Abdul Aziz Hussin Amn

Abdul Aziz Hussin Amn

COMPANY LAW

ABDUL AZIZ HUSSINAMN

DPA; LL.B ( Hons ) ; Dip. M. Mgmt; M. Sc ( Prjt. Mgmt. );

AMIM; Advocate & Solicitor; MMAP.

  1. THE NATURE OF A REGISTERED COMPANY

Person who wish to carry on a business in common with a view of profit

“person” – a subject of rights and duties & therefore, includes ‘artificial person’

A registered company is on entity district from its member

Solomon vs Solomon & Co. Ltd. (1897) A C 22

Debts & obligations incurred in the course of the company’s business are those of the company.

The statutory law relating to registered company is Companies Act 1965.

B.INCORPORATION

It is essential to register

To obtain a Certificate of Incorporation

To have the company’s Memorandum of Association and Articles of Association

Memorandum of Association

Ashbury Railway Carriage Co. vs. Riche (1875) L.R. 7 H.L. 653.

pp. 667-668

With regard to the Memorandum of Association ….that is, as it were, the charter, and define the limitation of the powers of a company to be established under the Act. With regard to the Articles of Association, those Articles play a part subsidiary to the Memorandum of Association. They accept the memorandum of association as the charter of incorporation of the company, and so accepting it, the articles proceed to defune the duties, the rights and the powers of the governing body as between themselves and the company at large and the mode and the form in which changes in the internal regulations of the company may from time to time be made.

Name:

Situation of the registered office

Objects – main objeccts

Change of objects

Articles of Association

(must not contain anything contrary to the general law of to the provisions of its Memorandum)

Contains the detialed regulations for the internal administration of the company and deal with such matters, inter alia.

  1. the issue and transfer of shares
  2. the conduct of the company meetings
  3. the appointment (termination) of directors
  4. the powers of directors

It contains covenants on the part of each member to observe all provisions of the Memorandum and Articles.

Four legal effect of the Articles:

  • Each member is under an obligation to the company to act in accordance with the Articles (Hickman vs. Kent of Romney Marsh Sheepbreeders’ Association (1915)! Ch 881)
  • Each member is given contractual rights against the company but only to a limited extent (Eley vs. Positive Assurance Co. (19876) 1 Ex D 88)
  • There is no contractual obligation between the company/its members to non-members.

-“a person, who is not a party to a contract, acquires neither rights nor liabilities under the contract”.

  • The Articles constitute a contract between the individual members of the company, and they regulate the member’s mutual rights and duties as members.

Rayfield vs. Hands (1960) Ch.1

  1. MANAGEMENT OF THE COMPANY

A company’s Articles provide that the business of the company shall be managed by the Directors.

The Directors may appoint one or more of their body to the office of Managing Director – they may confer upon him any of the powers exercisable by them on such terms and conditions as they think fit.

When acting on behalf of the company directors are agents of the company.

The powers – they should only exercise for the benefit of the company.

-Piercy v. S. Mills & Co.

(1920) 1 Ch 77

Directors (a minority of the voting power), alloted shares to themselves and their friends

Held: The allotments were invalid & void

They must not make secret profits from their position as Directors (even though the acquired the profit in all honesty and good faith)

- Regal (Hastings) Ltd. V Gulliver

(1942) 1 All E R 378

They should not place themselves in a position where their duty and their personal interest conflict. Therefore, a contract between a director and his company is voidable by the company.

Several other prohibitions are also provided under the Companies Act and in the Articles of Associations

D. COMPANY’S MEETINGS

Types of Meetings

Two types of meeting

-Shareholders meeting

(i)Annual General Meeting

(ii)Extra Ordinary General Meeting

-Directors Meeting

Refer to Articles of Association of the Company with regards to conducting of meetings .

Annual General Meeting

  • Must be held at least once in every calendar year in addition to any other General Meetings held in that year.
  • Notices convening the meeting must specify to be the “Annual General Meeting” of the Company (section 143 Companies Act 1965).
  • 14 days’ written notice is required to be given to members ( Section 145(3) )
  • The purpose of meeting

(i)to receive and consider the Director’s and Auditors’ reports, the Accounts and Balance Sheet;

(ii)to sanction the dividend (if any) recommended by the directors;

(iii)to appoint, or re-appoint, the directors;

(iv)to appoint, or re-appoint, the auditors and fix their remuneration

  • Must be held within the State in which the company been registered.

Directors Meetings

Also known as Board Meetings. The directors have no individual rights (subject Articles of Association) to act on behalf of the company. They must act through the Board and their powers emanate from their collective decisions.

Regulations affecting the conduct of Board meeting and their powers (and limitations) are usually set out in their Articles of Association.

Quorum of Meetings

Refer to Articles of Association.

The principle:

At least two members must attend to constitute a quorum.

Refer:

  1. Re Salvage Engineers Ltd.

(1962) 28 MLJ 438

  1. United Investment and Finance Ltd.

V

Tee Chin Yong & Ors.

(1967) 1 MLJ 31

E. HOLDING & SUBSIDIARY COMPANY

  • Holding & subsidiary company has its own separate legal entity.
  • Meeting of Board of Directors of subsidiary company (in which its Directors holding senior offices in holding company) (parent company) do not represent parent company. They attend meeting as directors of subsidiary company.

People’s Insurance Co. (M) Sdn. Bhd.

v

People’s Insurace Co. Ltd. & Ors.

(1986) 1 MLJ 68

The fact:

In 1978, the plaintif company, People’s Insurance Co. (M) Sdn. Bhd. (PICMSB), was a subsidiary of the first defendants company, People’s Insurance Co. Ltd. (PICL). On 12 Januari 1978, five directors of PICMSM held meeting. One of the directors was the Managing Director of the defendant (PICL), another one was General Manager and Director of the defendant (PICL), and another one was Executive Director of the detendant (PICL). During the meeting they passed a resolution that affected PICL. The defendant (PICL) denied any liability.

Held

(1)The parent (holding) and subsidiary companies are two separate legal entities;

(2)Officers of the parent company who are on the Board of the subsidiary are not representatives of the parent company but sit at the Board Meeting as directors and agent of the subsidiary;

(3)A resolution of the Board of directors of the subsidiary does not bind the parent company. The resolution did not constitute a contract between the parties.

Cases Referred to:

Ebbow Vale Urban District Council

v

South Wates Traffic Area Licensing Authority

(1951)2 K.B. 366

Cohen L.J. :

“Under the ordinary rules of law, a parent company and subsidiary company, even a 100 percent subsidiary company, are distint legal entities…..”

Northern Countries Securities Ltd.

v

Jackson & Ateeples Ltd.

( (1974) 1 W.L.R. )

Walton J. :

“…… a director is an agent, who casts his vote to decide in what manner his principal shall act through the collective agency of the board of directors”

  • Refer to

Companies Act 1965

  1. Section 5 – definition of subsidiary and holding company
  2. Section 5A – definition of ultimate holding company
  3. Section 5B – definition of wholly – owned subsidiary
  4. Section 6 – when corporations deemed to be related to each other
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