1 CHAPTER 1: MALAYSIAN LEGAL SYSTEMREV 01 CHAPTER 1: MALAYSIAN LEGAL SYSTEM Introduction to Law According to Oxford English Dictionary, law is defined as ‘the body of enacted or customary rules recognized by a community as binding’. The aim of the law is to attain justice in society. Justice is an abstract idea of right and wrong, fairness and equality. Example: it is a rule of law that theft is a crime under Section 378 of the Penal Code of Malaysia and is imprisonment or a fine or both. LAW 2013/BIB 3227 BUSINESS LAW

2 Malaysian Legal History REV 01 Malaysian Legal History Malaysia, which consist of Peninsular Malaysia, Sabah & Sarawak is one political unit, but not governed by the same set of laws. There are, two important links which unite the two parts of Malaysia – the Parliament and the Federal Court. The Malaysian Parliament can and does legislate for the whole country while the Federal Court acts as a final court of appeal for the whole country. Within Malaysia, there are thirteen states and every state has a government and has rules which lay down who shall govern and how. LAW 2013/BIB 3227 BUSINESS LAW

3 The Federal Constitution REV 01 The Federal Constitution Is the supreme law of the land so that any general law that is inconsistent with the Constitution is, to the extent of the inconsistency, void. Has the capacity to amend the constitution under which it functions albeit by a two-third majority vote of both chambers of Parliament. Establishes a constitutional monarchy and a federal system of government. Under the federal system, there is a division of legislative powers between the central Parliament and the State Assemblies. State may make laws includes Islamic laws, Malay customs, land mining, forests, agriculture and local government. LAW 2013/BIB 3227 BUSINESS LAW

4 Fundamental Liberties REV 01 Fundamental Liberties The usual constitutional guarantees in respect of fundamental liberties that one would normally expect in a constitution of an independent nation come to be subject to the overhanging dark cloud of special emergency powers and powers against subversion. The Article 149 Special Powers Against Subversion permit the violation of fundamental rights contained in Articles 5,9,10,13. These powers which curtail fundamental liberties are triggered by the simple expedient of a magical incantation in the form of a ‘recital’ in an Act of Parliament that ‘action has been taken or threatened by any substantial body of persons whether within or outside the federation. LAW 2013/BIB 3227 BUSINESS LAW

5 REV 01 LAW 2013/BIB 3227 BUSINESS LAW

6 REV 01 LAW 2013/BIB 3227 BUSINESS LAW

7 REV 01 LAW 2013/BIB 3227 BUSINESS LAW

8 Administrative System REV 01 Administrative System Malaysia is a constitutional monarchy, nominally headed by the Yang-di-Pertuan Agong. King is the leader of the Islamic faith in Malaysia. Executive power is vested in the cabinet led by the prime minister, the Malaysian constitution stipulates that the prime minister must be member of the lower house of parliament. The bicameral parliament consist of the Senate (Dewan Negara) and the House of Representatives (Dewan Rakyat). Legislative power is divided between federal and state legislatures. LAW 2013/BIB 3227 BUSINESS LAW

9 The head of the judiciary is the Chief Justice. REV 01 Judicial System The Federal Constitution provides that power is exercised by the legislative, the executive and the judiciary. The judiciary has the power to hear and determine civil and criminal matters. The judiciary power of Malaysia is vested in the Federal Court, the Court of Appeal, the High Courts and subordinate courts The head of the judiciary is the Chief Justice. The court system – refer to General Principles of Malaysian Law by Lee Mei Pheng, 4th edition, Fajar Bakti, pg. 54. LAW 2013/BIB 3227 BUSINESS LAW

10 CHAPTER 2: THE SOURCE OF MALAYSIA LAWREV 01 CHAPTER 2: THE SOURCE OF MALAYSIA LAW The Sources of Malaysian Law The word ‘sources’ has several meanings which may include the following:- Historical sources. These are factors that have influenced the development of the law although they are not recognized as law. Legal sources. These are the legal rules that make up the law. Places where the law can be found – for example, statutes, law reports and text books. LAW 2013/BIB 3227 BUSINESS LAW

