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Assignment LAW 485Past Year Question JUN 2019Issue 1 : Whether Ah Yam will be personally liable for the losses suffered by the company since the insurance company since the insurance company refused to pay.Effect : Under Section 20 of effects of incorporation, a company incorporated under this Act i...

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Assignment LAW 485 Past Year Question JUN 2019 Issue 1

:

Whether Ah Yam will be personally liable for the losses suffered by the company since the insurance company since the insurance company refused to pay.

Effect

:

Under Section 20 of effects of incorporation, a company incorporated under this Act is a body corporate and shall have a legal personality separate from its member and continue in existence until it is removed from the register. Based on Secton 21, a company shall be capable of exercising all the functions of a body corporate and have full capacity to carry on or undertake any business or activity including to sue or be sued, to acquire, own, hold, develop or dispose of any property and to do any act it may do or enter into transactions.

Case

:

This situation can be related to the case of Macaura versus Northern Assurance Co. Ltd. (1925). Macaura, an owner of an estate sold all the timber on the estate to a company. He and his nominees owned all the shares of the company in his own name. The insurance policy was not transferred into the company’s claimed the insurance but the insurance company refused to pay. The court held that when Macaura sold the timber to the company, he gave up his interest in it. He had no interest in the timber that he could insure. Therefore the insurance company was not obliged to pay.

Application:

In realtion to issue 1 , Ah Yam sold the timber to his company and the insurance was still under his name. Therefore insurance company was not obligated to pay when company’s timber fire broke out.

Issue 2

:

Whether Ang Sa is personality liable for the contract entered between Ang Sa and Nuri.

This case are related to lifting the corporate veil. It states that when the company is used to evade legal obligations or to commit fraud, the separate personality doctrine cannot be used for evading legal duties or to commit fraud. If this happens, the court will more often than not, lift the veil or disregard the separate legal personality doctrine. Case

:

We can relate this situation based on the case of Jones versus Lipman. Lipman agree to sale his house to Alamed Ltd. but then he changed his mind to sale the house to Jones. Alamed Ltd sought an order of specific performance. The company defense that the they was not a party against whom SP should be ordered.

The court held that Alamed Ltd, was the creature of Lipman, a device and a shame, a mask which he hold before his face in an attempt to avoid legal obligation. Both Lipman and the company were ordered to specifically perform the contract to sell the house. Application:

In relation to this issue, Ang Sa entered a contract with Nuri to sell the land. Ang Sa is one of the shareholders and directors of Unggas Sdn. Bhd. Before he faced in an attempt to avoid legal obligation when he entered a contract to sell his land to Nuri but changed his mind and decided not to sell land. Both Ang Sa and Unggas Sdn. Bhd. Were ordered to speciafically performed the contract to sell the land.

Issue 3

:

Whether Ee Teck is personally liable to settle the debt entered with Bank Elang. Statutory exceptions have been enacted to lift the veil of incorporation in the following situations which render members and officer who commit the wrong liable. Section 539(3) read with section of the Companies Act 2016 states that when debts are contracted, the officer must really ascertain the ability of the company to repay debts. If he knew or have reasons to believe that the company is not in a position to repay debts, but still entered into the contract, he will be guilty of an offence under the Companies Act 2016, on conviction will be liable to

imprisonment not exceeding 5 years of fine not exceeding RM500,000. The officer will also be personally liable for the debts, if the company goes into liquidation. In relation to issue 3, Ee Teck borrowed RM2 Million in order to overcome financial difficulties from Bank Elang. Thus, Ee Teck is personally liable to Bank Elang for the payment of the whole debt. Since he borrows money on behalf of the company at the time he knows that company has no ability to pay. Ah Yam, Ee Teck and Ang Sa are liable for all their liabilities.

Conclusion:

December 2019

Issue 1

:

Whether the transaction purchasing the land made between Sinar Sdn. Bhd. and Bumi Bank Bhd. was legal?

Prnciple

:

In order to decide whether the loan agreement between Sinar

Sdn. Bhd. and Bumi Bank Bhd. was legal, it will be determining under Section 20 and Section 21. Section 20 of the effects of incorporated provides that a company incorporated under this act is a body corporate and shall have a legal personality separate from its members and continue in existence until it is removed from the register. Under Section 21, a company shall be capable of exercising all the functions of a body corporate and have the full capacity to carry on or undertake any business or activity including to sue and be sued, to acquire, own, hold, develop or dispose of any property, and to do any act which it may do or enter into transaction. The rule regarding a capacity to enter into transactions under Section 21 (1)(C), for a company to be able to carry on its business or activity, it must have the capacity to do any act or to enter into transactions. Section 64(1) provides how a company’s contract may be made by a company in writing under its common seal, on behalf of a company, by a person acting under its authority, express or implied or on behalf of a company, orally, by a person acting under its authority, express or implied. Application

:

In relation to issue 1, the loan agreement entered between Sinar Sdn. Bhd. and Bumi Bank Bhd. when Sinar Sdn. Bhd. decided to purchase a piece of land as the directors and shareholders of the company is in writing under its common seal on behalf of the company.

Conclusion

:

Therefore, the transaction purchasing the land made between Sinar Sdn. Bhd. and Bumi Bank Bhd. was legal so, Shiela and Jack is not liable for any liabilities.

Issue2

:

Whether Sheila is personally liable for the contract entered between Shiela and Saleem?

