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Athiyah Alfath Alias 244331 Question Tutorial QUESTION ONE (5 Marks)

1) A pre-incorporation contract is a contract entered into on behalf of a company before it is officially incorporated. Promoters often enter these contracts to accomplish the formation of the company. However, the company itself cannot be party to any contracts before it exists. This was seen in Newborn v Sensolid, where the company was not incorporated at the time the contract was signed so there was no valid contract between the parties. 2) Candy transferred shares in PBSB to another member without approval from the board of directors, which violated the company's articles of association requiring board approval for share transfers. The board objected to Candy's transfer. Based on previous case law and the Companies Act, Candy's transfer is

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92 views

Athiyah Alfath Alias 244331 Question Tutorial QUESTION ONE (5 Marks)

1) A pre-incorporation contract is a contract entered into on behalf of a company before it is officially incorporated. Promoters often enter these contracts to accomplish the formation of the company. However, the company itself cannot be party to any contracts before it exists. This was seen in Newborn v Sensolid, where the company was not incorporated at the time the contract was signed so there was no valid contract between the parties. 2) Candy transferred shares in PBSB to another member without approval from the board of directors, which violated the company's articles of association requiring board approval for share transfers. The board objected to Candy's transfer. Based on previous case law and the Companies Act, Candy's transfer is

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Atiyah Alias
Copyright
© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
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ATHIYAH ALFATH ALIAS 244331

QUESTION TUTORIAL
QUESTION ONE (5 marks)
A pre-incorporation contract is contract on behalf of the company prior to its corporation. It is
usually entered by promoters, who involved in the formation of the company. He or she will take
necessary steps to accomplish its purpose. However, a promoter is not denied in the act or by
courts.
One of the effects of the pre-incorporation is that the company cannot enter into any contracts on
its behalf. This can be seen in the case of Newborn v Sensolid (Great Britain) Ltd, where a
contract was entered between the parties for the purchase of goods by the latter. It was
discovered at the time the contract had been entered into the company had not been incorporated.
It was held that the company was not in existence when contract was signed and there was never
a contract between parties.

QUESTION TWO (5 marks)


Whether Candy’s act has been objected by the board of directors of PSSB?
According to the companies Act 2016, all transfer of shares are subject to approval from the
Board of Directors. According to Section 108(1) of the companies Act 2016, the court may make
an order of validating the issue of allotment of shares of confirming by terms of issue or
allotment of shares or both upon application by the company or a shareholder. In section 180(2)
(b) of the same act stated that the issue or allotment of shares is invalid due to the constitution of
the company. The articles of an association in considered to be valid and it is bound by its
members.
This can be seen in the case of Hickman v Kent, where in the company’s article, there was a
provision said when there is any dispute between association and members, then they should
refer to arbitration. Later, a dispute arose and Hickman sued association in court. The court held
the parties not allowed to continue action because company is bound by the association article.
In this case of Candy, she was acting against the article. She transferred shares to Datin Suhana,
one of the members of PBSB without informing the board of directors when there is an article of
association of PBSB said that no shares can be transferred without any permission from the
board of directors. Candy has been objected by the board of directors. The transfer of her shares
is null and void as according to articles of association.
QUESTION THREE (10 marks)
Whether Bob can claim the money he had lent to the company, Nexis Bhd. ?
A limited liability company is a business structure where the owners are liable to the amount they
have invested. It is to be treated as a ‘separate legal entity’ company as stated in section 3 of the
Limited Liability Partnerships Act 2012. Every partner of a limited liability partnership is an
agent of the limited liability partnership. The effect of winding up is that it shall operate in
favour of all creditors and contributories of the company as if made on the joint petition of a
creditor and of a contributory.
In this case, Bob is a the one establishes Nexis Ltd. And he is the largest shareholder and
remainder are held by his children. He was also the one provided loans to the company. Due to
the incompetence of management, the company has been wound up. Here, Bob as the person
who had lent money to company should get repayment for the company, even though he was the
largest shareholder of the company.
Whether an injunction by Bob can be applied to the RB Bhd. ?

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