11 Malaysian law can be classified into written and unwritten law.REV 01 Sources Written law Unwritten law Muslim law ‘Source of Malaysian Law’ means the legal sources, i.e. the legal rules that make up the law in Malaysia. Malaysian law can be classified into written and unwritten law. LAW 2013/BIB 3227 BUSINESS LAW

12 Legislation enacted by Parliament and the State Assemblies. REV 01 Written Law It refers to that portion of Malaysian law which includes the following:- The Federal & State Constitutions. The Federal Constitution is the supreme law of the land. Legislation enacted by Parliament and the State Assemblies. Subsidiary legislation made by persons or bodies under powers conferred on them by Acts of Parliament or State Assemblies. LAW 2013/BIB 3227 BUSINESS LAW

13 Found in cases decided by the courts, local customs, etc. REV 01 Unwritten Law Is simply that portion of Malaysian law which is not written, i.e. law which is not being enacted by Parliament or the State Assemblies and which is not found in the written Federal and State Constitutions. Found in cases decided by the courts, local customs, etc. The unwritten law comprises the following:- Principles of English law applicable to local circumstances Judicial decisions of the superior courts Customs of the local inhabitants which have been accepted as law by the courts LAW 2013/BIB 3227 BUSINESS LAW

14 REV 01 Muslim Law In Malaysia, Muslim or Islamic law is increasingly being applied in our local laws. For instance, currently there is a move to incorporate some Islamic principles into land laws. Muslim law applies to all persons who are Muslims and of particular importance are the law relating to family matters (e.g. marriage and divorce) and inheritance. LAW 2013/BIB 3227 BUSINESS LAW

15 CHAPTER 3: LEGISLATION Definition of legislation:REV 01 Definition of legislation: The law enacted by the legislature, and by bodies and persons authorized by the legislature. In Malaysia, the power to enact law is vested in Parliament at the federal level and the State Legislative Assembly at the state level. Laws enacted by parliament are called Acts, but federal legislative between 1 April 1946 and 10 September 1959 are called Ordinances. The Parliament is responsible to legislate the law of the federal law whereas the State Legislative Assembly at the state level. Parliament and State Legislatures have to enact law according to the provisions in the Federal Constitution. LAW 2013/BIB 3227 BUSINESS LAW

16 Function and Power of LegislatorREV 01 Function and Power of Legislator The power of Parliament to make laws shall be exercised by Bills passed by both Houses and, assented to by the Yang di-Pertuan Agong. The legislature of State shall have power to make laws with respect to any matter not enumerated in any of the Lists set out in the Ninth Schedule, not being a matter in respect of which Parliament has power to make laws. The legislature of the State of Sabah or Sarawak may make laws for imposing sales taxes, and any sales tax imposed by State law in the State of Sabah or Sarawak shall be deemed to be among the matters enumerated in the State List and not in the Federal List. LAW 2013/BIB 3227 BUSINESS LAW

17 Procedure of LegislationREV 01 Procedure of Legislation When a Bill has been passed by the House in which it originated it shall be sent to the other House; and it shall be presented to the Yang di-Pertuan Agong for his assent when it has been passed by the other House and agreement has been reached between the two houses on any amendments made in it or when it is required to be so presented under Article 68. The Yang di-Pertuan Agong shall within 13 days after a Bill is presented to him assent to the Bill by causing the Public Seal to be affixed thereto. A Bill shall become law if the Bill is not assnted to by the Yang di-Pertuan Agong within 13 days. LAW 2013/BIB 3227 BUSINESS LAW

18 Procedure of LegislationREV 01 Procedure of Legislation Pre-Parliamentary Stage Minister formally introduces the Bill in the Dewan Rakyat by having its short title read. Parliamentary Stage Debate on the general principles of the Bill, followed by a vote. Detailed examination of the Bill and consideration of amendments, followed by a report on the Bill to the Dewan. Further debate on the general principles of the Bill, followed by a vote. Similar procedures as in the Dewan Rakyat/ If passes, the Bill is referred back to the Dewan Rakyat. The Yang-Di-Pertuan Agong affixes the Public Seal within thirty days of presentation. Bill becomes an Act. Act comes into force. LAW 2013/BIB 3227 BUSINESS LAW

