Ukml2013 Company Law|Syarikat Assessment Answer

Syarikat Healthy SkrullsSdnBhd (“Skrulls”)runs a wholesale business in healthcare services and pharmaceutical products. It has five (5) directors: Talos,Fury, Maria, Monicaand Ronan. Except for Ronan, all directors are also shareholders. There are six (6) other shareholders in Skrulls. Talos is the Non-executive Chairman. Monica and Ronan are executive directors. The Company Secretary of Skrulls is CarolDanvers. Today, 4May 2020, Carol receives three long emails from Talos:(a) The first emailreads: “Ronanwas our Chief Executive Officer (CEO) from July 2018until his resignationas a directorin January 2020.He was not a shareholder in Skrulls. In October 2019, Ronan instructed Skrulls to release a sum of RM50,000/-to his bank account. When Skrull’s finance department asked Ronan, he told them that the payment was to assist him to purchase shares in Skrulls. During the last Annual General Meeting in September 2019, members had given approval for a general issue of any shares within the financial year2019-2020.Yet, our company has no plans to issue any new shares. We also do not have any employee share scheme to provide money for the purchase ofany shares for the benefit of employees and directors. Till today, no new shares has been allotted to Ronan and he has not returned the said sum. We the Board of Directors (BOD) werenot notifiedof this transaction. Will the shareholders think that we are to be blamed for this incident? All along, we did not really require Ronan to consult us over important transactions. He is a top talent in the healthcare and pharmaceutical industry, and we trust his decisions all along. Now, we hear thatthere may have been several breaches of the Companies Act 2016pertaining to the release of this sum of money, with dire consequences. Please advise if any of us the directors have incurred any liability and advise us as to what steps we can take from here.”(b)The second emailreads: “In November 2019, before his resignation, Ronan instructed Skrulls to release a sum of RM100,000/-to a client company, Syarikat StarforceSupplements Sdn Bhd. This transaction was described as a loan from Skrulls to Starforce. Skrulls and Starforcedo not hold any shares in each other, andStarforceis also not a person connected to any of our directors and shareholders. We the Board of Directors (BOD) werenot notifiedof this transaction. We are concerned that Starforcemay eventually be unable to pay us back the RM100,000/-. Can we make Starforce’s shareholders sign an agreement to pay up the RM100,000/-? Since Starforcehas four (4) shareholders there, each of them should pay RM25,000/-to our Company. I hear that a creditor company can take security of a debtor company’s assets, in the form of charges. What are the differences between these charges? Which charge we should opt for? One more thing, if Starforce is unable to pay back this debt, is it easy for us to windup Starforce? Please advise us on issues regardingundue preferences and validity of floating charges. Even if Starforce were to create a floating charge in our favour, will the charge be valid? Will we face threats from other creditors, e.g. executioncreditors? Also, as a secured creditor, what are our options in a liquidation?”

This assessmentpaper consistsof 7questions on 6printed pages.(c) The third emailreads: “Skrulls has a wholly-owned subsidiary, Syarikat Kree Industries SdnBhd(“Kree”). Lawson, Korath, Minn-ErvaandYon-Roggare Kree’s directors. Kree’s constitution providesthat a director can be removed by either special resolution or ordinary resolution.In January 2020, Skrull’s board of directors passed a resolution to authorize Skrull’s corporate representative, Keller, to take the necessary steps to seek the removal of Yon-Rogg, to be replaced by Coulson.So, on 15-1-2020, Keller signed a requisitionpursuant to Section 311Companies Act 2016, to requisition for a meeting of members to pass aresolution to remove Yon-Rogg. Lawson, the Executive Chairman,then convened a Board meetingin order to discuss whether to convenea meeting of members pursuant to this requisition.The Board meeting was to be held on 25-1-2020. However, since Minn-Ervaand Yon-Roggwere unable to attendthe Board meeting on that particular date, Lawsonthen cancelled the meeting. In fact, Yon-Roggwrote a long email to Kree’s Board to say that as long as he was not present in any director’s or members’ meeting, no meeting could proceed. He also said that Keller had noauthority to issue a requisition notice as Keller was not a shareholder in Kree. Lastly, he mentioned that Skrulls must always give 28 days’ notice to him regarding any proposed resolution to remove him. As a result, the meeting of members was neither convened nor conducted as required by Skrull’srequisition notice.I would like to know, are Yon-Rogg’s arguments correct? Even if two directors cannot come, our subsidiary’s constitution provides for a quorum of two directors, so why the meeting must be cancelled? Also, why must everyone be present at the same time? Our subsidiary’s proceedings of board meetings follow the Third Schedule of the Companies Act 2016, which clearlyprovides that board meetings can be held by audio and/or visual communication, no need physical presenceof everyone. For members’ meeting, I hear that the law also provides that it can be conducted by video-conferencing.Since Kree’s board of directors have failed to comply with Skrulls’ requisition notice, what are the options available to Skrulls? We are also thinking of just circulatinga written resolution on removal of Yon-Rogg. It should be easier, since Skrulls is the only shareholder in Kree”. Required: Assume you are Carol Danvers. Write three (3) Reports(dated 6May 2020 each) to the Board of Directors on the issues outlined below: (a) Regarding the first email, combine all parts of the following issues in a single Report:(1) In relation to the release of the sum of RM50,000/-to Ronan’s bank account, explain whether Ronan and the Board of Directors have contravened any provisions of the Companies Act 2016and the consequences of contravention(2) Explain whether the Board of Directors might be held responsible for breach of duty of skill, care and reasonable diligenceThis assessmentpaper consistsof 7questions on 6printed pages.(b) Regarding the second email, combine all parts of the following issues in a single Report:(3) Explain whether Skrulls may make Starforce’s shareholders sign an agreement to pay back the sum of RM100,000/-which was a loan from Skrulls to Starforce. Elaborate also on whether Skrulls may sue Starforce’s shareholderspursuant to this agreement.(4) In relation to charges that may be created over a debtor company’s assets, explain the differences between these charges. Advise also on which charge that Skrulls should opt for. (5)Explain how Skrulls may wind-up Starforce if Starforce is unable to pay its debts to Skrulls. Address the issues highlighted by Talos regarding undue preference, floating charges, execution creditors and options available to a secured creditor. (c) Regarding the third email, combine all parts of the following issues in a single Report:(6) Evaluate the correctness of the contents of Yon-Rogg’s email to Kree’sBoard regarding: The need for his presence in any director’s or members’ meeting, Keller’s authority to issue a requisition notice and the need for 28 days’ notice regarding any proposed resolution to remove him.(7) Since Kree’s Board of Directors have failed to comply with Skrulls’ requisition notice, advise on the optionsavailable to Skrull