Part A Company Law – Course Test PDF

Part A Company Law – Course Test Qn 1: Which of the following statements is incorrect? o Director – includes any person occupying the position of director of a corporation by whatever name called, and includes a person in accordance with whose directions or instructions the directo...

Part A Company Law – Course Test Qn 1: Which of the following statements is incorrect? o Director – includes any person occupying the position of director of a corporation by whatever name called, and includes a person in accordance with whose directions or instructions the directors of the majority of directors are accustomed to act and an alternate or substitute director - A shadow director must exercise his directorial powers for the proper purpose. [Correct] ▪ Shadow director – a person in accordance with whose directions or instructions the directors are accustomed to act. ▪ Duty of proper purpose – duty to act in accordance with the power that has been conferred (Fiduciary duty) [distinct from the duty to act in the best interests] ▪ Determining breach of proper purpose: 1. What is the particular power in question, and what are the legal purposes for which the power may be used? 2. Does the proper purpose rule apply in this case? 3. What are the facts, and the intentions of the director? ▪ Shadow directors are considered as directors and have the ordinary duties of director imposed on him (Raffles Town Club Pte Ltd v Lim Eng Hock Peter) - An alternate director is obliged to act honestly in the discharge of the duties of his office at all times. [Correct] ▪ Alternate director – alter ego of someone else, turns up at meetings only when principal director is unable to do so ▪ Has all the rights, duties and liabilities of directors over the period for which they are appointed ▪ Duty to act honestly – s157(1) CA (mirrors the fiduciary duty to act bona fide in the interests of the company) Duty to act in what the director honestly considered to be in the company’s interests - A nominee director owes his primary duty to the company on whose board he sits and not to the person who appoints him. [Correct] ▪ Nominee director has a fiduciary relationship with the principal (person who appoints him to the board) ▪ Nominee director should exercise his judgment in the best interests of the company and should not be bound to act in accordance with the direction or instruction of his appointer (note: can take into account the interest of his appointer if such interest does not conflict with the interest of the company) (Oversea-Chinese Banking Corporation Ltd v Justlogin Pte Ltd) - A person who controls the board of directors is considered to be a shadow director and consequently a fiduciary of the company. [Incorrect]  ▪ Shadow director test: whether or not the directors or a majority of the board of the company are accustomed to acting in accordance with that person’s instructions – not required to control all of the directors - All directors are obliged to display a reasonable degree of diligence in the discharge of the duties of their office. [Correct] ▪ S157(1) – obliges a director to at all times act honestly and to use reasonable diligence in the discharge of his duties of office ▪ Reasonable diligence – has the director exercised the same degree of skill and diligence as a reasonable director found in his position? ▪ Standard is raised if the director should possess or hold himself out as possessing, such special qualifications, knowledge or experience Qn 2: Mike is a minority shareholder in Alfa Pte Ltd. He is convinced that the directors of Alfa Pte Ltd have been transferring the company's assets to corporations that they control. How can he ensure that the company commences litigation against the directors to recover those assets? Mark the appropriate answer. o Proper plaintiff rule – company is a legal person in its own right, distinct from shareholders - Write a letter to the errant directors requesting that they return the assets taken from the company and stating that he will personally sue them if they do not do so within the stipulated time. [Incorrect] ▪ Shareholder has no standing to bring proceedings where wrongs to the company are concerned (Foss v Harbottle) ▪ S216A derivative action – prerequisite is that a complainant must give the board 14 days’ notice of his intention to bring the application, but the application is brought in the name and on behalf of the company, not personally - Initiate a criminal prosecution to have the errant directors convicted of an offence under s157(3)(b) and disqualified under s154(2)(b). [Incorrect] ▪ Mark wants to ensure that the company will commence litigation against the directors – s157(3)(b) will cause the errant director to be guilty of an offence (which can cause them to be disqualified under s154) - Make an application under s216A for leave to commence civil proceedings against the errant directors in the name of Alfa Pte Ltd. [Correct] ▪ S216A – allows a member of the company to bring an action in the name of the company where a corporate wrong is said to have been done to the company and the controlling directors refuse to remedy the corporate wrong (Ho Yew Kong v Sakae Holdings) ▪ Preconditions to the grant of leave 1. Complainant must give 14 days’ notice to the board Objective: gives the company, acting through its board of directors, the opportunity to evaluate the complaint and consider its rights and appropriate course of action 2. Complainant must be acting in good faith  Objective: ensure that the applicant is the right person to bring the application, and that the action is being brought for the company’s purposes 3. It must appear to be prima facie in the interests of the company that the case be brought Objective: must be in the interests of the company that the case be pursued - Commence civil proceedings against the defendant directors in his own name on behalf of Alfa Pte Ltd as claimant. ▪ Wrong to the company – should be pursued under s216A, hence not the most appropriate answer - Apply under section 216(2)(c) for winding up of the company and then ask the liquidator to sue the errant directors. ▪ S216 – Personal remedies in cases of oppression or injustice ▪ Objective of s216: to provide a remedy to minority interests who are being opposed by the majority ▪ To properly invoke s216, the plaintiff has to identify that the injury amounts to oppressive conduct against it as a shareholder ▪ Mike wants the company to commence litigation – not the most appropriate as winding-up is a remedy of last resort, and he can go under s216A Qn 3: Which of the following companies is not required to hold an AGM? o Every company is required to hold at least 1 AGM every calendar year (s175 CA) o A company