BBBL2043 Corporate Law Tutorials 6 & 7
BBBL2043 Corporate Law Tutorials 6 & 7
BBBL2043 Corporate Law Tutorials 6 & 7
Tutorials 6 & 7
1. Extreme Bhd. is a public listed company manufacturing consumable products. One of its best-
selling products is ‘Meilu’, a chocolate drink mixed with cereal. Recently, a blogger
published an article stating that there was a finding that ‘Meilu’ contains 50% of sugar. This
has raised public concerns regarding the nutritional value of ‘Meilu’. Since then, the share
price of Extreme Bhd. has been dropping from RM80.00 per share down to RM40.00 per
share over a period of two weeks.
A directors meeting was called to discuss various measures to overcome this issue. Among
the measures proposed were share buy-back and declaring a special dividend for shareholders.
(a) Illustrate to the BOD under what circumstances a share buy-back is permitted under the
Companies Act 2016. (12 marks)
(b) Describe the rules with regard to payment of dividends under the CA 2016. (8 marks)
2. Jonathan, a college student, inherits a sum of RM 1,000,000 from his late uncle He decides to
invest the money equally into 2 companies, BBCoins Investment Sdn Bhd and Fortune Funds
Bhd. Once the transaction is completed, he will be holding 10% of the total voting shares in
BBCoins Investment Sdn Bhd and 3% of the total voting shares in Fortune Funds Bhd.
(a) Identify which documents will prove Jonathan’s shares ownership in both BBCoins Sdn
Bhd and Fortune Funds Bhd, respectively. (8 marks)
(b) Examine whether Jonathan is a substantial shareholder in both BBCoins Sdn Bhd and
Fortune Funds Bhd, respectively upon the shares purchased. (6 marks)
(c) Explain to Jonathan the duties imposed on substantial shareholders under the CA 2016. (6
marks)
3. Janet is new to share market investment. Recently, she has acquired 5.2% of the total voting
shares in Wanna Laugh Bhd, trading in Bursa Malaysia and another 10% of the total voting
shares in 1-Crai Sdn Bhd. Having acquired those shares, Janet seeks your advice on the
following matters:
(a) Which document(s) she could rely on as proof of her share ownership in both Wanna
Laugh Bhd and 1-Crai Sdn Bhd respectively. (8 marks)
(b) Whether or not she is now deemed to be a substantial shareholder of Wanna Laugh Bhd
and 1-Crai Sdn Bhd respectively under CA 2016. (6 marks)
(c) The duties imposed on substantial shareholders by the CA 2016. (6 marks)
4. Transfer of shares takes place when existing shareholder passes ownership of his shares to
another. Discuss the general rules on transfer of shares in respect of a public company and a
private company, respectively. (4 marks)
6. A shareholder may own shares in a company through allotment of shares or transfer of shares.
Explain the difference between allotment of shares and transfer of shares. (4 marks)
8. Serba Boleh Bhd. (“Serba Boleh”) is a retail company selling sports apparels, equipment and
accessories. Siva and Saraju are the directors and each of them holds 20,000 shares whereas
Yusri holds the remaining 30,000 shares. The directors and Yusri were not on a cordial term
due to several disagreements in the past relating to management decisions and some personal
issues.
Yusri decided to transfer 20,000 of his shares to his brother, Yassin. He has submitted the
instrument of transfer to Serba Boleh but Siva and Saraju refused to register the transfer. The
directors never disclosed to Yusri the reasons for the refusal but Yusri knew it had something
to do with the fact that he and the directors had some issues in the past. After 2 months, the
transfer was never registered. Advise Yusri whether Siva and Saraju have contravened any
provisions of the Companies Act 2016. (13 marks)
9. Oryza Sativa Sdn. Bhd. is a company producing and processing rice in Malaysia. The only
three shareholders of the company, Hasan, Bakri and Syakirah are also its directors. The
company’s business was blooming fast for the past 3 years. However, due to some personal
issues, the three directors had a falling-out and Hasan is not on a speaking term with Bakri
and Syakirah.
Fearing that Hasan would create a huge problem in the future, Bakri and Syakirah have
passed a resolution to allot new shares to themselves and Judika, a senior operation manager
of the company. The allotment of the new shares has resulted in the dilution of Hasan’s shares
by 20% since the shares ranked equally with the existing shares held by the three directors.
With reference to the Companies Act 2016 or decided cases, if any, advise Hasan whether he
could challenge the validity of the allotment of the new shares. (16 marks)
Issue- whether Hasan could challenge the validity of the allotment of the new shares
Law- S.85(1) CA 2016 – Subject to the constitution, where a company issue shares which
rank equally to existing shares as to voting or distribution rights, those shares shall first be
offered to the holders of existing shares in a manner which would, if the offer were accepted,
maintain the relative voting and distribution rights of those shareholders.
