Tutorial 10- Directors

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW2513)

TUTORIAL 10 – DIRECTORS

1.       The situation of conflict of interest in the performance of duties of directors will arise in the following situations EXCEPT

A.            where the director compete with the company

B.            where the act of director are ultra vires

C.            where the directors contract with the company

D.           Where the directors use the corporate property, information or opportunity   

2.       The fiduciary duties of directors are as follows;

I.             act honestly for the company’s interest

II.           act in a manner where his duties to the company conflict with his personal interest

III.         act negligently in discharge of his duties

IV.          act and employ power for a proper purpose

A.            I and IV

B.            II and III

C.            I and II

D.           III and IV

3.       The fiduciary duties of the director can be described as follows________

                 I.    the directors must act honestly for the company’s interest

               II.    the director must not place himself in the position where his duties to        the company conflict with his personal interest

             III.    the director acted negligently in the discharge of his function

              IV.    the director must employ the powers and assets of the company for the proper purpose 

         

A.    I, II, III

B.    I, II, IV

C.    II, III, IV

D.   I, II, IV

4.       The following are duties of directors except:

A.    duty to act for personal purpose

B.    duty to exercise power in good faith

C.    duty of skill care and diligence

D.    duty to avoid conflict of interest

5.       The fiduciary duties of directors are as follows;

I      act honestly for the company’s interest

II     act in a manner where his duties to the company conflict with his personal interest

III    act negligently in discharge of his duties

IV    act and employ power for a proper purpose

A.    I and IV

B.    II and III

C.    I and II

D.    III and IV

6.       In the event of breach of director’s duty to his company, the company,

A.            May sue for damages

B.            Cannot seek for the return of property

C.            Unable to recover secret profit

D.           Incapable to terminate the contract

7.       Tan Boon Chit is a director of a company, entered into a contract with a firm of partnership where he is also one of the partners. This may put his personal interest above the company’s interest. Tan Boon Chit has breach the director’s duty of,

A.            reasonable care,

B.            exercising power for proper purposes

C.            avoiding conflict of interest

D.           skill and diligence

8.       The situation of conflict of interest in the performance of duties of directors will arise in the following situations except,

A.            Where the directors compete with the company

B.            Where the directors misuse the company properties or fund

C.            Where the directors act bone fide in the company’s interest

D.           Where the directors misuse contract or opportunity belongs to company

9.       Which of the followings is true regarding director’s duties?

A.       In an absence of grounds of suspicion, a director is justified to delegates his function to other company officer.

B.       A director with skills in accounting is not expected to use his skills to review company’s financial statement.

C.       A director may use his position as a director to secure his family interest.

D.       A director will be personally liable if the persons he trusted defraud him.

ESSAY & PROBLEMATIC QUESTION

Question 1

a)       The common law duties of the directors consist of duties of skill, care, diligence and fiduciary duties. Explain the duty of care and skill required from directors                                                                                                           [8 marks]                               

b)       Shafiq was a director in Moga Sdn Bhd. The company enters into an agreement to supply iron seats from Dedalu Sdn Bhd where Shafiq is one of its partner. When discover the true situation, Moga Sdn Bhd intends to avoid the contract and the reason given was that Shafiq was the director at the time of the contract and he was never disclosing the fact that he has an interest in Dedalu Sdn Bhd.

Advise whether Shafiq is in breach of his fiduciary duty of a director.                                                                                                                        [12 marks]

Question 2

(a)      Briefly explain the following duties of directors:

          (i)       duty not to enter into a contract with the company                            [4 marks]

          (ii)      duty not to compete with the company                                  [4 marks]

(b)     Maneez was one of the directors of Gogo Bhd. She had been offered by Hatiku Bhd the position of a manager to a lucrative project belongs to Hatiku Bhd. Before this, Gogo Bhd tried to get the project, but Hatiku Bhd only interested in engaging Maneez personally.

Maneez resigned from Gogo Bhd using family problem as an excuse. After resignation, Maneez immediately accepted Hatiku Bhd’s offer.

Gogo Bhd claimed that Maneez had breach director,s duty and wanted to sue to recover all profits that Maneez had obtained under his contract with Hatiku Bhd.

Advise Gogo Bhd.

                                                                                                          [12 marks]

Question 3

a)       State THREE (3) remedies available to a company in the event of its director breach          his duty.                                                                                [3 marks]

b)       Jimmy is the managing director of Lovely Lands Bhd. During a networking luncheon with the ex-clients of the company, he heard about a tender for license to extract timber from a vast piece of land in Sabah. Jimmy was excited about the prospect of the license and immediately started to prepare the paperwork to bid for the tender. However, Jimmy did not mention about the project to the rest of the management in Lovely Lands Bhd. Instead he successfully tendered for the license and secured it for another company, Jimmy Asmara Sdn Bhd, in which Jimmy is a majority shareholder.

Has there been any breach of duties by Jimmy; and if there has been a breach, what type of duty is it? Explain and support your explanation with relevant provision in companies Act 1965 and decided case.

                                                                                                         [12 marks]