Principal

:

To decide whether Sheila is liable for the contract entered between Shiela and Saleem, it is important to examine the legal

position of the capacity to enter into transaction. Based on Section 21, a company shall be capable of exercising all the functions of a body corporate and have the full capacity to carry on or undertake any business or activity including to sue and be sued, to acquire, own, hold, develop or dispose of any property, and to do any act which it may do or enter into transaction. The rule regarding a capacity to enter into transactions under Section 21 (1)(C), for a company to be able to carry on its business or activity, it must have the capacity to do any act or to enter into transactions. Section 64(1) provides how a company’s contract may be made by a company in writing under its common seal, on behalf of a company, by a person acting under its authority, express or implied or on behalf of a company, orally, by a person acting under its authority, express or implied. Application

:

In relation to issue 2, the sale and purchase agreement between Sheila and Saleem were entered after Sheila decided to sell her apartment to Saleem. Sheila was the one who made an offer when she approached Saleem. Saleem may accept or reject the offer made by Sheila.

Conclusion

:

Therefore, Sheila is personally liable for the agreement entered between Sheila and Saleem.

Issue 3

:

Whether Sheila and her husband is personally liable to settle the debt entered between Sinar Sdn. Bhd. and Juara Bank Bhd.?

Principal

:

To determine whether Sheila and her husband is liable for the loan made, we must evaluate the legal position of the loan made by Sheila and her husband. The rule displayed under Section 539(3) read with Section 540(2) of the CA2016 where when debts are contracted, the officer must really ascertain the ability of the company to repay debts. If he knew or have reasons to believe that the company is not in a position to repay debts, but still entered into the contract, he will be guilty of an offence

under the CA2016. Application

:

In relation to issue 3, at the time the loan was made between Sheila and her husband with Juara Bank Bhd., they already aware about the company’s financial which was not in a good condition.

Conclusion

:

Therefore, Sheila and her husband is personally liable to settle the loan made with Juara Bank Bhd.

JUNE 2018.

Issue 1

:

Whether Zati is personally liable for the financial loses which the insurance company refused for the claim ?

General rules :

Incorporation lies under Section 20 and Section 21. Under Section 20, a company incorporated under this Act is a body corporate and shall have a legal personality separate from its

members and continue in existence until it is removed from the register. Under Section 21, a company shall be capable of exercising all the functions of a body corporate have the full capicity to carry on or undertake any business or activity including to sue and be sued, to acquire, own, hold, develop or dispose of any property and to do any act which it may do or enter into transactions. This falls under Section 21 (1)(b) on the ability to acquire, own, hold, develop or dispose of any property. A company may own property in its name distinct from the property of its member. The members do not have proprietary interest in the property of the company. Although the members have shares in the company. However, a company limited by guarantee shall not hold land unless the Minister has licensed it to do so under Section 45(4) Case

:

This situation can be related to the case of Macaura versus Northern Assurance Co. Ltd. (1925). Macaura, an owner of an estate sold all the timber on the estate to a company. He and his nominees owned all the shares of the company in his own name. The insurance policy was not transferred into the company’s claimed the insurance but the insurance company refused to pay. The court held that when Macaura sold the timber to the company, he gave up his interest in it. He had no interest in the timber that he could insure. Therefore the insurance company was not obliged to pay.

Application :

In relation to issue 1, Zati is personally liable for all the debts and liability since Zati is the only shareholder and director left in XMoney Sdn. Bhd. Thus, all the responsibilities falls on her shoulders.

Issue 2

:

Whether Zati is personally liable for the contract entered liable between Linda and Simon. Incertain situation, the veil of incorporation may be lifted, therefore, the company and the member’s become no longer a separate body.

The effect of this that the members and the officers can be made liable on the company’s debts or liabilities. This known as the lifting up for the company veil. There five situation under Judicial exceptions to the separate entity doctrine and we can relate this issue with the situation of when the Case

company is used to evade legal obligation or to commit fraud. We can relate this situation based on the case of Jones versus

:

Lipman. Lipman agree to sale his house to Alamed Ltd. but then he changed his mind to sale the house to Jones. Alamed Ltd sought an order of specific performance. The company defense that the they was not a party against whom SP should be ordered.

The court held that Alamed Ltd, was the creature of Lipman, a device and a shame, a mask which he hold before his face in an attempt to avoid legal obligation. Both Lipman and the company were ordered to specifically perform the contract to sell the house. Application :

In relation of issue 2, Zati is liable for the contract entered between Linda and Jimmy because the separate personality doctrine cannot be used for evading legal duties or to commit fraud. The court will disregard the separate legal personality doctrine.

Issue 3

:

Whether Zati is personally liable to settle the debt entered with Typo Bank ?

Principle :

Under Section 20 of effect of incorporate under this out is a body corporate and shall have a legal personality separate from its member and continue existence until it is removed from the register. Based on Section 20(b) of perpetual successionthe company is immortal. It will continue until it is properly warned out or struck off the register. Even if all the member dies, the business still exist. The continuous life of the company is said to be perpetual succesion.

Application :

In relation to issue 3, Zati borrowed RM 1Million in order to overcome financial losses from Typo Bank. Thus, Zati is personally liable to Typo Bank for the payment of the whole debt since she borrows money on behalf of the company at the time she has not

Conclusion :

been able to cope with the financial affairs of the company In the conclusion, Zati is not personally liable for the financial loses which the insurance company refused for the claim and for the contract entered liable between Linda and Simon but she is personally liable to settle the debt entered with Typo Bank....