Company Law

| 2011 |

| |

[BM54-3.5-3 CLAW] |

Lecturer : Mr. KHO GUAN KHAI |

AHMED SAEED (TP021261)

UC3F1101AF

TABLE OF CONTENTS

Introduction 2

Liabilities of the Directors 2

Lift the veil of Incorporation. 3

Directors Fiduciary Duties 5

Insolvency 7

The remedies available to Gemsales Ltd. 8

Conclusion 10

Reference 11

Introduction

As per the case of Gemsales Ltd the main issues came up with the point where the company had over-extended itself and was insolvent, and could not pay the interest on its loan. And in the meantime one of the Directors resigned from the post and was it came to notice that he was a major share holder in company which Gemsales Ltd had paid the loan amount to expand its business to be competitive in the market. The remaining directors didn’t have clear information what was going on at the time, and due to their negligence the company was in difficulty paying the loan. Also there will be discussion on how the company can sue the liable person in the Fraudulent trading .

Liabilities of the Directors

The first main issue in the case Gemsales Ltd is the liability of Directors for payment of the interest on the loans to Friendly Bank Ltd, where by The courts will first decide whether or not the directors of the company have engaged in insolvent trading and breached s303(3). If in the course of the winding up of a company or in any proceedings against a company it appears that an officer of the company who was knowingly a party to the contracting of a debt had, at the time the debt was contracted, no reasonable or probable ground of expectation, after taking into consideration the other liabilities, if any, of the company at the time, of the company being able to pay the debt, the officer shall be guilty of an offence against Company Act 1965 of Malaysia.

Salomon v Salomon & Co Ltd

A registered company is, like any other corporation, an entity separate from its members .an exception to the...