TUTORIAL 8

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW2513)

TUTORIAL 8 – THE COMPANY CONSTITUTION

1.       Which of the following statements regarding the legal effect of memorandum and articles of association is UNTRUE?

A.       It is a binding contract between members and other members of the company

B.       A member can enforce any provision in the articles of association against the company in the case the company acted against it

C.       An outsider also has the right to enforce provisions in the company’s articles of association

D.       It is a binding contract between company and its members

2.       Which of the following is not the feature of a memorandum of association of a company?

A.            It is a basic constitutional document of the company

B.            No provision in the memorandum can be altered

C.            It has the effect of a contract between the company and each member

D.           It sets out the structure and aim of the company

3.       If a company limited by shares does not lodge its own articles, it may adopt,

A.            Table A of the Third Schedule

B.            Table B of the Third Schedule

C.            Table A of the Fourth Schedule

D.           Table B of the Fourth Schedule

4.       What is the minimum number of subscribers in the memorandum of association of a company?

A.            1

B.            2

C.            3

D.           4

5.       How may an act done by a company outside its object clause be called?

A.            Part of indoor management

B.            The act of a separate legal entity

C.            Intra vires

D.           Ultra vires

6.       A company registered as a private company under the Companies Act 1965 must have the following characteristics in the memorandum and articles of association except:

A.            There exist restrictions on the right to transfer shares

B.            The number of members can be more than 50

C.            The company will have the word ‘Sendirian’ as part of its name

D.           There exist restrictions on invitation to public to subscribe share

7.       What is the effect of an ultra vires transaction under the Companies Act 1965?

A.            The transaction is voidable

B.            The transaction is void

C.            The company is bound by the transaction

D.           The transaction is valid if it is ratified by the company

8.       The purpose of object’s clause in the memorandum of association in the company is to _______________________

A.       determine what a company can do and what it cannot do

B.       prevent the company from entering into a contract

C.       set out rules and regulation in the company

D.       minimize the authority of a company

9.       The effects of section 20 on the ultra vires doctrine are

I.             the transaction is valid

II.           the third party can take legal action against the company

III.         the third parties are not protected

IV.          third party cannot take legal action again a company

A.            I and II

B.            I and IV

C.            I and III

D.           II and IV

10.     The expression “bona fide for the benefit of the company as a whole” means

A        the benefit of the majority shareholders in the company

B.       the benefits of the creditors only

C        the benefits to the majority of the members only

D        the benefits which any individual hypothetical member of the company would enjoy directly or through the company

 11.     Article of Association may be define as …           

A.       The provision which regulate the relationship of the company and outsider dealing with it.

B.       The regulation governing the internal management and operation of the company

C.       The provision regarding the main object and powers of the company

D.       The regulation governing the relationship between employer and employees

12.     The documents which sets out the objects and powers of the company, the relationship between the company and outsiders and the extent of member’s liability is known as,

A.       Certificate of incorporation

B.       Articles of association

C.       Memorandum of association

D.       Prospectus of the company

13.     How a company may get its power?

I.             Explicitly from the object clause in the Memorandum of Association

II.           Impliedly and incidental to achieve the objects of the company

III.         Power implied by law

IV.          Power from the application of section 19 (1) of Companies Act 1965

A.            I, II & III only

B.            I, II & IV only

C.            I, III & IV only

D.           I, II, III & IV

14.     What is the Common Law effect on ultra vires transaction entered by a company?

A.            The transaction can be enforced by the company

B.            The transaction can be ratified by the members

C.            The company could not be bound by such transaction

D.           The third party can exercise their legal rights under such transaction

15.     Why the Articles of Association are called as special contract?

A.            The contract binds all the existing members who sign the memorandum and the incoming members

B.            The contract is made with a special person recognized by the company

C.            The contract is signed for a special event

D.           The contract is made for a special reason recognized by the board of directors

 16.     Among clauses of the Memorandum of Association includes the following except:

A.       the object of the company.

B.       the name of the company.

C.       a liability and share capital clause.

D.       power of directors.

17.     The memorandum of Association of Temasek Co. Ltd expressed the company’s main object is “to engage in the tailoring business”. However, in a year of 2005, the company had signed an agreement with Nona Ramai Bhd to purchase a cosmetic product although it was not within the objects of the company. Later, Temasek Co. Ltd refuses to pay for the cosmetic product which had been supplied to it.

The above contract is...

