PowerPoint Presentation

Group 8Assignment Law 346MOHAMAD FAIZ BIN MOHAMADMUHAMMAD IZZUDDIN BIN AYUBMUHAAMD AKIRA BIN PAUZI

Anand, Bakri, and Chan are the directors of ABCD Sdn Bhd, a company dealing in the import and sale of foreign carpets. They are also its majority shareholders, each holding 20% of its issued shares. The remaining shares are held by a few persons, one of whom is David, who approaches you for advice. He says:In January 2004, there was speculation that there was likely to be a takeover of ABCD Sdn Bhd by another company, Predator Bhd. In order to ward off such a takeover, the directors, pursuant to a board meeting, issued new shares to Ali, the trustee for employees under the companys employee share scheme, on the understanding that Ali would vote against any potential takeover of the company.In April 2004, the company purchased a piece of land from Tanahku Sdn Bhd for RM500,000. It has now come to light that the only shareholders and directors of Tanahku Sdn Bhd are Anand, Bakri and Chan. Last month, Anand and Bakri went to Nigeria and successfully negotiated a two million ringgit contract on behalf of ABCD Sdn Bhd. I have just discovered that the directors have transferred the benefit of the contract to a company called Kleen Deals Sdn Bhd, whose only directors and shareholders are Anand, Bakri and Chan.Advise David and the company whether there has been any breach of duty to the company by the directors in respect of the aforementioned matters as well as the consequences of such breach.

Question

Whether Anand, Bakri , & Chan has breach of duty as director to the company ABCD Sdn Bhd ?

Issue

A director is an officer of a company within the meaning of this sectionSection 4(1) of company Director as including :Any person occupying the position of director of a corporation by whatever name calledA person in accordance with whose directions or instructions the directors of a corporation are accustomed to actAn alternate or substitute directors

Definition of Director

a)Common law dutiesb)Statutory duties of directors

Common lawFiduciary dutyA fiduciary is someone who is in control of property in which others have an interest or is given power powers for which is exercised on behalf of those in position of dependenceSection 132(1) of CA state that a director shall at all times act honestly and use reasonable diligence in the discharge of the discharge of the duties of his office. The word honestly used here is the basis for deciding cases relating to directors fiduciary

Duties and Liabilities of Director

As a fiduciary , a director duties areTo exercise his powers for the proper purposes, and not for any collateral purposeTo avoid any conflict of interest between his duty to the company and his personal interest

Issue:Whether the act of directors issue new share to Ali is exercise their duty to act for a proper purpose?

Duty to act for a proper purposeThe power given to the directors must be exercised only for the benefits of the company.The court will consider 2 factors when it has to decide whether the directors power has been exercised for a proper purpose or notThe objective for which the power was grantedThe main purpose for which the power was excercised

The related case Howard Smith LTD v. Ampol Petroleum LTD

Issue:Whether the act of silent from Anand, Bakri, and Chan as the director and shareholder of Tanahku Sdn Bhd is valid the transaction of purchase the land?

Duty to avoid any conflicts of interestDirectors must not put themselves in a position in which their duty and their personal interest may conflict

Director enters into a contract with his company, without disclosing the fact that he is the party at interestS. 131(1) of CA provides that directors must disclose all material facts to the shareholders. ~The related case Aberdeen Railway Co v. Blaikie Bros

Issue:Whether the director can use their position to obtain personal benefit?

Use his position as a director to obtain personal benefitA director is under a duty not to make use of hisposition as a director to obtain a profit to himself.The director can breach of duty if him take advantages to make the secret profit with his position as a director of the company. ~The related case Furs Ltd v. Tomkies

As a conclusion,Anand,Bakri and Chan had breach of duty to the company because them had make some offence to the their duties.First,them act for proper purpose.They had issued new shares to third party (Ali)to act on their behalf to protect the company from takeover by outsider(Predator Bhd).Second,they did not disclose to the company that they are the shareholders and director for Tanahku Sdn Bhd.Lastly,they use their position as a director to make others profit from the company contract whereby they transferred the benefit of contract to Kleen Deals Sdn Bhd.Conclusion