family and is therefore a person connected with a director.
Applying the law as stated above, the company has to obtain prior approval of the members by a resolution at a general meeting
as the value of the transaction exceeds RM 250,000.
From the facts it is clear that no prior approval had been obtained.
Snowyte may therefore be advised that Jack and Jill are in breach of s.132E.

10 This problem-based question tests the candidates’ knowledge on some aspects of company meetings and resolutions.

(a) The issue here is whether the validity of the AGM of Nalab Bhd could be challenged on the ground that it was not held in Kuala
Lumpur. Prior to its amendment under the Companies (Amendment) Act 2007, s.145A stated that company meetings were
required to be held in the State where the registered office was situated. However, by virtue of an amendment to the section
effected by the said Amendment Act, companies are now required to hold all meetings of its members within Malaysia and may
even do so at more than one venue using any technology that allows all members a reasonable opportunity to participate.
Thus, Ahmad may be advised that the validity of the AGM cannot be challenged on the ground that it was not held in Kuala
Lumpur.

(b) The issue here is whether the validity of the AGM could be challenged on the ground that the length of notice given to members
was insufficient.
Prior to the amendments introduced by the Companies (Amendment) Act 2007, s.145(2) of the Companies Act 1965 only
required a notice of 14 days for all meetings of a company or a class of members other than a meeting for the passing of a
special resolution. Today, however, the newly introduced s.145(2A) requires that, notwithstanding s.145(2), the AGM of a
public company shall be called by notice in writing of not less than 21 days before the AGM or such longer period as is provided
in the articles.
Applying the law to the problem, it can be seen that Nalab Bhd, being a public company is now required to give 21 days’
notice in writing to call an AGM. Since the facts of the question indicate that the AGM was called by notice of less than
21 days, Ahmad may be advised that he may challenge the validity of the AGM.

(c) The validity of the resolution to appoint Abu, aged 73, as a director of the company may be challenged on the ground that the
company has failed to follow the proper procedure, as required under the Companies Act 1965.
By s.129 of the Companies Act 1965, the general rule is that no person of, or above the age of 70, may be appointed or act
as a director of a public company or subsidiary of a public company. However, such over-aged persons may be appointed or
re-appointed as directors through a special procedure as laid down in s.129(6) i.e. by a resolution of which no shorter notice
than that required to be given to the members of the company of an AGM has been duly given and passed by a majority of not
less than three-fourths of the members voting in person or by proxy. In the given problem, although the resolution was passed
by the required majority, no proper notice of the resolution had been given. As ABC Bhd is a public company and the new
s.145(2A) requires a 21 days’ notice for an AGM, the company should have given the members 21 days notice of the
resolution to appoint Abu, aged 73, as a director. Thus, as the facts indicate that 21 days’ notice was not given, Ahmad will
also be able to challenge the validity of the resolution to appoint Abu as a director.

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Fundamentals Level – Skills Module, Paper F4 (MYS)
Corporate and Business Law (Malaysia) December 2009 Marking Scheme

1 (a) 0–4 An accurate answer clearly distinguishing legislation from delegated legislation will fall into the upper part of this band
while an inaccurate one will fall into the lower part.

(b) 0–6 A maximum of one and a half marks for each of the two advantages and two disadvantages correctly explained.

2 (a) 0–4 An accurate answer clearly explaining the difference between a contract of service and a contract for services will fall
into the upper part of this band while an inaccurate one will fall into the lower part.

(b) 0–6 A maximum of two marks for each of the three tests correctly explained.

3 (a) 0–2 An accurate answer stating who is a minor will fall into the upper part of this band while an incomplete or inaccurate
one will fall into the lower part.

(b) 0–8 A maximum of two marks for each of the four exceptions correctly explained.

4 (a) 0–4 An accurate answer clearly stating the liability of a partner for partnership debts both before and after his retirement,
with reference to the Partnership Act 1961 will fall into the upper part of this band while an inaccurate one will fall into
the lower part.

(b) 5–6 An excellent answer accurately explaining the steps that a retiring partner may take to protect himself from liability for
future debts of the firm with reference to the Partnership Act 1961.
3–4 Average to good answer sufficiently explaining how a retiring partner may protect himself from liability for future debts
of the firm after his retirement.
0–2 Incomplete or inaccurate answer.

5 7–10 An excellent answer accurately explaining how the common law position relating to the ultra vires doctrine has been modified
in Malaysia, with reference to s.20 of the Companies Act 1965.
5–6 Average to good answer sufficiently explaining how s.20 has modified the ultra vires doctrine.
0–4 Incomplete or inaccurate answer.

6 (a) 3–5 An average to good answer explaining the prohibition on companies giving financial assistance for the purchase of their
own shares with reference to s.67 of the Companies Act 1965.
0–2 Incomplete or inaccurate answer.

(b) 3–5 An average to good answer sufficiently explaining the exceptions to the rule that a company cannot give financial
assistance for the purchase of its own shares, with reference to s.67 of the Companies Act 1965.
0–2 Incomplete or inaccurate answer.

7 (a) 3–5 Average to good answer accurately stating the qualifications necessary for appointment as a company secretary with
reference to the Companies Act 1965.
0–2 Incomplete or inaccurate answer.

(b) (i) 0–2 An accurate answer stating who is an approved company auditor with reference to the Companies Act 1965 will
fall into the upper part of this band while an inaccurate one will fall into the lower part.
(ii) 0–3 Approximately one mark for accurately stating each category of persons who may appoint an auditor.

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8 (a) 5–6 Excellent answer explaining all the matters that need to be proved in order to maintain an action in the tort of
negligence.
3–4 Average answer reasonably explaining the matters that need to be proved in order to maintain an action in the tort of
negligence.
0–2 Incomplete or inaccurate answer.

(b) 0–4 An accurate application of the law to the given problem with correct advice to Ali will fall into the upper part of this band
while an incomplete or inaccurate one will fall into the lower part.

9 (a) 3–5 An average to good answer accurately identifying the breaches of directors’ duties committed by Jack with particular
reference to ss.132(1) and 132(2)(e) as amended by the Companies (Amendment) Act 2007, which concerns directors
carrying on business in competition with the company.
0–2 Incomplete or inaccurate answer.

(b) 3–5 An average to good answer accurately identifying and explaining the breach of s.132E (as amended by the Companies
(Amendment) Act 2007, with accurate advice to Snowyte.
0–2 Incomplete or inaccurate answer.

10 (a) 0–3 An accurate answer with reference to the amended s.145A of the Companies Act 1965 will fall into the upper part of
this band while an inaccurate one will fall into the lower part.

(b) 0–3 An accurate answer with reference to s.145(2A) as introduced by the Companies (Amendment) Act 2007 will fall into
the upper part of this band while an inaccurate one will fall into the lower part.

(c) 0–4 An accurate answer clearly identifying the issue relating to the formalities required for the appointment of an over-aged
director, with reference to the new s.145(2A) of the Companies Act 1965 will fall into the upper part of this band while
an inaccurate one will fall into the lower part.

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