need hold an AGM for a financial year if: (s175A CA) 1. it is a private company in respect of which there is in force a resolution passed in accordance with subsection (2) to dispense with the holding of annual general meetings 2. if, at the end of that financial year, it is a private company and has sent to all persons entitled to receive notice of general meetings of the company the documents mentioned in section 203(1) within the period specified in section 203(1)(b) 3. if, at the end of that financial year, it is both a private company and a dormant relevant company the directors of which are, under section 201A, exempt from the requirements of section 201 for the financial year. - A dormant company [Required to hold an AGM] ▪ A company is dormant during a period in which no accounting transaction occurs (s205B CA) ▪ Must be a private company and a dormant company to exempt from holding AGM - A listed company if the SGX has allowed it to dispense with the AGM [Required to hold AGM] ▪ Criteria not met under s175A - A private company with fewer than 5 members [Not required to hold AGM] ▪ Provided that there is a resolution in force, or if it has sent notice to all persons entitled to receive notice of general meetings the documents as required in s203 (financial statements) - A company limited by guarantee which is a charity [Required to hold AGM]  ▪ Criteria not met under s175A - An unlimited company [Required to hold AGM] ▪ Criteria not met under s175A Qn 4: Which of the following persons is not permitted to be a director of a company incorporated in Singapore? Mark the statement that is incorrect. Not permitted = correct Permitted = incorrect - A person who is subject to a disqualification order made by an English court. [Correct, not permitted] ▪ Once disqualified in the UK, cannot be a director of any company registered in the UK or an overseas company that has connections with the UK - A person who has been adjudged bankrupt by an American court and who has not had the order discharged [Correct, not permitted] ▪ Automatic disqualification – undischarged bankrupts (s148 CA) ▪ Disqualification applies even if a person was adjudicated in a foreign court (s148(1)) - A person who has been convicted of criminal breach of trust by a Malaysian court. [Correct, not permitted] ▪ Automatic disqualification (s154(1)(a)(i)) ▪ Where convicted of any offence, whether in Singapore or somewhere else, involving fraud or dishonesty ▪ Note: punishable with imprisonment for 3 months or more - A person who has been a director of a company wound up for insolvency and whose behaviour renders him unfit to be a director, if a disqualification order has been made on the application of the Minister [Correct, not permitted] ▪ Disqualification of unfit directors of insolvent companies (s149 CA) – not automatic ▪ In this case, disqualification order has been made hence not permitted - A person who has been convicted of cheating in Singapore but has only been fined and not sentenced to imprisonment [Incorrect, permitted] ▪ Under s154, a person is subject to automatic disqualification only if they were convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty, and punishable with imprisonment for 3 months or more Qn 5: Which of the following statements is correct? - All companies limited by guarantee are public companies. [Correct] ▪ Company limited by guarantee – each member undertakes to contribute a specific amount to the company’s assets in the event that it is wound up, stated in the constitution ▪ Prohibited from having a share capital – hence by definition, a public company  - All companies incorporated in Singapore under the Companies Act 1967 must have a share capital. [Incorrect] ▪ Companies limited by guarantee do not have share capital - Only private companies must have a share capital. ▪ Untrue - Only public companies must have a share capital. ▪ Untrue - Unlimited companies can no longer be incorporated under the Companies Act 1967. ▪ Untrue, just rare Qn 6: Charlie is managing director of Alfa Pte Ltd. He authorizes a bribe to be paid to a politician in Cambodia in order to obtain licences, without which business would not be possible in that country. Which of the following statements is incorrect? - Charlie may be prosecuted in Singapore for corruption if he is a citizen, even though the bribes were paid in Cambodia. - Alfa Pte Ltd may sue Charlie for breach of his fiduciary duties as a director. [Correct] ▪ Fiduciary duty to act in good faith and in the interests of the company ▪ Directors must act honestly – bribe would likely contravene this duty - If Charlie is convicted of corruption under the Prevention of Corruption Act 1960, he will be disqualified and must resign from the board of Alfa Pet Ltd. [Correct] ▪ Provided that Charlie has been convicted and is subject to imprisonment for a period of 3 months or more, he will be subject to disqualification under s154(1(a)(i)) - Charlies' employment as managing director of Alfa Pet Ltd may be terminated by the company for breach of an implied term of his contract of employment. [Correct] ▪ Would likely be reasonable to imply a term for a director not to give bribes, hence likely that Charlie’s employment can be terminated - Charlie may be relieved from civil and criminal liability if he obtained the prior approval of the shareholders to pay the bribe [Incorrect] ▪ Possible for the company to forgive or ratify the breach that has already occurred ▪ Exonerates the errant director from his wrongdoing and releases him from personal liability in respect of the breach ▪ Members cannot ratify an act that is illegal Qn 7: The constitution of Alfa Pte Ltd provides that “The directors may exercise all the powers of a company except any power that the Act or this Constitution requires the company to exercise in general meeting.” Which of the following statements is untrue? o (2) The directors may exercise all the powers of a company except any power that this Act or the constitution of the company requires the company to exercise in general meeting. o Residual powers – where the board must obtain the member’s approval prior to proceeding with an intended activity: ▪ Disposal of the whole or substantially the whole of the company’s undertaking ▪ The issue of shares ▪ Payment of retirement and compensation benefits to directors  ▪ Payment of commissions to a director in connection with the transfer of the company’s property or business ▪ Provision of emoluments for directors ▪ Members in a general meeting may exercise powers where the board is deadlocked or unable to act (Chan Siew Lee v TYC Investment) - The members may reverse a decision of the board of directors by passing a special resolution [Likely untrue] ▪ Directors may exercise