19 Process Before Enforcement of LegislationREV 01 Process Before Enforcement of Legislation Arbitration Conciliation Tribunal Mediation LAW 2013/BIB 3227 BUSINESS LAW

20 Parliamentary Control of LegislationREV 01 Parliamentary Control of Legislation Election Debates in Parliament Ministerial control Judicial Precedent Subsidiary legislation Lack of control LAW 2013/BIB 3227 BUSINESS LAW

21 CHAPTER 4: ADMINISTRATION STRUCTURE AND POWER OF GOVERNMENTREV 01 CHAPTER 4: ADMINISTRATION STRUCTURE AND POWER OF GOVERNMENT Malaysia administrative divided into 13 states: Johor, Kedah, Kelantan, Melaka, Negeri Sembilan, Pahang, Perak, Perlis, Pulau Pinang, Sabah, Sarawak, Selangor and Terengganu; and one federal territory with three components: city of Kuala Lumpur, Labuan and Putrajaya. The Federal Constitution is the supreme law of the federation. Is used as a yardstick with which to measure the validity of all other laws. Any law inconsistent with the Federal Constitution may be challenged in court. Federal Constitution provide the main laws, which can be referred as the main guide law in Malaysia. LAW 2013/BIB 3227 BUSINESS LAW

22 REV 01 State Constitution Each state in Malaysia has its own constitution, which provide the regulation of the State Government. Part V of the Federal Constitution provides the provisions pertaining to the States. If any law State is inconsistent with a Federal law, the Federal law should prevail. LAW 2013/BIB 3227 BUSINESS LAW

23 Federal Government & State GovernmentREV 01 Federal Government & State Government Federal List Concurrent List State List LAW 2013/BIB 3227 BUSINESS LAW

24 Governmental Policy Malaysia DemocracyREV 01 Governmental Policy Malaysia Democracy - combination of Federal and Unitary system USA more towards the Federal system of Government Russia Communism - Central government LAW 2013/BIB 3227 BUSINESS LAW

25 REV 01 CHAPTER 5: HUMAN RIGHTS Human rights refer to human beings having universal rights or status. Cover: civil and political rights Humanitarian rights LAW 2013/BIB 3227 BUSINESS LAW

26 REV 01 Human Rights Act 1998 The Act incorporates the European Convention on Human Rights (ECHR) Becomes part of the UK legal system Act of parliament incorporating and recognizing human rights in the UK Domestic legislation must not be incompatible with ECHR Courts to decide whether is an abuse of human rights LAW 2013/BIB 3227 BUSINESS LAW

27 REV 01 Human Rights Act 1998 All statutes must be interpreted according to rights conferred by the Act If rights have been violated can take matters to the courts Courts have interpret and developed the legislation based on the Act Parliament would comply with the ECHR LAW 2013/BIB 3227 BUSINESS LAW

28 Individual Rights V Public PolicyREV 01 Individual Rights V Public Policy Article 17 provides rights cannot be pleaded to defeat exercise or enjoyment of rights by others Restrictions imposed on certain activities for reason of public policy LAW 2013/BIB 3227 BUSINESS LAW

29 Human Rights in MalaysiaREV 01 Human Rights in Malaysia Striking a balance between protecting the State and collective subjects against the power of the individuals to protect themselves from abuse of powers Fundamental rights of the individuals are guaranteed by the Constitution Cannot be altered by ordinary way but by 2/3 majority LAW 2013/BIB 3227 BUSINESS LAW

30 Constitutional guarantee of Human Rights MalaysiaREV 01 Constitutional guarantee of Human Rights Malaysia Article 1- Right to live or personal liberty Article 4- No person may be tried for the same offence twice after acquittal or conviction Article 5- Equality before the law Article 6- Right against discrimination Article 8- Freedom of peaceful assembly and association subject to restrictions imposed by Parliament LAW 2013/BIB 3227 BUSINESS LAW

