Pearl, Jade & Diamond decided to form a limited company. The company will be involved in the entertainment business providing models and dancers for the industry. In the meantime, they entered into a contract of employment with Tyra. Tyra is to act as their event manager. The terms of the contract states that Tyra will be paid RM10,000 a month and will continue to work with the company once the company has been formed, for a period of three years.
Three months later, a company known as CayoteUgly Bhd (CUB) was formed. CUB’s MOA expressly states that the business of the company is to provide services for fashion and dance shows, promotional campaigns and product launches, talent casting and paperdoll shows. In their first Board of Directors’ (BOD) meeting, CUB decided to issue their shares to the public. In the same meeting, the directors have decided to terminate Tyra’s employment prematurely.
Giselle subscribes 30,000 units of shares of CUB. Six months later, the BOD have decided that the company should venture into new businesses. The businesses that they have in mind are manufacturing and selling beauty products and liquor. For this purposes, CUB entered into a contract to purchase three pieces of land, to be developed into factories, from Slippery WhenWet Sdn Bhd. (SWW). The contract was entered into on the 1st February 2004. Under the contract, SWW is to transfer the land to CUB on the 31st of March 2005 and CUB is to pay the purchase price (RM900,000) upon completion of the transfer.
On the 1st of January 2005, Gisselle found out about the contract between CUB and SWW and she is extremely unhappy with the company’s expansion plan as she is a muslim and doesn’t want to be associated with a company that manufacture and sells liquor.
Based on the above facts, decide:
a)whether Tyra would be successful in her action against CUB for breach of contract; and b)wheter Giselle would be able to restraint the company from carrying on the business of manufacturing and selling liquor.
The understanding of different type’s business organisations in Malaysia is the fundamental mean to lead us going further into Company Law. There are many distinctions of what should be identified and what laws that is applicable to them. In contrast to sole proprietorship and partnerships, companies are incorporated associations. Therefore, persons who wish to incorporate one must observed the formal process of incorporating a company that has been set out under the Companies Act 1965.
Basically, the companies in Malaysia may be classified according to its liability and status. The most common company structure in Malaysia is a company limited by shares. Such limited companies may be either private (Sendirian Berhad or Sdn. Bhd.) or public (Berhad or Bhd.) companies. Once the company being incorporated, it becomes a separate legal person and called as the body corporate as provided by section 16(5) of the Companies Act:
“ On and from the date of incorporation specified in the certificate of incorporation but subject to this Act the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate by the name contained in the memorandum capable forthwith of exercising all the functions of an incorporated company and of suing and being sued and having perpetual succession and a common seal with power to hold land but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is provided by this Act.”
According to the facts of Pearl, Jade, Diamond and Tyra, it appears that they have been entered into a pre-incorporation contract and which at the same time, Tyra in the eyes of law, shall be referred...