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Company Law

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by

Lay Guat

on 5 January 2015

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Transcript of Company Law

Criminal
s 157(3)(a)
Civil
s 157(3)(b)
3.
2.
Section 157(1)
Statutory Duties
Common Law Duties
Case Law
Section 157(2)
Section 156(1)
Section 339(3)
Section 162
Company Law
An officer or agent of a company shall not make improper use of any information acquired by virtue of his position.
Every director and chief executive officer who is in any way, whether directly or indirectly, interested in a transaction or proposed transaction with the company shall declare the nature of his interest at a meeting of the directors of the company.

He cannot gain an advantage for himself, whether directly or indirectly or for any other person to cause detriment to the company.
A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of this office.
The law states that the director should not use any inside information privy acting as an officer for his own personal gain instead of the company.
It imposes a duty on the officers of the company to not engage in reckless trading.
An officer has to reduce the losses that creditors of insolvent companies may face by exercising care in overseeing the financial state of the company.
A company is prohibited to borrow loan or quasi loan to any person in a specified group
Eg. director, director of related company and their immediate family

Company is also debarred from entering to any credit transaction or any guarantee or security or arrangement made by a third party to any such person.
These credit transaction and loans are known as restricted transaction.
Motive of the director’s decision is more important than the result.
Honestly --> acting for the benefits of the company such as the company’s members, creditors and employees of the company.
Lim Weng Kee
Lim Weng Kee v Public Prosecutor [2002]

Samuri
Women who imposed as the wife of the Sultan of Brunei
Charges
Samuri visited the pawnshop and pawned expensive jewellery items which have a total value of 4 to 5 million.
Samuri then issued a $6 million cheque in the name of Wang Wang pawnshop to redeem her jewellery items.
Managing Director of
- Thai Sin Pawnshop
- Thai Hong Pawnshop

Director of Wang Wang Pawnshop

Has 20 years experience in this field

Lim Weng Kee had permitted the pawned items to be returned back to Samuri without ensuring that the cheque had cleared and honoured.
The cheque was later found to be dishonoured and Samuri was nowhere to be found.
THANK YOU
She also issued four $1 million cheques for Lim Weng Kee and four other staffs as personal gifts.
Skill & Care
Directors are required to act with skill and reasonable care.
Exception to Section 162
Section 163
Fiduciary Duties
Standard of skill is measured by 'subjective' test which a reasonable man of his knowledge and experience would display.
Regarded as a “fiduciary” in relation to the company of which he is a director

When one “person” (Eg. the Company) places trust and confidence in another (eg. the directors) and therefore places himself or herself in a vulnerable position.
Standard of reasonable care is measured by ‘objective’ test which is any reasonable man might be expected to take if he were in the director’s circumstances.
Diligence
Attend board meetings which is of an intermittent nature.
Exception to S162
1. Anything done for the purpose of enabling director to perform his duties, subject to member’s prior approval at annual general meeting
2. Full time employed director with company or related company is provided a loan to acquire a home for him to occupy, subject to the members’ prior approval at annual general meeting and the limit of 1 outstanding loan at any time (failing which loan must repaid within 6 months)
3. Director of full time employment with company or related company borrowed a loan in accordance with an employee loan scheme which has been already approved during annual general meeting; or
4. Loan borrowed to a director in the ordinary course of business of company engaged in the business of a bank, finance company or insurance company.

Forms of Fiduciary Duties
Must disclose his interest in any contract entered into by the company
To prevent or reduce the chance of fraudulent acts by the directors
Forms of Fiduciary Duties
Should not take advantage of a business advantage or opportunity intended for a company
Should not make secret profit
Not obliged to attend every board meeting.
Reasonable diligence is measured by what is reasonable in the circumstances.
Use Power for their Proper Purpose
Duty to retain discretion
Exercise caution to use his power for proper purpose
Not supposed to use his power for
Illegal transactions
Transactions against public policies
Transactions contrary to the company's M&A
Exercise power given in company's article
Exception to Section 163
1. A fund is given by related company in defending any criminal or civil proceedings in related with any alleged negligence, breach of duty or trust provided it is repaid on specific term.
2. The expenditure in relation to regulatory action or investigations in related with any alleged negligence, breach of duty or trust provided it is repaid on specific term.
Permitted the release of the pawned jewellery items before the cheque was cleared.
1.
Full transcript