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Company Law

Autor:   •  February 22, 2018  •  2,434 Words (10 Pages)  •  671 Views

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A fiduciary is somebody who has been tasked to represent for or on behalf of other in specific circumstances which offer ascent to a relationship of trust and certainty (Rachagan, 2002). The recognizing commitment of a fiduciary is the commitment of steadfastness and dependability. The Malaysian Companies Act 1965 (“MCA”) provides for the statutory liabilities and duties of the firm directors. One of the obligations that directors should comply to is with their fiduciary duties. Directors are said to be in a fiduciary relations ship with the company when directors are disallowed from doing any demonstrations regarded biased to the organization.

At the end of the day, by applying the judgment in Healing center Products Ltd v United States Surgical Corpn chiefs can't and ought not to utilize his position to get individual increases. In any case, there is a concern about directors owing fiduciary obligations to other people other than their trustee obligations to the organization. In connection to shareholders, court decided that Percival v Wright that the executives did not owe any fiduciary obligation to unveil the arrangements made when they planned to buy shares. Be that as it may, this case additionally did not set out any guidelines that chiefs of an organization can never be in trustee association with shareholders.

When exercising fiduciary obligations to the organization, there are degrees that the directors require to act upon. The extent of the fiduciary obligations are yet to be organized by the Malaysian officials, yet the guideline established in cases in light of the common law can be connected by righteousness of Section 132(5) of the Companies Act. Section 132(5) of the Act peruses, this section is in addition to and not in derogation of any other written law or rule of law relating to the duty or liability of the directors or officers of the company’ and the word ‘rule of law’ can be interpreted as including the rule under the common law (Khoo, 1997).

In Re W and M Roith Ltd case Roith an organization chief, had agreed to a service contract with his organization with the end goal of giving an annuity to his wife in case of his passing and without mulling over whether the agreement was for the advantage of the organization. The court held that the entire protest of the agreement was not to be official on the organization as it was to profit Mrs Roith and not the company. When this case is investigated, it can be seen that as Roith did not represent the best enthusiasm towards the organization as he acted in the best interest of his wife, he had ruptured his fiduciary obligation which is the duty to act to the greatest advantage of the organization. Hence, the court held that the agreement was not authoritative to the organization.

Pre incorporated contacts and validity

Pre-incorporation contract is the agreement entered by promoters for the benefit of the company before it has been enlisted. Before the incorporation, the organization is not a separate legitimate entity or artificial legal individual. Hence they have no right to be sued and sue, and even may not purchase and hold assets in its own name. According to Malaysia Companies Act 1965, legitimate status of pre-incorporation agreements is invalid and can be endorsed by prudence of Section 35(1) of the Act.

“Any contract or other transaction purporting to be entered into by a company prior to its formation or by any person on behalf of a company prior to its formation may be ratified by the company after its formation and thereupon the company shall become bound by and entitled to the benefit thereof as if it had been in existence at the at date of the contract or other transaction and had been a party thereto” (Rajak, 1995).

In the case of Ahmad bin Salleh & Rawanag Hills Resort Sdn Bhd the accusers reached an agreement to trade a piece of land to the defendants. One part of the purchasing price was received by the accusers and in addition to these they also allowed defendants irrevocable power of attorney to split up the land. The contract clearly mentions that the process must be settled within a period of six months from the contract date. The main concern regarding pre-incorporation agreement was that the plaintiffs accuse that the defendants had dishonored the contract by, claiming that when sale and purchase was held inter alia was not being incorporated. Court dismissed the plaintiff’s accusation and allowed the defendants to counter claim. It was found out that when the first purchase and sale agreement was implemented, defendants certainly were not inexistence. Nevertheless the contract was then approved under s 35 Companies Act 1965.

Pre-incorporated contracts prepared by “promoter" might be endorsed by the organization upon incorporation. In any case, if the organization does not endorse the agreement, or does not respect its legally binding commitments, the promoter might be by and by at risk. Unincorporated affiliations don't have legally binding limit. Along these lines, contracts must be made with the individual individuals from the affiliation or with the administration advisory group individuals. Legal capacity of an incorporated association alludes to the degree of their corporate power to go into a specific exchange or to do a specific demonstration that has legal impact.

Capacity to contract refers to the legal capability of an individual to enter into a valid agreement. The basic component to go into into a valid agreement is that he/she must be sound mind, not insane or not under age. If one these elements are present in the contract, then the incorporation cannot take place since the agreement becomes automatically void. Section 11 of the Contracts Act 1950 provides that “Every person is competent to contract, who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject" (Griffin, 2000). Both Wang and Ngan were older than 18 years old when they enter into the contract. Section 12 (1) of the Contract Act 1950 provides that “A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests." As a result, the agreement is valid (Teacher, 2013).


All the companies running in Malaysia are incorporated under Companies Act law 1965. Incorporation is referred as the legal process to form a corporate venture. The incorporation leads to parting of ownership, pinpointing contractual capacity, and also legal entity.


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