LAW604

TUTORIAL: COMPANYS CONSTITUTION & INDOOR MANAGEMENT RULE

QUESTION 1
The Articles of Association of Manisan Sdn Bhd state, inter alia;
Clause 99: "All members of the company are entitled to purchase the manufactured goods of
the company at a discount of 30%."
Clause 100: "Arbi shall be appointed as the arbitrator of any dispute arising between the
company and its shareholders."
Despite such clauses the company has not appointed Arbi as arbitrator. In addition, it refuses
to sell its products to members at any discount at all.
Arbi, a non-member and Amir (a member) are unhappy about this blatant disregard of the
company's articles and wish to know whether they can successfully sue the company to
enforce the company's compliance with the said articles of association.
Advise Arbi and Amir.
QUESTION 2
The Articles of Association of Anggun Bhd. include the following clauses:
i.
that Chombi should be the company secretary for life; and
ii. that the company's sales manager should receive an annual bonus equal to five
percent of the company's profit for that year.
Daud, the majority shareholder has just sold his 75 per cent share holding in Anggun Bhd to
Embong. Embong proposes to alter the articles so that the annual bonus payable to the
sales manager should be reduced to three per cent of the profits. He also intends to appoint
Paris as the company secretary. The sales manager has a contract with the company which
makes no provision for the payment of any bonus.
Advise Embong.
QUESTION 3
Arnab Sdn Bhd (the company) was incorporated in 2003. Its objects clause states that its
sole object is the running of restaurants. Recently, the company decided to venture into
rabbit farming. It contracted to purchase 5000 rabbits from Rabbit Sdn Bhd. The rabbits are
due to be delivered in the next few days. Amir and Rima, who together hold 28% of the
company's shares objected to this new venture. The directors then called an extraordinary
general meeting and passed a resolution altering the objects clause to include rabbit farming.
Amir and Rima voted against the resolution. Advise Amir and Rima on the following:
i. whether they could restrain the company from proceeding with the contract to
purchase the rabbits or, alternatively, make the directors liable to the company for
committing the company to such a contract.
ii. whether they could challenge the validity of the purported alteration of the objects
clause.

QUESTION 4
Rodenrid Sdn Bhd is a company involved in pest control. In 2008 Ratty was appointed as
managing director of the company by a board resolution, which gave him exclusive power to
manage the company, subject only to a requirement to get the approval of the board for all
contracts in excess of RM 100,000.
On behalf of the company, Ratty began negotiating for the purchase of insecticides from
Pesty, who had supplied the company with similar products for a number of years. Before
these negotiations were concluded, Pesty accepted an invitation to become a member of the
board of Rodenrid Sdn Bhd, and thenceforth duly attended its board meetings. Some months
after this, Ratty without getting the approval of the board, signed a contract with Pesty for the
supply of RM200,000 worth of insecticides.
Preliminary examinations of these insecticides have revealed that they are not as effective as
the company had been hoping. The board, with the exception of Ratty and Pesty, is now
seeking some way in which the company can claim that it is not bound by its obligations
under the contract.
Advise the board.