all powers of the company, no provision in the CA which requires the company to exercise the power in general meeting The members may replace the board of directors and the new board may reverse the decision of the old board. [Likely true] ▪ CA does not prescribe the manner in which directors are to be appointed – usually appointed at AGM ▪ Decision-making powers vested with the board - The members may amend the constitution to remove the power of the directors to manage the company, but this does not affect decisions already taken. [Likely true] ▪ Company can alter the constitution by special resolution (requires a ¾ majority) - The members may amend the constitution to remove the incumbent directors and appoint new directors who are willing to accede to their wishes [Likely true] ▪ Nothing stopping members from doing so? - The members may amend the constitution to remove the power of the board to exercise all the powers of the company despite section 157A(2) [Likely untrue] ▪ Cannot exclude the statute Qn 8: Which of the following situations requires a resolution of the members? o Residual powers – where the board must obtain the member’s approval prior to proceeding with an intended activity: ▪ Disposal of the whole or substantially the whole of the company’s undertaking ▪ The issue of shares ▪ Payment of retirement and compensation benefits to directors ▪ Payment of commissions to a director in connection with the transfer of the company’s property or business ▪ Provision of emoluments for directors - A proposal by the directors to employ a general legal counsel. ▪ Would not require resolution - Signature by the directors of the directors' report on the company’s financial statements. ▪ Would not require resolution - Improvement of directors' emoluments. ▪ Would require resolution (s169 CA) – Company must not… improve emoluments for director of a company unless approved by resolution - Payments to an employee as compensation for loss of office as an officer. ▪ Company may not make payment to a director as compensation for loss of office as an officer of the company  ▪Does not prohibit compensation to employee – would likely be governed by employment contract - Commencement of litigation on behalf of the company ▪ Would not require – procedure under s216A Qn 9: Abel is a non-executive director of Alfa Pte Ltd. Which of the following statements is incorrect? o Every director, regardless of whether he is an executive or non-executive director, has fiduciary duties and legal responsibilities to the company (Vita Health) o Non-executive director: does not work for the company in a full-time capacity - Abel is also an executive director in Bravo Pte ltd, which is in the same business as Alfa Pte Ltd. He must disclose this to the board of directors of Alfa Pte Ltd under s156. [Correct] ▪ S156 – Obligation placed on directors who are in any way, whether directly or indirectly, interested in a transaction or a proposed transaction with the company to declare the nature of that interest (6) Every director and chief executive officer of a company who holds any office or possess any property whereby, whether directly or indirectly, any duty or interest might be created in conflict with their duties or interests as director or chief executive officer (as the case may be) must — (a) declare at a meeting of the directors of the company the fact and the nature, character and extent of the conflict; or (b) send a written notice to the company setting out the fact and the nature, character and extent of the conflict. ▪ 156(6) – targets situations where directors or CEOs either hold an office or possess property that may result in potential conflict - Abel is a gifted musician and occasionally is paid to perform at concerts. Abel need not disclose this to the members of Alfa Pte Ltd or obtain their approval to keep his fees, since there is no conflict of interests. [Potentially incorrect] ▪ No conflict with his role as director - Alfa Pte Ltd is competing with Bravo Pte Ltd (of which Abel is an executive director) for a contract. Abel must disclose his interest to the board of Alfa Pte Ltd under s156 [Correct] ▪ S156 – Obligation placed on directors who are in any way, whether directly or indirectly, interested in a transaction or a proposed transaction with the company to declare the nature of that interest - Abel’s wife owns a property which Alfa Pte Ltd is negotiating to purchase. Abel must disclose his wife’s interest to the board of Alfa Pte Ltd under s156 [Correct] ▪ S156(13) (a) an interest of a member of a director's family is treated as an interest of the director and the words "member of a director's family" include his or her spouse, son, adopted son, stepson, daughter, adopted daughter and stepdaughter; and - Abel gets a business opportunity because he is a director of Alfa Pte Ltd. He may keep any profit he obtains from this provided he has disclosed to the board of Alfa Pte Ltd and they have approved. ▪ Director is not allowed to retain any profit which he has made out of his position unless he has the company’s fully informed consent Qn 10: Under what circumstances can a director of a company be personally liable for some or all of the debts of the company? Mark the statement that is INCORRECT. Correct = personally liable Incorrect = not personally liable - If he has entered into personal guarantees for the debts of the company. [Correct, personally liable] ▪ Entering into personal guarantee – taking personal responsibility - If he has entered into contracts beyond his actual authority as a director, on the basis of breach of warranty of authority. [Correct, personally liable] ▪ Whether a company is bound by the acts of its agent will depend on whether the agent acted within his scope of authority ▪ Act was beyond actual authority – not bound - If he has been party to carrying on the company's business in a fraudulent manner and an application to make him liable for the debts of the company is made under section 238 of the Insolvency Restructuring and Dissolution Act 2018. - If he has wilfully permitted payment of a dividend when there are no profits available for distribution [Correct, personally liable] ▪ declare that any person who was knowingly a party to the carrying on of the business in that manner is personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court directs. - If he is the sole director ordinarily resident in Singapore [Incorrect, not personally liable] ▪ Sole director is not personally responsible for debts of the company simply by virtue of his position Qn 11: Which of the following statements is incorrect? - The term "shareholder" in the Companies Act 1967 is sometimes used as a synonym for "member". - To be a member of a company, a person must be registered in the Register of Members. [Correct] ▪ S19(6) and s19(6A) Companies Act – entered as member in register of members - A person who is not registered as a member may nonetheless appoint a proxy to exercise the right to vote in respect of shares held in trust for him. [Incorrect] ▪ s181.