31 Article 9- Freedom of movement Article 10- Freedom of speech REV 01 Article 9- Freedom of movement Article 10- Freedom of speech Article 11- Freedom of religion Article 13- Rights to property LAW 2013/BIB 3227 BUSINESS LAW

32 European Convention on Human RightsREV 01 European Convention on Human Rights Article 1- Right to peaceful enjoyment of possessions Article 2- Right to life Article 3- Protection from inhuman treatment Article 4- Freedom from forced labour Article 5- Right to liberty Article 6- Right to fair trial Article 8- Respect to privacy Article 9 & 10- Freedom of thought and expression Article 11- Freedom of peaceful assembly LAW 2013/BIB 3227 BUSINESS LAW

33 Limits to Human Rights To ensure safety of the StateREV 01 Limits to Human Rights To ensure safety of the State Preservation of democratic ways of life to guarantee peace and harmony Internal Security Act Official Secrets Act Emergency powers given to the Yang di-Pertuan Agong by the Constitution Article 150 LAW 2013/BIB 3227 BUSINESS LAW

34 Comparison of Human Rights with Other CountriesREV 01 Comparison of Human Rights with Other Countries A restricted form of democracy with regard to individual rights compared to USA, UK Individual rights must not affect collective rights Have to consider sensitive issues like religion, racial harmony and special rights Human rights in Malaysia v Communism (China, Cuba) LAW 2013/BIB 3227 BUSINESS LAW

35 CHAPTER 6: MALAYSIAN LAW OF CONTRACTREV 01 CHAPTER 6: MALAYSIAN LAW OF CONTRACT Formation of contract Contract by deed Lease Conveyance A promise not supported by consideration Contracts must be in writing Transfer of shares Sale of interest in land Bills of exchange and cheques Consumer credit contracts Contracts which must be evidenced in writing LAW 2013/BIB 3227 BUSINESS LAW

36 Unenforceable contract REV 01 Unenforceable contract Refers to a situation where a contract in substance is valid but cannot be enforced by legal action on account of a failure to comply with certain mandatory technicalities required by law. The Contracts Act uses the terms ‘enforceable by law’ and ‘not enforceable by law’ and they bear a more extensive meaning than that conveyed by the English term ‘unenforceable’. Section 2 (paragraphs g) of Contracts Acts states that ‘an agreement not enforceable by law is said to be void’ and (paragraph h) of the same states that ‘an agreement enforceable by law is a contract’. LAW 2013/BIB 3227 BUSINESS LAW

37 Void & Void able Contract REV 01 Void & Void able Contract ‘a void contract’ refers to an agreement that is destitute of any legal effect ab initio so that no rights or obligations are created at all. It is indeed a misnomer to refer to a ‘void contract’ when no legal rights and obligations exist and yet the term is commonly used. In respect of void able contracts, section 2(i) declares that. If any part of a single consideration for one or more objects or any part of any one of several considerations for a single object, is unlawful, the agreement is void. LAW 2013/BIB 3227 BUSINESS LAW

38 Refer to Kanhaya Lal v. National Bank of India Ltd case.REV 01 Coercion Is the committing, or threatening to commit any act forbidden by the Panel Code or the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement. Explanation – it is immaterial whether the Penal Code is or is not in force in the place where the coercion is employed. Refer to Kanhaya Lal v. National Bank of India Ltd case. LAW 2013/BIB 3227 BUSINESS LAW

39 Section 16 of the Contracts Act, 1950 reads: REV 01 Undue Influence Is a development of equity to cover cases of particular relations and is sometimes used as a comprehensive phrase to include cases of coercion, domination or pressure within or without those special relations. Section 16 of the Contracts Act, 1950 reads: A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. Refer to Raghunath Prasad v. Sarju Prasad case Refer to General Principles of Malaysian Law by Lee Mei Pheng, p.124. LAW 2013/BIB 3227 BUSINESS LAW