A.       enforceable and the third party has the right to take a legal action against  the company.

B.       invalid as the company has no capacity to enter into it.

C.       enforceable as it is against company’s Memorandum of Association.

D.       ultra vires the company’s Memorandum of association and has no legal effect.

18.     Every company must have this document which contains internal regulations of the company that concerns the company and its dealings with the members.

         

          This document is called ____________.

A.       Memorandum of Association.

B.       Books of Partnership.

C.       Companies Act

D.       Articles of Association.

   

19.     Articles of Association (AOA) may be freely altered or added to subject to companies Act 1965. When voting to alter the articles, a member must vote ‘bona fide’ for the benefit of the company as a whole. A company’s ability to alter its article may be restricted in certain situations. Which of the following statements is correct?

I.             The AOA cannot be altered so as to include clause contrary to Companies Act 1965.

II.           The AOA may not be altered to force members to subscribe more shares and thus increase their liabilities.

III.         The AOA may be altered to force more members to subscribe more shares and thus increase their liabilities.

IV.          The AOA cannot be altered so as to meet the company breach its existing contract.

A.       I, II

B.       I, II, III

C.       I, II, IV

D.       I, II, III, IV

20.     Besides its legal effect as a contract that binds the company and members, Memorandum and Articles of Association are also considered to be a binding contract between______________.

A.            company and outsiders.

B.            members and other members of the company.

C.            members of the company and outsiders.

D.           outsiders and other outsiders to the company.

21.     Since Memorandum and Articles of Association are considered as a binding contract between the company and members, it carries the effect that_______________.

A.       the company is prohibited from taking legal action against its members for breach of any provision in the Memorandum and Articles of Association

B.       the company can take legal action against its members for breach of any provision in the Memorandum and Articles of Association

C.       the members is prohibited from taking legal action against the company for breach of any provision in the Memorandum and Articles of Association

D.       the outsiders can take legal action against the company and its members for breach of any provision in the Memorandum and Articles of Association

22.     “In the absence of its own Articles of Association, the content of a limited company’s articles will be determined by reference to the Companies Act 1965.”

Which schedule of the Companies Act 1965 does the above statement refer to?

A.            Table A of the First Schedule

B.            Table A of the Second Schedule

C.            Table A of the Third Schedule

D.           Table A of the Fourth Schedule

23.     “Memorandum and Articles of Association are considered to be a binding contract between the company and its members.”

          Which of the followings best explains the above statement?

A.       Only the company is obliged to obey all the provisions in the Memorandum and Articles of Association but not the members.

B.       Both the company and its members can sue and be sued for breach of any provision in the Memorandum and Articles of Association.

C.       Only the members are obliged to obey all the provisions in the Memorandum and Articles of Association but not the company.

D.       Neither the company nor its members can sue and be sued for breach of any provision in the Memorandum and Articles of Association.

24.     “Article 23 of Shrek Sdn Bhd’s Articles of Association provides that ‘the lessor of the company has the right to appoint a director for the company.’ Bank Fiona which is Shrek Sdn Bhd’s lessor intends to enforce Article 23 and nominate one of its branch managers, Mr Danny as director for Shrek Sdn Bhd.”

What is the principle which could be used by existing directors of Shrek Sdn Bhd to refuse the nomination from Bank Fiona?

A.       The Articles of Association has no legal effect between a company and outsiders.

B.       The Articles of Association has no legal effect between a company and its directors.

C.       The Articles of Association has no legal effect between a company and its members.

D.       The Articles of Association has no legal effect between members of the company inter se.

25.     Besides its legal effect as a contract that binds the company and members, Memorandum and Articles of Association are also considered to be a binding contract between______________.

A.            company and outsiders.

B.            members and other members of the company.

C.            members of the company and outsiders.

D.           outsiders and other outsiders to the company.

  

26.     Since Memorandum and Articles of Association are considered as a binding contract between the company and members, it carries the effect that_______________.

A.       the company is prohibited from taking legal action against its members for breach of any provision in the Memorandum and Articles of Association

B.       the company can take legal action against its members for breach of any provision in the Memorandum and Articles of Association

C.       the members is prohibited from taking legal action against the company for breach of any provision in the Memorandum and Articles of Association

D.       the outsiders can take legal action against the company and its members for breach of any provision in the Memorandum and Articles of Association

27.     Why an outsider cannot sue or enforce his right provided in Memorandum or Articles of Association of a company?

A.            The Memorandum and Articles of Association is not a contract between the company and outsiders.

B.            The Memorandum and Articles of Association is not a contract between the company’s shareholders among themselves.

C.            The Memorandum and Articles of Association is not a contract between the company and its members.

D.           The Memorandum and Articles of Association is a contract between outsiders of the company.