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Disputes between the company and its members shall
Course:- Business Law and Ethics
Reference No.:- EM131273861




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TOPIC REVIEW EXERCISE: COMPANY INCORPORATION AND COMPANY CONSTITUTION

Question One

Fatah was a sales manager of Jual Tanah Berhad (JTB), a company that deals in the sale and purchase of agricultural land. Three months ago Fatah resigned from JTB. The employment contract between Fatah and JTB provided, among others, that Fatah could not make use of JTB's client list nor copy their sales method within a year after Fatah left JTB.

Four months after Fatah left JTB, he assisted his Lofah, who is Fatah's girlfriend, in setting up a company called Beli Rumah Sdn Bhd (BRSB).

BRSB runs a business similar to that of JTB i.e. in land and real estate transactions. Lofah and her younger brother are the only two shareholders of BRSB. Under the direction and guidance by Fatah, Lofah approaches customers of JTB for business and has successfully entered into several lucrative contracts with the customers.

Upon realizing this JTB sent a letter to Fatah reminding him of his contract with them. Fatah however claim that he has done no wrong and continue assisting BRSB. JTB wish to sue Fatah for breach of contract. Advise JTB whether they would be successful in claiming against Fatah.

Question 2

Teguh Kita Sdn Bhd is a company in Rawang, Selangor. It manufactures automotive spare parts. The company has four directors: Fadhil, Harun, Awang and Yassin.

Fadhil and Harun has 35% shares each and Awang holds 20%. Yassin holds the remaining 10% of shares. All the shares carry one vote each.

The company's articles of association contain the following provisions:

i. Any member who intends to transfer shares shall inform the directors who will take the said shares equally between them at fair value.

ii. All payroll services required by the company will be exclusively supplied by Awang through his own company Panglima Awang Sdn Bhd

iii. Disputes between the company and its members shall be referred to arbitration.

iv. All members of the company agree that the articles of the company cannot be altered.

Recently there have been serious disagreements between all the directors with regard to management of the company's business. You are to advise the parties on the following in the context of Malaysian Companies Act 1965:

a) Yassin has become disinterested in the company and wants to sell his shares to the directors but they have refused to purchase them.

b) The directors have passed a resolution to contract with Bayar Suda Sdn Bhd for all Teguh Kita's payroll needs. With the passing of this resolution, the company is no longer using the service of Panglima Awang Sdn Bhd.

c) Fadhil has backed out of selling property he owns to Harun, and Harun wishes to sue him but Fadhil insisted that they have to refer the dispute to arbitration.

d) Harun is considering proposing a resolution to alter the articles but is frustrated at the company's inability to change the articles of association.




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