S.85(2) CA 2016 – a pre-emptive offer shall be made to the holders of existing shares in a
notice specifying the number of shares offered and the time frame of the offer within which
the offer, if not accepted, is deemed to be declined.
Application-Since the shares ranked equally with the existing shares held by the three
directors, those shares shall first be offered to Hasan, as he is also a shareholder of the
company although he is not speaking with Bakri and Syakirah, it doesn’t mean that he had left
the company. So those shares shall first be offered to Hasan , which is one of the holders of
existing shares in a manner which would. Moreover, Bakri and Syakirah also did not made a
pre-emptive offer in a notice to Hasan as he is also a holder of existing shares, so he cannot
know that the number of shares offered and the time frame of the offer within which the offer.
Bakri and Syakirah’s action of reducing Hasan’s shares by 20% is considered violating
S.85(2) CA 2016.
Conclusion- Hasan could challenge the validity of the allotment of the new shares as he still
the shareholder of the company and no notice of pre-emptive offer given to him.
10. Bunga Jelita Sdn. Bhd. (“Bunga Jelita”) is a direct sale company and a distributor of various
cosmetic and beauty products. Misha, the director of Bunga Jelita is also the majority
shareholder, holds 70,000 shares whereas 30,000 shares were held by Aliza and Iqbal. The
Board of Bunga Jelita is keen on raising more capital for the purpose of employing more
agents and distributors to increase sales due to high demands from customers. It also plans to
utilise the capital to repay its creditors and to expand and upgrade its warehouse and logistics
network. Consider the following separate and independent situations whether Misha has
contravened any provisions of the Companies Act 2016.
(a) To raise more share capital, Misha offered 100,000 new shares to her cousins, Sarah and
Karim and she subscribed for additional 20,000 shares to herself. Aliza and Iqbal were
unaware of the new issue. (10 marks)
(b) Aliza and Iqbal submitted an instrument of transfer to Bunga Jelita to transfer 10,000 of
their shares to their mutual friend, Khair. After two months, Misha failed to register the
transfer and she never provided any explanation to Aliza and Iqbal for her failure to register.
(10 marks)
11. (a) Kento Tech & Electronics Bhd. (“Kento”) is a public company carrying on the business of
manufacturing and selling electrical and electronic products. Kento’s business is prosperous,
and it is planning to raise capital by issuing 500,000 new shares to the public. However,
Kento’s managing director, Ken Matsutomo is uncertain whether issuing preference shares or
ordinary shares is the best choice for the company. Advise Ken on the most appropriate type
of shares to be issued to the public and provide THREE (3) legal reasons for your choice. (10
marks)
(b) Kevin subscribed for 100,000 ordinary shares in Laskar Cinta Sdn. Bhd. (“Laskar Cinta”)
and he registered his best friend, Praveen as a joint holder of those shares. Unfortunately,
Kevin passed away due to COVID-19. Marcus, one of the directors of Laskar Cinta,
submitted an instrument of transfer to Laskar Cinta on 3 August 2021 to transfer all 100,000
Kevin’s shares to Aaron, Marcus’ son. Praveen is dissatisfied with Marcus’s decision to
transfer the shares to Aaron because Praveen wishes to transfer 50,000 out of 100,000 shares
to his friend, Taufik. Advise Praveen whether he can challenge Marcus’s decision. (15 marks)
12. Nicolene owns a beauty salon business and operates a few salons in Petaling Jaya. Her salon
provides various services such as hair-cutting, colouring and styling, facials and skin care
treatment, waxing and hair removal. Meanwhile, Petra runs numerous massage parlours in
Kuala Lumpur. In the hope to expand their business and attract new customers, Nicolene and
Petra decided to combine their businesses by incorporating a new private company called
Magic Touch Salon & Spa Sdn. Bhd. (“Magic Touch”), where both of them are the directors
and shareholders.
The other shareholder of the company is Amanda, who owns 20% of the shares. Due to the
expansion, Magic Touch requires more capital for the business merger and for other expenses.
Based on the Companies Act 2016, answer the following questions.
(a) Nicolene and Petra would like to issue 20,000 new shares to their mutual friend, Matthew
and additional 5,000 shares to Nicolene without Amanda’s vote. Illustrate to both of them
whether it is possible to do so under the Companies Act 2016. (12 marks)
(b) Magic Touch also plans to raise funds by issuing different classes of preference shares.
Explain any FOUR (4) types of preference shares. (8 marks)