LAW2034 Company Law

TUTORIAL 1
  a. Explain the main functions of the Suruhanjaya Syarikat
Malaysia.
https://www.ssm.com.my/Pages/About_SSM/Corporate_Profile/Func
tion-&-Power.aspx
 ​Function
 To ensure that the provisions of the Companies Commission of
Malaysia Act and laws are administered, enforced, given effect to,
carried out and complied with;
To act as agent of the Government and provide services in
Question 1(a)

administering, collecting and enforcing payment of prescribed fees or
any other charges under the laws administered;
 To regulate matters relating to corporations, companies and
businesses in relation to laws administrated;
 To encourage and promote proper conduct amongst directors,
secretaries, managers and other officers of a corporation, self-
regulated corporations, companies, businesses, industry groups and
professional bodies in the corporate sector in order to ensure that all
corporate and business activities are conducted in accordance with
established norms of good corporate governance;
  To enhance and promote the supply of corporate
information under any of the laws administrated,
and create and develop a facility whereby any
corporate information received by the Companies
Commission may be analysed and supplied to the
public;
 To carry out research and commission studies on
any matter relating to corporate and business
activities;
Question i(a)  To advise the Minister generally on matters
relating to corporate and business activities in
relation to the laws administered; and
 To carry out all such activities and do all such
things as are necessary or advantageous and proper
for the administration of the Companies
Commission or for such other purpose as may be
directed by the Minister.​
  b. What are its powers?
 Section 18 Companies Commission of Malaysia
Act 2001 [Act 614] (as at 1 March 2018)
Question i(b)  (1) The Commission shall have the power to do
all things necessary or expedient for or in
connection with the performance of its
functions.
  (2) Without prejudice to the generality of subsection (1) , the powers
of the Commission shall include power—
 (a) to utilize all the property of the Commission, movable and
immovable, in such manner as the Commission may think expedient
including the raising of loans by mortgaging such property;
 (b) to impose fees or charges for services rendered by the
Commission as may be prescribed by the Minister by regulations
made under section 40;
 (c) to appoint such agents, experts or consultants as it deems fit to
Question i(b) assist the Commission in the exercise of its functions;
 (d) to grant loans to employees of the Commission for such purposes
as may be approved by the Minister;
 (e) to formulate and implement human resource development and
funding and co-operation programmes for the proper and effective
performance of its functions;
 (f) to co-operate with any corporate body or government agency for
the purpose of performing the Commission's functions; and
 (g) to do anything incidental to any of its functions and powers.
  (3) The Commission shall have all such powers
as may be necessary for or in connection with,
Question i(b) or reasonably incidental to, the performance of
its functions under the laws specified in the First
Schedule.
Question i(c)
Local Foreign Total Total Total LLP
Companies Companies Companies Business
 c. Find out the total
Until 2018 1,293,715 4,803 1,298,518 7,279,636 18,797
number of registered December
companies in Malaysia for Until 2019 1,340,024 4,882 1,344,906 7,674,385 22,740
2019 and the total number December
of businesses registered in Until 2020 1,384,000 4,904 1,388,904 8,064,300 26,596
Malaysia for the year 2019. December
  d. Explain the reasons for the variance in
figures i.e. Why are there more businesses than
companies?
 8,064,300 vs 1,388,904 in 2020
New entrants are normally businesses, Financing
Question i(d) 
challenges, Market niche, Ease of registration.
 But do take note of the growth of Limited Liability
Partnerships: 26,596 in 2019
  e. Compare the statistics for 2019 and 2020;
what is the growth rate for businesses in
Malaysia. Is this a positive development?
Question i(e)  Overall, it appears that there is growth
although the rate of growth is not that large
which could be largely be caused by the
Covid-19 global pandemic.
  ii. What is the effect of a pre-incorporated
contract on the company?
 A company can enter into a contract in its own
name only after it has been incorporated. In
Question ii certain instances, a promoter may want to enter
into contracts on behalf of the company before
incorporation to secure certain benefits, this type
of contract is know as pre-incorporated
contracts.
  Briefly explain the Malaysian position on pre-
incorporated contracts.
 Section 65 CA 2016 enables pre-incorporation
contracts to be entered into on behalf of the
company which is yet to be registered.
 Section 65(1) CA2016 provides that the person
Question iii who signs the pre-incorporation contract will be
personally liable on the contract or transaction
