tutorial 9-promoters and pre incorporation

KOLEJ PROFESSIONAL MARA AYER MOLEK

COMPANY LAW (LAW 2513)

TUTORIAL 8 – PROMOTERS AND PRE-INCORPORATION CONTRACTS

1.       What is the effect of pre – incorporation contract in Malaysia?  

A.       A company is not bound by a contract made before it is incorporated

B.       The company could not enforce the contract

C.       The company may ratify the contract

D.       The company cannot ratify the contract

2.The person who undertakes to form a company with reference to a given project and set it going and who takes the necessary steps to accomplish this purpose.A joint adventurer and who will benefit from the incorporation of the company even though he does not take an active part in the formation of the company

Ÿ   

The above statements referred to…

A.        Company Secretary

        B.        Shareholder

C.        Promoter

D.        Auditor

3.       The following are the legal effects of pre-incorporation contract under common law  EXCEPT…

A.       A company is not bound by a contract made before it is incorporated

B.       A company is bound by a contract made before it is incorporated

C.       A company is not bound to the contract that had been signed by the promoters before its incorporation

D.       A company is not yet in existence

4.       Who is a promoter of a company?

A.            A person who promotes the company to outsiders

B.            A person who carries out the procedure necessary to incorporate a company

C.            A person who promotes company’s product

D.           A person who carries out the management of the company after its incorporation

5.       Which of the following statements best describes promoters?

                 

A.           A person who carries out the procedure necessary to incorporate a company.

B.           A person who promotes goods or services at the shopping complex.

C.           A person who engages in promoting a partnership.

D.           The board of directors of a company.

6.       Disclosure of profits to a company by promoters may be made in the following forms EXCEPT:

                              

A.            By disclosing in the memorandum or articles of the company.

B.            By communicating to an independent board of directors.

C.            By communicating to the existing and intended members of the company.

D.           By communicating to the Chairman of the company.

7.       When does a promoter is consider to have breached his duty?

     

A.       When the promoter avoid conflict of interest with the company.

B.       When the promoter made a fully and frankly disclosure of any benefits received.

C.       When the promoter disclose whatever commission or payment he receives upon transfer of property to the company.

D.       When the promoter make a profit out of promotion without adequate disclosure.

SECTION B

Question 1      

(a)      Define ‘promoter’ of a company                                                     [2 marks]

(b)     Explain the primary duty of a promoter to make full and independent disclosure. Support your answer with a decided case.                             

[6 marks]

(c)      Discuss the position of pre-incorporation contracts under Common Law. Support      your answer with relevant decided case.

[6 marks]

(d)      Briefly explain three (3) remedies for breach of promoters’ duties                         

[6 marks]

        [Total: 20 marks]

Question 2         

(a)      Explain the primary duty of promoters ‘to make full and independent disclosure’. Support your answer with a decided case.          

[8 marks]

(b)     Dindang and Tora are promoters who decided to set up a limited company which will involve in exploring of oil wells and processing petroleum in the South China Sea. For this purpose, they hired Anggun, a geologist to do research on the oil. In the pre-incorporation contract, they agreed that Anggun will be paid RM 10, 000 monthly and will continue to work for the new company that will be formed.

One month later, a new company which is known as Final Fantasy Sdn Bhd is successfully formed by Dindang and Tora. During the company’s first meeting, the appointment of Anggun was confirmed. Few months later, the company decided to remove Anggun. Anggun’s salary also has never been paid since she started to work for the company. Now, Anggun want to sue Final Fantasy Sdn Bhd to get her salary.

With reference to section 35(1) of Companies Act 1965, advise Anggun as to whether she can take action against Final Fantasy Sdn Bhd.

          [12 marks]

                                                                                             [Total : 20 marks]