—(1) Subject to this section, a member of a company entitled to attend and vote at a meeting of the company, or at a meeting of any class of members of the company, is entitled to appoint another person, whether a member or not, as the member’s proxy to attend and vote instead of the member at the meeting and a proxy appointed to attend and vote instead of a member also has the same right as the member to speak at the meeting. ▪ S181 makes specific mention to “member of the company”  - A person who is not registered as a member is not entitled to receive from the company dividends that have been declared in respect of shares held by nominees for his benefit [Correct] ▪ The company only has to pay out dividends to the named members registered in its books - A person whose name is omitted from a company's register of members may apply to court for rectification of the register, during which process the court may decide questions of ownership of the shares [Correct] ▪ If a person’s name is wrongly entered in or left off the register of members, an application may be made under s194 CA for rectification of the register (s194 CA) ▪ Court may decide questions of ownership of the shares in accordance with s 194(2) Qn 12: Which of the following statements is incorrect? - All private companies must have a share transfer restriction [Correct] ▪ By definition under s18(1) CA, private company must restrict the right to transfer its shares (s18(1)(a) - In all private companies the directors have the discretion to refuse registration of a transfer of shares [Incorrect] ▪ Directors have no discretion to refuse to register a transfer unless the articles so provide ▪ If such discretion exists, directors have to serve on the transferee, within 1 month after the date the transfer was lodged, a notice of refusal and a statement setting out the facts which they used to justify the refusal ▪ Power to refuse registration is fiduciary – must be exercised in the best interests of the company - Pre-emptive rights given to existing members to acquire the shares of members who wish to sell out are a common form of share transfer restriction [Correct] - A private company may include in its constitution any sort of share transfer restriction [Correct] - If directors of a private company refuse to exercise their discretion to allow a transfer of shares, they are required to state the facts on which they base their refusal [Correct] ▪ If such discretion exists, directors have to serve on the transferee, within 1 month after the date the transfer was lodged, a notice of refusal and a statement setting out the facts which they used to justify the refusal Qn 13: Which of the following steps is necessary when amending the constitution of a company? - The board of directors must pass a resolution to amend the constitution [Wrong] ▪ Company can alter the constitution by special resolution – not by a resolution of the directors (s26 CA)  - The persons wishing to propose an amendment to the constitution must give special notice to the company 28 days beforehand. [Wrong] ▪ Constitution can be altered by special resolution – does not require special notice - The members of the company must pass a special resolution to amend the constitution [Correct] ▪ Company can alter the constitution by special resolution – not by a resolution of the directors (s26 CA) - All past and present creditors of the company must be informed that the constitution has been amended [Wrong] ▪ company must, within 14 days after the passing of any such resolution or the making of any such order, lodge with the Registrar a copy of such resolution or other document or a copy of such order together with (unless the Registrar dispenses therewith) a copy of the constitution as adopted or altered, as the case may be. ▪ Need not inform past and present creditors of the company in accordance with s26 - A copy of the amended constitution must be posted on the company’s website within 30 days of the passing of the amendment [Wrong] ▪ (6) The Registrar must, where appropriate, issue a notice of incorporation in accordance with the alteration made to the constitution. ▪ No requirement to post the amended constitution on the company’s website Qn 14: Which of the following statements is incorrect? - A person who buys shares from a registered member does not have to register himself as the holder of the shares. ▪ Beneficial interest in shares is created by the transfer of the physical share certificate with a transfer form that has been signed in blank ▪ Once shares are purchased, you are the equitable owner of the shares - A registered member may create a security interest over his shares by executing an instrument of transfer leaving the name of the transferee blank ▪ Security interest in shares: where shares are used as collateral to secure financing for the holder of shares - A person whose name is entered into the register does not thereby acquire an indefeasible title to the shares [Correct] ▪ You do not get indefeasible title by registering shares - Since shares are equivalent to negotiable instruments, a bona fide purchaser for value of shares in a company acquires good title to those shares, overriding any equitable interests of which he has no notice [Correct] ▪ Equitable interests may be defeated by a bona fide purchaser of a legal interest in the shares who provided valuable consideration and was without notice of the prior equitable interest - A person (whether registered as holder of shares or not) can transfer no greater title to the shares than what he has, unless there is an estoppel preventing the owner of the shares from asserting his right to the shares  [Correct] ▪ A person taking a chose in action (right to something) from a person who has no valid title, has no better right to it as against the true owner than the person from whom he has taken it (Pan-Electric Industries v Overseas-Chinese Banking Corp) Qn 15: Which of the following statements is incorrect? - A director may be appointed by ordinary resolution of the members subject to any contrary provision in the constitution of a company. [Correct] ▪ CA does not prescribe the manner in which directors are to be appointed – left generally to the company’s constitution - Members of a joint venture company may agree in a shareholders’ agreement that each partner may appoint an equal number of directors [Correct] ▪ Shareholders’ agreement is separate from the constitution – regulates shareholder