accordingly. Unlike their previous position
under the CA 1965, they cannot exclude their
liability. ... Section 65(2) permits the company
to ratify the contract after its incorporation.
  Under the common law, a contract that is
entered into by a company or a by persons on
behalf of the company before incorporation is
invalid and not binding on the company after
incorporation. This is because the common law
considers that the company that has not come
Question iii into existence lacks capacity to enter into a
contract – Newbourne v Sensolid (Great
Britain) Ltd (1954) 1 QB 45.
 However, under Section 65 CA 2016, a contract
is binding upon ratification by the company put
through by an ordinary resolution . However, a
company is not obliged to ratify the contract.
  Once ratified, either party can sue the other party
for breach upon the contract as illustrated in
Cosmic Insurance Co. Ltd. v Khoo Chiang Poh
Question iii (1981) 1 MLJ 61where the court held that the
ratification was duly done and validated.
  A company is considered to have impliedly
ratified a contract is there are facts showing that
the company has taken steps to unequivocally
accept responsibility for the contract even
though the contract was not presented to and
approved in a general meeting.
Question iii  Ahmad bin Salleh & Ors V Rawang Hills
Resort Sdn Bhd (1996) MSCLC 91, 464, the
court stated, "Ratification can be combined with
other matters in a resolution , but so long as its
expression of ratification is clear, as in this case,
the process of ratification is completed by such
act.”
  In the event of a secret profit made by a
promoter of a company, what are the remedies
available to the company?
 Failure to disclose secret profit, the company
has options:
 Company may rescind the contract (Erlanger v
New Sombrero Phosphate), and
Question iv  In certain circumstances, company may be able
to claim the secret profit obtained by the
promoter (Gluckstein v Barnes),
 Company may file suit for damages for the
breach of fiduciary duties (Re Leeds & Hanley
Theater)
  What are the roles played by a promoter before
the formation of the company?
 A promoter conceives an idea for the setting-up
a business.
 He makes preliminary investigations and
ensures about the future prospects of the
business.
Question v  He brings together various persons who agree to
associate with him and share the business
responsibilities.
 He prepares various documents and gets the
company incorporated.
 He raises the required finances and gets the
company going.
 Normally they are the first registered director
  The following are some of the fiduciary duties
that the Courts insist that a Company promoter
should observe:-.
 Not to make a secret profit at the expense of the
company
 A duty to account to the company for the benefit
for any property he might purchase with the
intent of selling the property to Company for a
profit later.
Question v  A duty not to defraud the Company by active
concealment of any affairs relating to the
company
 A duty not to disclose confidential information
to outsiders
 A duty not to hide his personal interests through
a nominee
  Erlanger v New Sombrero Phosphate Co
(1878), Lord Cairns said, Promoters stand in a
fiduciary position. The have in their hands the
creation and moulding of the company; they
Question v have the power of defining how, and when, and
in what shape, and under what supervision, it
shall start into existence and begin to act as a
trading corporation.
  If there is a contract entered into before the formation of
the company, can the company choose not to honor the
contract? Please state your answer with the support of
case law.
 In the event, a pre-incorporated contract does not get
ratified than the promoter is personally liable and is
entitled to the contract – Section 65(1) CA 2016.
 However, Section 65 CA 2016 does not contain similar
wordings to that of its predecessor, Section 35 CA 1965,
stating that, “ unless there is an express agreement to the
contrary”, the person signing the contract is personally
Question vi liable.
 Thus, Section 35 CA 1965, allowed the person signing
the contract to expressly exclude liability in the event the
company did not ratify the contract – Perman Sdn Bhd
& Ors v European Commodities Sdn Bhd & Anor
(2006) 1 MLJ 97, Thai Hua Realty Sdn Bhd v Ketua
Pengarah Hasil Dalam Negeri (1997) 1 CLJ Supp 418
and Ahmad bin Salleh & Ors V Rawang Hills Resort
Sdn Bhd (1996) MSCLC 91, 464.
Question 2

 Legal issues to be discussed:-

 (i) Are A and B promoters? Definition of promoters. UK law? Malaysian law?
 (ii) Are there any legal issues relating to the purchase of property below the market price?
Is making a profit wrong? What is a secret profit? Did B know of the profit?
 (iii) Annie sold Grapefield to Slosh Sdn Bhd, what are the legal implication?
 (iv) Is there a valid contract between Annie and Dave Glee?
 (v) Is Slosh Sdn Bhd liable for the contract between Annie and Dave Glee?
 Always remember to apply the law (cases/statutes) to the facts. Engage with the issues.