40 Refer to General Principles of Malaysian Law, Lee Mei Pheng, p.127. REV 01 Fraud Under Section 17 of the Contracts Act lays down five different acts which may constitute fraud. It may be stated that wherever a person causes another to act on a false representation which the maker himself does not believe to be true, he is said to have committed a fraud. Fraud includes any of the following act committed by a party to a contract, or with his connivance or by his agent, with intent to deceive another party thereto or his agent. Refer to General Principles of Malaysian Law, Lee Mei Pheng, p.127. Refer to Wong Cheong Kong Sdn.Bhd. v Prudential Assurance Sdn. Bhd. case. LAW 2013/BIB 3227 BUSINESS LAW

41 Section 18 of the Contracts Act defines misrepresentation as: REV 01 Misrepresentation Section 18 of the Contracts Act defines misrepresentation as: The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true. Any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him. Causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement. Refer to Tan Chye Anor. v. Eastern Metal Co. case. LAW 2013/BIB 3227 BUSINESS LAW

42 Refer to Chop Ngoh Seng v. Esmail @ Ahmad Bros. Case. REV 01 Mistake Section 21 of the Contracts Act which provides for cases where there is a mistake of fact reads: Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Explanation: an erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of facts. For a mistake to be operative under Section 21, it must be a mistake ‘essential to the agreement’. Refer to Chop Ngoh Seng v. Ahmad Bros. Case. Refer to Chan Yoke Lain v. Orient Insurance Co. Sdn. Bhd. LAW 2013/BIB 3227 BUSINESS LAW

43 REV 01 Illegal contract Section 2(g) of the Contracts Act declares as a general proposition that ‘an agreement not enforceable by law is said to be void’. It appears that no distinction is made between illegal/unlawful contract on the one hand, and on the other, void contract as understood in English law. A contract that is merely void does not give rise to rights and obligations but the full ramifications of illegality are not applied. In section 21, 24 and 25 merge all the common law categories of contracts that are void, including those that are unlawful. LAW 2013/BIB 3227 BUSINESS LAW

44 Discharge by performance of contract REV 01 Discharge of Contract Discharge by performance of contract A contract that is created by consent can be extinguished by consent, expressed or implied. For instance, the parties may agree at the time of making the contract that on the occurrence of an event, one or more parties will be discharged. Section 63 deals with the effects of novation, rescission and alteration and reads as follows: If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. Refer to Pan Ah Ba & Nanyang Construction Sdn. Bhd. (1969) 2MLJ 181 case. LAW 2013/BIB 3227 BUSINESS LAW

45 Discharge by impossibility of performance REV 01 Discharge by impossibility of performance Section 57 lays down the law relating to two categories of impossibility of performance Impossibility of performance at the time a contract is made and Impossibility after it has been made. The first category, it is provided that ‘an agreement to do an act impossible in itself is void’. The second category concerns contracts that have become impossible to perform subsequent to their making. In section 57(2), a contract ‘becomes impossible, or by reason of some event the promisor could not prevent, unlawful’. This covers the common law doctrine of frustration. Refer to Ramli bin Zakaria & Ors. v. Government of Malaysia (1982) 2 MLJ 257 case. LAW 2013/BIB 3227 BUSINESS LAW

46 Discharge by new contract REV 01 Discharge by new contract Termination by substituted agreement is appropriate where the parties wish to abandon the original agreement and substitute a new one (on different terms) in its place. As with termination by mutual release, the consideration for abandoning the rights under the old agreement is the promise of each party to enter a new agreement on new terms. Date of discharge: on the date agreed by the parties. LAW 2013/BIB 3227 BUSINESS LAW

47 Discharge by breach of contract REV 01 Discharge by breach of contract Where one of the parties indicates to the other either by conduct or in clear terms an intention not to go on with the contract, the party is said to have repudiated or renounced the contract. A refusal to perform a contract may occur before the time for performance is due or during the time of performance itself. A refusal to perform a contract when performance is due would amount to a discharge. A contact is discharged only if the disability to perform is brought about through the fault of the party concerned. If the disability is caused through the occurrence of some other events, beyond the control of the parties, the contract may be discharged through frustration. LAW 2013/BIB 3227 BUSINESS LAW

