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FACULTY OF MANAGEMENT AND ENTREPRENEURSHIP BACHELOR OF

BUSINESS ADMINISTRATION

ACADEMY SESSION APRIL-AUGUST (2020)

CORPORATE LAW (MBB 3463)

TITTLE FINAL ASSESSMENT

NAME MUHD NAZIM KAMARUDIN

NO.MATRIC BBA18041078

LECTURER -

SUBMISSION 17/8/2020
DATE
QUESTION 1

Identify the determination of variation of class rights.

i. Under section 91(5), the issuance of new preferential shares rated similarly with
established preferential shares issued by the company amounts to a difference in the
rights of existing preferential shareholders, unless the company is allowed to do so
by the constitution of the company or by the terms of issue of existing preferential
shares.
ii. Because the conditions of issue of the current preferential shares and the constitution
authorizing the company to do so are not listed in the evidence, the issuance of
10,000 new preferential shares with the same rights as current preferential shares
will therefore amounts to a difference of class rights.
iii. Section 96(1) of the Companies Act 2016 states that the removal of existing rights
inserted in the company's constitution amounts to a variation in class rights, as well
as section 339(6)(b) of the same Act also specifies that any deletion of existing
provisions amounts to a variation in class rights.The Constitution of Cahya Biz Sdn
Bhd plainly says that current preference shareholders have the responsibility to give
in surplus assets upon liquidation equally with ordinary shareholders, and therefore
the proposal to cancel such rights amounts to a variation in class rights.
iv. Section 339(6)(a) of the Companies Act 2016 specifies that any alteration to a clause
existing in the constitution concerning the manner in which class rights are to be
varied must itself be regarded as a variation of class rights. The implementation of
the provision entails modifying the system of varying class rights, hence such a
provision should be regarded as a modification of class rights.
v. Once again, Section 91(5) of the Companies Act 2016 addresses the situation where
variance exists involving only preferential shares. The segment remains quiet about
issuing new shares other than preferred shares
  Case: Greenhaugh v Arderne Cinemas [1946] 1 All ER 512
 The issue of new shares of whichever class is not regarded to be a variation of
current share class rights.
 Although if the voting power can be reduced, current shareholders also have the
same voting rights.
 Therefore, adapting this common law principle to our current context, issuing new
ordinary shares of Class B with two votes each on voting shares is not a deviation
because it does not affect the current common shareholders rights.

Analyse whether XY Biz Sdn Bhd can issue new ordinary shares and what are the
procedures involved?

i. Directors can exercise the authority to issue shares, but shareholders' prior
approval by way of company resolutions must be obtained before directors can
distribute shares.
ii. Section 75 of the Companies Act 2016 also requires the shareholders' consent
before the directors can exercise the following powers:

-To allot shares in the company

-To grant rights to subscribe for shares in the company

-To convert any security into shares in the company

-To allot shares under an agreement or option or offer

iii. The permission may be granted with or without restriction, which may be
limited to a particular exercise of power or may be broadly relevant to the
exercise of that power.

iii.
iv. Section 76(4) of the Companies Act 2016, the General Assembly reserves the
right to revoke or vary any previously granted approval.
v. As long as the public sector is concerned, this permission expires sooner in
terms of The conclusion of the next annual general meeting after its approval
 or the expiry of the period within the next annual general meeting shall be
required by law.
vi. For private company,the permission shall be effective for no longer than 12
months after the permission has been issued. Section 75(4) of the Companies
Act 2016 specifies that any issue by a corporation with shares in contravention
of section 75 is invalid.
vii. Section 85 of the Companies Act 2016 also notes the pre-emptive rights to
new shares of which a corporation may sell similarly existing shares according
to the constitution of the company. Any new shares to be issued by a company
must first be sold to existing shareholders in a way that will preserve their
proportional voting and distribution rights. If the bid has been rejected within
the particular duration, such shares may be disposed of by the directors in such
a way that they believe the company is more valuable to them.
viii. Cahya Biz Sdn Bhd is a private corporation and this company's director must
seek prior consent from the owners by the board's resolution. Only when the
permission has been received will the director assign the new shares. Based on
section 85 of the Business Act 2016, the pre-emptive rights to new shares were
given to protect the voting power of the current shareholders by entitling them
to take part in the issuing of new shares.
Breakdown the procedures for variation of class rights that need to be complied in
order for the proposals to be effected?

i. In section 90(4), No company shall grant any preferential shares or turn any issued
shares into preferential shares unless provided for in the Constitution. It means
that the clause for the allocation of new preferential shares as agreed or a form of
variant provided for in the constitution of the business.
ii. Variation can be made in compliance with the company's constitution or, if there
is no clause in the constitution, with the consent of shareholders of that class as
provided for in section 91(1).
iii. Cahya Biz Sdn Bhd must first test the variance in the company's constitution to
allow for this variation. It is presumed that the constitution is ambiguous on the
process or rules relating to this variation.Cahya Biz Sdn Bhd must comply with
the second option by securing the shareholders' approval in that class, either in a
written form comprising 75 per cent, or by special resolution.
iv. In the case that the variation is not contested in compliance with section 93, the
company shall then send a written notice of the variation to each shareholder
within 14 days.
Identify whether the approval of preference shareholder is required for proposal (iii)
and (iv) to be effected?

i. According to section 2, a share of whichever name is named, but does not allow
the holder to vote on a motion or the right to engage in any payout in excess of a
specified amount, whether by dividend, withdrawal, winding-up, or otherwise.
ii. According to section 2, the right of preferential owners in favor of repayment of
capital, involvement in surplus assets and income, accumulated or non-cumulative
dividends, vote, preference of payment of capital and dividend must be
specifically given throughout the constitution.
iii. In section 91(1), with the consent of shareholders of that class provided of
compliance with this act, for system of differentiation, in accordance with the
company 's constitution except in the situation where there is no provision in the
Constitution.
iv. The omission of this clause of the newest Companies Act 2016 provides scope for
confusion as to whether preferential owners will have the right to vote in these
cases. Therefore, it must be explicitly specified in the constitution or the issue
contract of preferential shares and terms and conditions must be clearly defined.
v. For Proposal (iv), irrespective of whether or not it is a form of differentiation, it is
not appropriate to seek the consent of the preferential shareholder if that voting
privilege is not given in the constitution.
vi. In the question, it is claimed that Din and Man, who own 15 per cent of the
preferred shares, disagree and say that the proposals can not be made until they
are accepted.The legislation offers a redress for this by section 93 of the
Companies Act 2016, where shareholders with at least 10% of the class may order
the Court to disallow the difference within 30 days of the date the change is made.
REFERENCE

Percetakan Nasional Malaysia Berhad. Companies Act 2016.Retrieved

from:https://www.ssm.com.my/sites/default/files/companies_act_2016/aktabi_20160915_co
mpaniesact2016act777_0.pdf

Greenhalgh v Arderne Cinemas Ltd. En.wikipedia.org. (2020). Retrieved 17 August 2020,

from
https://en.wikipedia.org/wiki/Greenhalgh_v_Arderne_Cinemas_Ltd#:~:text=Greenhalgh
%20v%20Arderne%20Cinemas%20Ltd%20(No%202)%20%5B1946%5D,rule%20in
%20Foss%20v%20Harbottle.