relationships ▪ Parties are free to stipulate terms as they deem fit - A director of a company limited by guarantee may be removed by an ordinary resolution of which special notice is given despite any contrary provision in the constitution of a company [Correct] ▪ Public company may remove directors by ordinary resolution despite anything in its constitution or in any agreement between it ▪ Special notice (28 days) required for such resolution (s152 CA) - A director of a private company may be removed by special resolution of which special notice is given notwithstanding any contrary provision in the constitution of a company [Incorrect] ▪ No restriction on the removal of director in a private company - A director may not resign if he is the only one ordinarily resident in Singapore, even if there are other directors [Correct] ▪ Every company must have at least one director who is ordinarily resident in Singapore ▪ S145(5) a director of a company must not resign or vacate his or her office unless there is remaining in the company at least one director who is ordinarily resident in Singapore; and any purported resignation or vacation of office in breach of this subsection is invalid. Qn 16: Which of the following statements is incorrect? - There is no constructive notice of the constitution of a company registered with ACRA. [Correct] ▪ Despite anything in the constitution of a company, a person is not affected by, or deemed to have notice or knowledge of the contents of, the constitution of, or any document relating to, the company merely because the constitution is registered by the Registrar (s25A – No constructive notice)  - A company is bound by the acts of its Managing Director if he has actual authority to enter into a transaction [Correct] ▪ Whether or not a company is bound by the acts of its agent depends on whether the agent acted within the scope of his authority ▪ Individual director does not have the authority to bind the company unless he is specifically delegated with the board’s authority - A person dealing in good faith with a company is not bound by any limitation of the powers of the board contained in the company’s constitution [Correct] ▪ A third party acting in good faith is assured of transactional security even if the directors authorising it lack the power to do so by reason of being ultra vires the company (s25B CA) - A person relying on the apparent authority of a company's agent may enforce a contract against the company even though he has doubts about the agent's authority and there are circumstances that would put a reasonable person on notice as to the agent’s lack of authority [Incorrect] ▪ A third party cannot rely on apparent authority if he knows that the agent is acting without authority ▪ Third party cannot rely on the agent’s apparent authority if it had cognizance that the agent is acting for an improper purpose - An agent who misrepresents his actual authority to a third party may be liable for breach of warranty of authority. [Correct] ▪ If the company’s agent’s acts are outside the scope of his actual authority, the company will not be bound unless it is precluded from denying the authority of that agent Qn 17: Which of the following statements is incorrect? - "Company" in the Companies Act 1967 means a company incorporated in Singapore. [Correct] ▪ S4(1) CA – references in the Companies Act are to a Singapore-incorporated company - "Corporation" in the Companies Act 1967 does not include companies incorporated in Singapore. - [Incorrect] ▪ S4(1) CA – references in the Companies Act to corporations apply to both Singapore-incorporated and foreign companies - Foreign companies which conduct business in Singapore must comply with the sections of CA 1967 that refer to corporations - [Correct] ▪ Foreign companies that establish a place of business or carry on business in Singapore, or which intends to do so, has to comply with the regulations set out in the CA - A company incorporated in Singapore before the commencement of the CA 1967 is a “company” within the meaning of the Act [Correct] ▪ S4(1) CA – “company” means a company incorporated under this Act or under any corresponding previous written law  - Only the sections that refer to a “corporation” in the CA 1967 apply to foreign companies doing business in Singapore [Correct] Qn 18: Alfa Ltd holds 100% of Bravo Pte Ltd. Charlie is a senior executive of Alfa Ltd. He is appointed by Alfa Ltd to be the sole director on the board of Bravo Pte Ltd. Which of the following statements is incorrect? - If Charlie is sacked as an executive of Alfa Ltd he automatically ceases to be a director of Bravo Pte Ltd. [Incorrect] ▪ Directors are not, by fact of their directorship, an employee – by ceasing to be employed by Alfa Ltd, he does not automatically cease to be a director of Bravo ▪ Additionally, every company must have a director ordinarily resident in Singapore (s145 CA) - Charlie’s appointment as director of Bravo Pte Ltd may be terminated by Alfa Ltd at any time without notice, by passing the necessary resolution to remove him from the board of Bravo Pte Ltd [Correct] ▪ Mode for removing directors before their term of office will be provided for in the constitution – note: Bravo Pte Ltd is a private company ▪ As the sole shareholder, Alfa is able to fulfil the required majority for resolution (simple majority for ordinary resolution, ¾ majority for special resolution) to remove Charlie - All emoluments paid to Charlie by Bravo Pte Ltd must be approved by Alfa Ltd as the sole shareholder of Bravo Pte Ltd [Correct] ▪ A company must not at any meeting or otherwise provide emoluments or improve emoluments for a director of a company in respect of his or her office as such unless the provision is approved by a resolution that is not related to other matters and any resolution passed in breach of this section is void (s169 CA) - Charlie is considered to be an officer of both Alfa Ltd as well as Bravo Pte Ltd [Correct] ▪ “officer”, in relation to a corporation, includes — (a) any director or secretary of the corporation or a person employed in an executive capacity by the corporation; (b) a receiver and manager of any part of the undertaking of the corporation appointed under a power contained in any instrument; and (c) any liquidator of a company appointed in a voluntary winding up, ▪ Charlie is a Senior Executive of Alfa Ltd and a Director of Bravo Pte Ltd - Notice of termination of Charlie's employment as a senior executive must be issued by Alfa Ltd and not Bravo Pte Ltd. [Correct] ▪ Employment relationship is governed by contract – Charlie is employed by Alfa Ltd as a Senior Executive, not Bravo Qn 19: Which of the following statements is correct? - Persons registered as members of the