48 REV 01 Effects of Breach The effect of an innocent party putting an end to the contract is that the innocent party must restore any benefits which he may have received from the other party – Section 65, Contracts Act. If the innocent party has rendered services or had supplied goods, he may recover a reasonable sum for such services or goods rendered. If the innocent party has paid money under the contract, he may be entitled to recover the sum paid. LAW 2013/BIB 3227 BUSINESS LAW

49 Remedies for breach of contract Damages REV 01 Remedies for breach of contract Damages Granted to a party as compensation for the damage, loss or injury he has suffered through a breach of contract. Section 74 of the Contracts Act sets out the provision for such compensation. Compensation for loss or damage caused by breach of contract. Compensation for failure to discharge obligation resembling those created by contract. Compensation of breach of contract where penalty stipulated for. LAW 2013/BIB 3227 BUSINESS LAW

50 Refer to Venkatachalom Chettiar v. Arunasalam Chettiar case.REV 01 Specific Performance The Specific Relief Act,1950 provides for the remedy for specific performance. Specific performance is a discretionary remedy. Under Section 21 of the Specific Relief Act, 1950 the court has a discretion to refuse specific performance where the granting of it would cause undue hardship to the defendant. Refer to Venkatachalom Chettiar v. Arunasalam Chettiar case. LAW 2013/BIB 3227 BUSINESS LAW

51 Refer to Lee Sau Kong v. Leow Chang Chiang case. REV 01 However, the court will exercise its discretion not to decree specific performance under Section 20 of the Specific Relief Act 1950 where damages will provide an adequate remedy, where the terms of the contract are uncertain, where there is evidence of fraud. Refer to Lee Sau Kong v. Leow Chang Chiang case. Specific performance is also not granted to contracts for personal services – Dato’ Abdullah bin Ahmad v. Syarikat Permodalan Kebangsaan Ors. LAW 2013/BIB 3227 BUSINESS LAW

52 Refer to Neoh Siew Eng @ Anor. v. Too Chee Kwang case. REV 01 Injunction The remedy of an interlocutory injunction is used by a party to maintain the status quo to the subject-matter in a pending suit. A mandatory injunction is a court order requiring something to be done. Refer to Neoh Siew Anor. v. Too Chee Kwang case. An injunction may also be in the form of a restraining order, stopping something from being done. LAW 2013/BIB 3227 BUSINESS LAW

53 Refer to Broome (Selangor) Rubber Plantations v. R. H. Whitley case. REV 01 Refer to Broome (Selangor) Rubber Plantations v. R. H. Whitley case. An injunction is an equitable remedy. Thus, it can be varied or dissolved if the court discovers later that the application for injunction was made on suppressed facts or that the facts upon which the order was granted no longer exist. LAW 2013/BIB 3227 BUSINESS LAW

54 Types of losses recoverable REV 01 Quantum Meruit If it is the case that P can establish that his/her loss is not too remote, and he/she has mitigated his/her loss, P will be entitled to recover damages to compensate him/her for those loses. Types of losses recoverable Expectation losses (‘lost’ expected gains had the contract been completed) Reliance losses (wasted expenditure on the defunct agreement) Generally damages are not recoverable for any disappointment, distress, injured feelings or mere inconvenience arising from a breach of contract. Refer to Commercial Law in principle by Gibson, Rigby & Tamsitt, pp LAW 2013/BIB 3227 BUSINESS LAW

55 CHAPTER 7: LAW OF AGENCY Contract of AgencyREV 01 CHAPTER 7: LAW OF AGENCY Contract of Agency A contract of agency can be expressed or implied from the circumstances and the conduct of the parties. The authority of an agent may be expressed (given by words spoken or written) or implied (inferred from things spoken or written or from the ordinary course of dealings) An agency may arise in the following ways: By express appointment by the principal By implied appointment by the principal By ratification by the principal By necessity By the doctrine of estoppel or ‘holding out’ LAW 2013/BIB 3227 BUSINESS LAW

