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COURSE NAME: INTRODUCTION TO PARTNERSHIP AND COMPANY LAW /PARTNERSHIP AND COMPANY LAWCOURSE CODE: LAW346/330 ASSESSMENTRELEASE DATE:3 JULY 2020ASSESSMENT LAST SUBMISSION DATE: 17 JULY 2020 (by 5 pm)NAME: FATIN NABILAH BINTI JEFRIMATRIC NO.: 2018256462GROUP: MAC1104EPART A1. 3 advantages of registere...

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COURSE NAME: INTRODUCTION TO PARTNERSHIP AND COMPANY LAW / PARTNERSHIP AND COMPANY LAW COURSE CODE: LAW346/330 ASSESSMENT RELEASE DATE: 3 JULY 2020 ASSESSMENT LAST SUBMISSION DATE: 17 JULY 2020 (by 5.00 pm)

NAME: FATIN NABILAH BINTI JEFRI MATRIC NO.: 2018256462 GROUP: MAC1104E

PART A 1. 3 advantages of registered company as compared to partnership. i.

Easy to Obtain Funds Company can clearly obtain funds by selling shares to raise money for their business. This will save more time rather than seeking another alternative such as investors. In, partnership they must struggle to find own funds for business which consume lot of time.

ii.

Perpetual Succession The life of the company is not affected by the death of a shareholders. Since it is the separate legal entity, the company will still survive and continues to exist, where in partnership, the death of partner will put the partnership life to an end.

iii.

Liability Protection The liability in company from the shareholder’s property or personal money are protected and cannot be taken for company’s debt or liabilities because company and shareholders are separate entity, while the partnership are fully responsible for all liabilities and creditors have the right to claim partner’s own property to settle the debt.

2. Under partnership law, a minor is allowed to enter into a partnership agreement with an adult partner or partners with limited sense that meaning the partnership agreement is valid. The relevant case is Lovell and Christmas v Beauchamp, a minor has the capacity to be a partner. According to this case, although the minor can be a partner and is entitled to a share in the profits of the firm, he cannot personally be made liable for the firm’s debts or liabilities incurred by the minor on behalf of the firm. However, the minor’s capital contribution can be used by the adult partner to settle the firm’s debts or liabilities. Hence, a minor can enter into a valid partnership agreement but only in a limited sense and entitled to have rights given by law to a partner but he cannot be made liable for the debts or liabilities of the firm. Only the adult partner is liable. 3. An incoming partner is not liable for the debts incurred prior to his admission. He is only liable for the debts incurred by the firm after his admission. According to section 19(1) of the Partnership Act 1961 “A person who is admitted as a partner into an existing firm does not

thereby become liable to the creditors of the firm for anything done before he become a partner.” However, if the new partner agrees to be liable for the existing debts of the partnership at the time of his admission, he would be liable. This can be done either in express or implied, that the new may take over the liabilities. Based on the case of Rofle and Bank of Australasia v Flower Salting & Co., it was held that the new partner, S and T, were liable for the debt of the old firm. This is because, the incoming partners, T and S, had impliedly agreed to accept joint liability with the partners of the old firm for all the debts shown in those accounts by their conduct in not disputing the liabilities. In conclusion, a new partner can liable for the debts of the firm in the light of the Partnership Act 1961. 4. Pre-incorporation contract (PI contract) is a contract made on behalf of the company before it is incorporated. According to section 65(1) of the Companies Act 2016, it is defined as “a contract or transaction that purport to be made by on behalf of a company at a time the company has not been formed…” For example, contract to employ staff necessary for the company which will be formed or to buy goods or property or contract to rent a business premise. Under the Common Law, a company cannot enter into a contract before it incorporated. This is because, before its corporation, the company has no legal personality and has no contractual capacity. Therefore, the company not liable and cannot enforce the contact even after its information. Next, according to Malaysian Law Provision under section 35(1) companies act has made some changes by allowing the company to ratify contract created before its incorporation while under section 35(2) state that, the person who acted in the name on or behalf of the company to make the contract will be personally bound by the contract. Furthermore, according to section 65 of the Company Act 2016, it has changed a bit on the position of pre-incorporation contract under Company Act 1965. Section 65(1) of Company Act state that “A contract or transaction that purports to be made by or on behalf of a company has not been formed has effect as a contract or transaction made with the person purporting to act for the company or as agent for it, and he is personally liable on the contract or transaction accordingly” while under section 65(2) state that “ a contract or transaction referred to in the subsection may be ratified by the company after its incorporation and the company shall be bound by the contract or transaction.

PART B Question 1 Issue The issue in this question is whether the company can take any legal action against the promoter, Donny. Principal of Law According to section 14(1) of the CA 2016 “a person who desires to form a company…” This person can be referred to as ‘promoter’. The company’s promoter is the person who sets up a company and gets it going. Promoter is the person who initiates setting up a company and desires to run the company. Furthermore, the promoter’s primary duty is not to make a profit out of the promotion without adequate disclosure. If promoter receives or makes a profit or benefits during the period of promotion, he must disclose it. A disclosure to persons who are puppets or under control of the promoter will not be a sufficient discharge of his duty. However, there are remedies available to the company for breach of promoter’s duties. First and foremost, rescission of contract. The contract that entered into by the promoter and the company which the promoter made profit could rescinded or terminated. That means the company can claim the price already paid by the company to the promoter and the company must return the goods or the property to the promoter. Nevertheless, there might be certain situations where the company cannot be permitted to rescind the contract. The first situation is if the company decided to affirm the contract or if the benefits of the contract has been taken by the company; despite of discovering the true facts then the right to recission is set aside. Any unjustified delay also may lose the right of rescission or it can be in the case of ‘restitution in integrum’ is impossible. Next, recovery of promoter’s secret profit. When a promoter has made secret profit, the company may institute an action to recover the secret profit. The right remains even if the company had chosen to affirm the contract made by the promoter. However, if the company is claiming the secret profit, it is not allowed to claim for damages. It was held in the case of Whaley Bridge Calico Printing Co v Smith (1879) 5 QBD 109, the company was allowed to recover the unpaid balance of the secret commission from Green.

Lastly, other remedies available is damages for breach of duty in which another alternative the company can claim damages for breach of fiduciary duty. Such damages may be awarded especially where rescission is not possible as illustrated in the case of Re Leeds & Hanley Theatres of Varieties Ltd. The promoter who sells the property to the company that he promoted can be in the situation where the property is acquired by the promoter during promotion and with the intention that it should be resold to the company. Thus, if he makes a profit on the sale without adequate disclosure, the company is entitled to take that profit or sue him for the difference in price or claim rescission, if possible. Application Based on the situation given, Donny had breach of his duties as promoter and is entitled to claim for the available remedies. Puncakland Sdn Bhd may claim damages for the land. This is because for the period of 6 months, the land might be cleared or developed by the company. Therefore, the land cannot be restored or put to their original position and the rescission of contract cannot be made. In addition, the land was acquired by the promoter during promotion for RM 500,000 and resold it to the company for RM 700,000 with a price higher than the original price. The promoter had made a profit on the sale without adequate disclosure of all materials facts relating to the contract of the company. Hence, the company is entitled to sue the promoter for the different price. Next, as for the machine, the company may terminate the contract made between the promoter. Therefore, there is no an equitable remedy that may not be ordered that had fulfilled. That means the company can claim the price of profit that made for RM50,000 already paid by the company to the promoter and the company must return the machine to the promoter. Conclusion In conclusion, Puncakland Sdn Bhd can take legal action against Donny for breach of his duty as the promoter....