company may vote to amend the constitution only if they are the beneficial owners of the shares. [Incorrect] ▪ (2) In the case of a company limited by shares, the holder of a share may vote on a resolution before a general meeting of the company if, in accordance with the provisions of section 64, the share confers on the holder a right to vote on that resolution. (s180 CA) ▪ (3) In the case of a company other than a company limited by shares, a member may vote on a resolution before a general meeting of the company if the right to vote on that resolution is conferred on the member under the constitution of the company. (s180 CA) ▪ Beneficial ownership: where a share is not registered in the name of the owner, but the owner may still have beneficial title to the shares - The constitution of a company can only be amended by means of a special resolution of which special notice has been given [Incorrect] ▪ True that company can only alter constitution by special resolution (s26 CA) but there is no requirement to give special notice (special notice is 28 days) - Certain provisions of the constitution may be protected from amendment by means of an entrenching provision [Correct] ▪ Entrenching provision – a provision of the constitution to the effect that some other provision can’t be altered or can only be altered by special resolution or where other specified conditions are met (s26A CA) ▪ Enables shareholders to safeguard certain constitutional rights by setting more stringent requirements for their alteration - An entrenching provision may be altered or removed by a special resolution of which special notice is given. [Incorrect] ▪ (2) An entrenching provision may be removed or altered only if all the members of the company agree. ▪ Does not require special notice - An entrenching provision must be included in the constitution when the company is formed; it cannot subsequently be introduced into the constitution. [Incorrect] ▪ (1) An entrenching provision may - (a) be included in the constitution with which a company is formed; and (b) at any time be inserted in the constitution of a company only if all the members of the company agree. (s26A(1)(b) CA) Qn 20: If a member of a company feels that he is not being treated fairly and wants to exit the company, what are his options? Mark the one that is legally unfeasible. Legally unfeasible = impractical - If he owns shares in a listed company, sell those shares even if he incurs a loss [Legally feasible] ▪ Member wants to exit the company, sell his shares  - If he owns shares in a private family company, attempt to sell the shares to other family members at an agreed price, failing which apply to court under section 216 for a buyout order [Legally feasible] ▪ Private family company – private company must have share transfer restriction (s18(1)(a) CA) and allowing other members to buy first is a pre-emptive right ▪ Action under s216 – may be invoked where there is “oppression” of a member or where a member’s interests are disregarded ▪ Buyout order under s216 is appropriate where the relationship between the parties may be gravely deteriorated – Member wants to exit the company so legally feasible - If he owns shares in a private company, apply to court under section 125(1)(i) read with section 125(3) of the Insolvency, Restructuring and Dissolution Act 2018 for a buvout order on the basis that he has been treated unfairly [Legally unfeasible] (possibly) ▪ S125 Insolvency Act – court can wind the company up if it is just and equitable to do so, court can order liquidation is there is oppression ▪ 125(1)(i) the court may order the winding up of a company if – the court is of the opinion that it is just and equitable that the company be wound up ▪ But – if the company is viable, the court will likely not be happy to make such an order - If it is commercially impossible for the company to carry on the business for which it was incorporated, apply under section 125(1(i) of the Insolvency, Restructuring and Dissolution Act 2018 for a winding-up order on the basis that the substratum of the company has been lost [Legally feasible] ▪ 125(1)(i) the court may order the winding up of a company if – the court is of the opinion that it is just and equitable that the company be wound up ▪ Loss of substratum is a situation where s125(1)(i) Insolvency Act is wider than s216 - Chua Kien How v Goodwealth Trading Pte Ltd - If he cannot get along with the other members of the company, pass a special resolution for voluntary winding-up if he has enough votes to do so [Legally feasible] ▪ S160 Insolvency Act – A company may be wound up voluntarily if the company so revolves by special resolution (s160(1)(b) Insolvency Act) Qn 21: By what means may a resolution of the members be passed? Mark the incorrect statement. - Simple majority of those present and voting at an EGM [Correct] ▪ Ordinary resolution may be passed by a simple majority of the votes of members who vote in person or by proxy - Unanimous agreement by all members given informally at different times [Correct] ▪ If all members entitled to vote attend an irregularly called meeting and vote unanimously in favour of a resolution, irregularities are waived and the resolution is as effective as if it had been effectively passed ▪ The protection of the state is fully afforded by an informal and unanimous consent and approval of all the members of a company (Jimat bin Awang)  - Simple majority of members given in writing even if contained in different documents and at different times [Correct] ▪ Ordinary resolution is passed by written means if the resolution is formally agreed on by a simple majority - Simple majority of members at a meeting of the board of directors. ▪ Would depend on whether all members entitled to vote attend the meeting - Declaration by the sole member that the resolution is passed [Correct] ▪ Despite anything in this Act, a company that has only one member may pass a resolution by the member recording the resolution and signing the record. (s184G(1) CA) Qn 22: Which of the following steps is NOT necessary when a member of a private company wishes to transfer his shares? - The registered member or his agent must execute an instrument of transfer. [Incorrect, necessary] ▪ Necessary step – transferor must execute proper instrument of transfer (s126(1) – private company, s130(1) public company) - The instrument of transfer must be sent to the company [Incorrect, necessary] ▪ Necessary step –proper instrument of transfer must be delivered to the company (s126(1) – private company, s130(1) public company) - The company must inform ACRA immediately upon receiving the executed instrument of transfer. [Correct, not necessary] - If all share transfer restrictions are complied with, the