56 By Express Appointment REV 01 By Express Appointment May be in a written or oral form. An example of an express appointment made in writing is a Power of Attorney. Even written or words spoken may be effective in appointing an agent. By Implied Appointment When a person by his words or conduct holds out another person as having authority to act for him – Section 140 and Illustration. Refer to Chan Yin Tee v. William Co. (Malaya) Ltd. (1964) MLJ 290 By Ratification An agent who was duly appointed has exceeded his authority A person who has no authority to act for the principal has acted as if he has the authority Refer to R.M.Meyappa Chettiar v. Lim Kian Koo case. LAW 2013/BIB 3227 BUSINESS LAW

57 The agent of necessity to his principal must have acted in good faith. REV 01 By Necessity It is impossible for the agent to get the principal’s instruction – Section 142, Contracts Act. The agent’s action is necessary, in the circumstance, in order to prevent loss to the principal with respect to the interest committed to his charge, e.g. when an agent sells perishable goods belonging to his principal to prevent them from rotting. The agent of necessity to his principal must have acted in good faith. By Estoppel A person cannot be bound by a contract made on his behalf without his authority. However, if he by his words and conduct allows a third party to believe that particular person is his agent even when he is not, and the third party relies on it to the detriment of the third party, he will be estopped or precluded from denying the existence of that person’s authority to act on his behalf. LAW 2013/BIB 3227 BUSINESS LAW

58 CHAPTER 8: MALAYSIAN COMPANY LAWREV 01 CHAPTER 8: MALAYSIAN COMPANY LAW Commencing business Promoter Companies Registration procedures Memorandum and Article of Association Off the shell companies LAW 2013/BIB 3227 BUSINESS LAW

59 Off the shelf companies Because registration can be a lengthy business REV 01 Promoter Definition Off the shelf companies Because registration can be a lengthy business Registration procedures Submit to the registrar memorandum and articles of association A statement about director’s and secretary’s particulars (Form 10) A statutory declaration (Form 12) LAW 2013/BIB 3227 BUSINESS LAW

60 The memorandum and articles Content of memorandum The company name REV 01 The memorandum and articles Content of memorandum The company name Change of name Business name other than the company name Registered office Objects Alteration of objects Articles of association Alteration of articles Commencement of business Private co. Public co. LAW 2013/BIB 3227 BUSINESS LAW

61 Registrar of CompaniesREV 01 Registrar of Companies The role of the registrar To keep the company’s file for inspection by anyone who wish to deal with the company Content of the registry file Includes a copy of its certificate of incorporation The original documents to secure its incorporation LAW 2013/BIB 3227 BUSINESS LAW

62 Companies Minority Protection Articles Companies Meetings REV 01LAW 2013/BIB 3227 BUSINESS LAW

63 Articles As Contract – s 14 Companies Act 1985REV 01 Articles As Contract – s 14 Companies Act 1985 Binds members to members, members to company, company to members. Articles do not bind the company to third parties Shares Carries some rights Determined by articles Transferable Preference and ordinary shares Pre-emption Rights LAW 2013/BIB 3227 BUSINESS LAW

64 Shareholders’ MeetingREV 01 Shareholders’ Meeting General meeting affects how the company is to be run. Types of meeting Annual general meetings Extraordinary general meeting Procedures Special notice of resolution Requisitioning a resolution Content of notices Proxies LAW 2013/BIB 3227 BUSINESS LAW

65 Voting and polls (show of hands, poll)REV 01 Resolutions There are five kinds of resolution (ordinary resolution, extraordinary resolution, special resolution , elective resolution and written resolution). Voting and polls (show of hands, poll) LAW 2013/BIB 3227 BUSINESS LAW

66 The Rule in Foss v HarbottleREV 01 Minority Protection DTI Investigations The Rule in Foss v Harbottle Minority protection Common Law Rules Statutory Rules LAW 2013/BIB 3227 BUSINESS LAW

67 The Rule In Foss v Harbottle Foss v Harbottle Statutory Rules REV 01 The Rule In Foss v Harbottle Foss v Harbottle Statutory Rules s 459 (company’s affairs are being conducted in a manner unfairly prejudicial to the interest of the members generally. Re A Noble & Sons (clothing) Ltd 1983 Re London School of Electronics Ltd 1985 Common Law Rules Illegal decisions are not binding Special procedures must be observed Pender v Lushington Legal proceedings against fraudulent majority LAW 2013/BIB 3227 BUSINESS LAW

68 Investigations by the Department of Trade and Industry REV 01 Cook v Deeks 1916 Pavdiles v Jensen 1956 Daniels v Daniels Investigations by the Department of Trade and Industry Has statutory power to appoint an inspection to investigate the affairs or ownership of the company LAW 2013/BIB 3227 BUSINESS LAW

69 REV 01 Directors Who and what? S 741 (director, shadow director, alternative director and a non-executive director) S 282 (nos. of director) Appointment Register of directors and secretaries Vacation of Office Disqualification of directors (e.g. unsound mind) Retirement of directors (s 293 (3) 70 yrs old) Statutory disqualification of directors (s 1 of Company Directors Disqualification Act 1986 (CDDA) on the following grounds… LAW 2013/BIB 3227 BUSINESS LAW

70 Director’s Duties Fiduciary dutiesREV 01 Director’s Duties Fiduciary duties ‘Fiduciary’ means a position in which they must serve faithfully. Re W M Roith Ltd 1967 Directors’ duty of care Common law duty Company’s action against negligent directors Statutory duties Directors’ interest in company contracts. Loans to directors (ss ) LAW 2013/BIB 3227 BUSINESS LAW

71 REV 01 Directors Powers The powers of the directors are defined by the articles (Table A Article 70). Board meetings Collective decisions Directors can delegate any of their powers to a single director for a specific transaction or as managing director (Table A Article 72). Managing and other working directors Depends on the powers provided by the Articles. LAW 2013/BIB 3227 BUSINESS LAW

72 Companies: Compulsory LiquidationREV 01 Companies: Compulsory Liquidation Completion Inability to pay debts Compulsory liquidation Just and equitable ground Effect of order Proceeding LAW 2013/BIB 3227 BUSINESS LAW

73 The grounds for compulsory liquidation are listed in s 122 IA 1986.REV 01 Section 117 of Insolvency (IA) Act 1986 states that a petition is presented to the Chancery Division of the High Court or in the Country (if amount below % ). The grounds for compulsory liquidation are listed in s 122 IA 1986. Company unable to pay its debts s 123 The just and equitable ground Proceedings for compulsory liquidations LAW 2013/BIB 3227 BUSINESS LAW

74 Effects of an order for compulsory liquidation. REV 01 Effects of an order for compulsory liquidation. Official Receiver becomes a liquidator – s 136 Disposition of co. property/shares – s 127 Employees of a co. are automatically dismissed. Any legal proceedings in progress against the co are halted. Any floating charges crystallizes. Meetings of contributories and creditors Completion of compulsory liquidation. The order being gazetted. S 205 LAW 2013/BIB 3227 BUSINESS LAW

75 Companies: Voluntary LiquidationREV 01 Companies: Voluntary Liquidation There are two types of voluntary liquidation: A members’ voluntary liquidation. A creditors’ voluntary liquidation. Members’ voluntary liquidation By extraordinary/special resolution s 84. 14 days notice Declaration of solvency Deliver to the registrar a declaration of insolvency s 89. Creditors’ voluntary liquidation. The effect of voluntary winding up. No automatic stay of legal proceedings against the co. Employees are not automatically dismissed. LAW 2013/BIB 3227 BUSINESS LAW

76 Application of Assets in a Winding UpREV 01 Application of Assets in a Winding Up A secured creditors has a prior claim compared to unsecured creditors. Order of Application Secured creditors who have fixed charges Cost of winding up Preferencial unsecured debts Debts secured by floating charges Deferred debts Shareholders Preferencial debts Distribution of surplus assets LAW 2013/BIB 3227 BUSINESS LAW

77 REV 01 Striking Off The registrar of companies may, in limited circumstances, strike companies of the Register, as an alternative of winding up. Defunct companies Non-trading private companies. LAW 2013/BIB 3227 BUSINESS LAW