company must lodge notice of transfer of shares with ACRA in the prescribed form [Incorrect, necessary] ▪ Necessary step – private company must lodge with the Registrar notice of that transfer of shares in the prescribed form (s126(2) CA) - The company must issue a new share certificate within 30 days of lodging the notice of transfer with ACRA [Incorrect, necessary] ▪ Private company shall complete and have ready for delivery all the appropriate certificates within 30 days after the date on which a notice of transfer of shares is lodged with the Registrar under section 126(2) (s130 AE(2)(b) CA) Qn 23: Which of the following statements is incorrect? - No company may buy back its shares. [Incorrect] ▪ Company may repurchase its shares in accordance to the provisions under the CA - Dividends may only be paid when there are profits. [Correct] ▪ No dividend is payable to the shareholders except out of profits (s403(1) CA) - Companies may reduce capital by returning assets to members if a court order has been obtained to approve the capital reduction [Correct]  ▪ Company can apply to court for an order approving a special resolution for the reduction of capital (s78G CA) - A company may pay a member for services provided as a lawyer [Correct] ▪ Company cannot give back assets to members gratuitously – would be paying the member for his services as a lawyer, not in his capacity as member - A company may not gratuitously return assets to members without receiving anything in return as this would prejudice the creditors [Correct] ▪ Company cannot give back assets to members gratuitously Qn 24: Under section 76B a company may acquire its own shares. Which of the following statements is incorrect? - A listed public company may not acquire its own shares. [Incorrect] ▪ A company, whether or not it is listed on an approved exchange in Singapore or any securities exchange outside Singapore, may make a purchase or acquisition of its own shares - A company limited by guarantee may not purchase its own shares. [Correct] ▪ Company limited by guarantee – each member undertakes to contribute a specific amount to the company’s assets in the event that it is wound up, stated in the constitution ▪ Prohibited from having a share capital - Generally, a company may not acquire more than 20% of its shares in the period between the passing of the resolution to authorise the acquisition and the date of the following AGM [Correct] ▪ The total number of ordinary shares and stocks in any class that may be purchased or acquired by a company during the relevant period must not exceed 20% (or such other percentage as the Minister may by notification prescribe) of the total number of ordinary shares and stocks of the company in that class ascertained as at the date of any resolution passed pursuant to section 76C, 76D, 76DA or 76E (exceptions in 3(a) and (b) (s76B(3) CA) - There is no limit on the number of redeemable preference shares that a company may acquire [Correct] ▪ Company having a share capital may, if authorised by its constitution, issue preference shares which are liable to be redeemed (s70 CA) ▪ There is no limit on the number of redeemable preference shares that may be purchased or acquired by a company during the relevant period. (s76B(3D CA) - A company may only purchase its own shares if it is solvent [Correct] ▪ A payment made by a company in consideration of acquiring any right with respect to the purchase or acquisition of its own shares may be made out of the company’s capital or profits so long as the company is solvent Qn 25: Which of the following companies may provide financial assistance for the acquisition of its shares? 76.—(1) Except as otherwise expressly provided by this Act, a public company or a company whose holding company or ultimate holding company is a public company must not, whether directly or indirectly, give any financial assistance for the purpose of, or in connection with — - An exempt private company [Correct, may provide financial assistance] ▪ Not subject to the prohibition under s76 - A public company [Wrong, may not provide financial assistance] ▪ Subject to the prohibition under s76 - A listed company, provided that SGX has approved. [Wrong, may not provide financial assistance] ▪ Subject to the prohibition under s76 by virtue of being a public company - A company limited by guarantee. [Wrong, may not provide financial assistance] ▪ Company limited by guarantee – each member undertakes to contribute a specific amount to the company’s assets in the event that it is wound up, stated in the constitution ▪ Prohibited from having a share capital – no shares to acquire - The subsidiary of a public company [Wrong, may not provide financial assistance] ▪ Subject to the prohibition under s76 Qn 26: In which of the following situations are the companies A, B and/or C related? S5 – a corporation is, subject to subsection (3), deemed to be a subsidiary of another corporation, if — (a) that other corporation — (i) controls the composition of the board of directors of the firstmentioned corporation; or (ii) controls more than half of the voting power of the firstmentioned corporation; or (b) the firstmentioned corporation is a subsidiary of any corporation which is that other corporation’s subsidiary. S6 – Where a corporation — (a) is the holding company of another corporation; (b) is a subsidiary of another corporation; or (c) is a subsidiary of the holding company of another corporation, that firstmentioned corporation and that other corporation are for the purposes of this Act deemed to be related to each other. - Company A and Company B have common majority shareholders, all of whom are natural persons. ▪ Not related companies because the common majority shareholders are human - Company A is registered as holder of 49.99% of the shares of Company B. ▪ Not related because Company A does not control more than half of Company B’s voting power - Company A is the largest single shareholder in Company B and can usually pass ordinary resolutions though not having more than 50% of the voting power  ▪ Company A likely does not control the composition of the board of directors - Company A and Company B are both subsidiaries of Company C ▪ Related – company A and B are subsidiaries of C (s6(c) CA) - Company A and Company B are wholly owned by a single human member. ▪ Not related because they are wholly owned by single human member Qn 27: Upon incorporation of a company, which of the following consequences would follow? o Consequences of separate personality: 1. Company may exercise all the functions of a legal person 2. Company may bring and defend legal actions 3. Company has perpetual succession 4. Company has the capacity to own business and property – members have no direct interest - A person who owns 100% of the company's shares no longer has any interest in the company's assets. ▪ Would follow from incorporation – company’s shareholders have neither legal nor beneficial interests in the company’s property - A person who owns 100% of the company's shares cannot be convicted of stealing the company's property. ▪ Wrong – Company’s property belongs to the company, not to the member - A person who owns 100% of the company's shares becomes vicariously liable for all of the torts committed by the company. ▪ Wrong – the company is regarded as either having itself committed the tort (where the company has specifically authorised the commission of the tort), or vicariously liable where the tort has been committed by a primary tortfeasor (employee) - Members holding the majority of the voting rights may withdraw assets from the company at any time. ▪ Wrong – Company’s property belongs to the company, not to the member - Members holding the majority of the voting rights may sue on the company's behalf to enforce the company's contracts ▪ Wrong – proper plaintiff rule Qn 28: What are the consequences if dividends are paid when profits are not available? Mark the incorrect statement. o S403(2) Every director or chief executive officer of a company who wilfully pays or permits to be paid any dividend in contravention of this section — (a) shall, without prejudice to any other liability, be guilty of an offence and shall be liable on conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months; and (b) shall also be liable to the creditors of the company for the amount of the debts due by the company to them respectively to the extent by which the dividends so paid have exceeded the profits and such amount may be recovered by the creditors or the liquidator suing on behalf of the creditors. - All the directors are collectively liable to the company for the amount by which the dividend exceeds the distributable profit. [Wrong] ▪ The directors are liable to the creditors, not the company  ▪ Additionally, liability falls on directors or chief executive officers who wilfully pay or permit any dividend to be paid, not just all directors - Any director who authorises the payment of the dividend is liable to the creditors for the debts due to the extent that the dividend exceeds the distributable profit. [Correct] ▪ S403(2)(b) - Any director who authorises the payment of the dividend commits an offence [Correct] ▪ S403(2)(a) - The CEO of the company who authorises the payment of the dividend is liable to the creditors for the debts due to the extent that the dividend exceeds the distributable profit [Correct] ▪ S403(2)(b) - The liquidator of the company may sue the directors who authorised the payment of a dividend for the amount by which the dividend exceeds the distributable profit. [Correct] ▪ S403(2)(b) Qn 29: In relation to an action under section 216, which of the following statements is correct? Mark the incorrect statement. o S216 – Personal remedies in cases of oppression or injustice o Objective of s216: to provide a remedy to minority interests who are being opposed by the majority o To properly invoke s216, the plaintiff has to identify that the injury amounts to oppressive conduct against it as a shareholder - On an application for relief under section 216 the court will give effect to the legitimate expectations of the claimant. [Correct] ▪ Unfair conduct is tied and measured against the standards of corporate behaviour that the shareholder is entitled or expected to rely on ▪ Test: what did the applicant expect? How did the expectation arise? What remedy does the client want? - The test for the grant of relief is whether the behaviour of the defendants is commercially unfair to the claimant [Correct] ▪ Breach of the terms on which the member agreed that the affairs of the company should have been conducted - The court will not grant relief to the claimant it he is able to cure the mischief complained of by the exercise of his voting powers [Correct] ▪ Premise of an oppression action is an inequality of power and an unfair or inequitable exercise of the dominant power – if can cure mischief it would not be oppression - Relief will be granted only it the claimant can show that he is a minority shareholder in a quasi-partnership [Incorrect] ▪ Applicant can be member (though need not be a minority member), person who has shares in the company transmitted to him by operation of law, debenture holder or Minister  ▪ Conduct complained of must affect the member in his capacity as a member - The court will order the liquidation of the company as a last resort if there is no other commercially reasonable option like an order for the defendant(s) to buy over the shares of the claimant at a fair price - [Correct] ▪ Winding up is a remedy of last resort – buyout order preferred Qn 30: Which of the following rights do members of a company NOT have? - The right to requisition an extraordinary general meeting. ▪ Member’s right ▪ On the requisition of members holding at the date of the deposit of the requisition not less than 10% of the total number of paid-up shares as at the date of the deposit carries the right of voting at general meetings or, in the case of a company not having a share capital, of members representing not less than 10% of the total voting rights of all members having at that date a right to vote at general meetings, immediately proceed duly to convene an extraordinary general meeting of the company to be held as soon as practicable but in any case not later than 2 months after the receipt by the company of the requisition. (s176 CA) - The right to attend an extraordinary general meeting ▪ Member’s right ▪ A member has, despite any provision in the constitution of the company, a right to attend any general meeting of the company and to speak on any resolution before the meeting. (s180(1) CA) - The right to speak at an extraordinary general meeting. ▪ Member’s right ▪ A member has, despite any provision in the constitution of the company, a right to attend any general meeting of the company and to speak on any resolution before the meeting. (s180(1) CA) - The right to remove any director of a private company by ordinary resolution of which special notice is given under section 152 ▪ Removal under s152 CA pertains to removal of directors in public companies - The right to approve the emoluments of directors ▪ Member’s right ▪ (1) A company must not at any meeting or otherwise provide emoluments or improve emoluments for a director of a company in respect of his or her office as such unless the provision is approved by a resolution that is not related to other matters and any resolution passed in breach of this section is void. (s169 CA) ▪