SAMPLES QUESTIONS & SUGGESTED ANSWERS
DIRECTORS
JUNE 2017 - QUESTION 1
***PLEASE USE COMPANIES ACT 2016 IF WANT TO ANSWER THIS QN****
Scientex Sdn Bhd has received several proposals from its directors to be approved at
the board meeting. The board of directors is uncertain whether the following proposals
are valid and do not contravene the provisions of the Companies Act 1965. As a
company secretary, you are required to advise the board of directors on the following
proposals:
a. The company has been awarded a RM40 million project by the government of
Brunei, and Farah, a director of the company has undertaken the job to set up
an office and she has approached the company for a loan for this purpose.
(5 marks)
b. Ken, an independent non-executive director of Scientex Sdn Bhd has been
urging the board of directors to give him a loan of RM900,000 to purchase a
bungalow house for him.
(5 marks)
c. Raja, an executive director has requested a loan from the company to enable
him to purchase shares in the company. The recent Annual General Meeting of
the company has approved a scheme of loan to employees to purchase shares
of the company.
(5 marks)
d. Halim, the Managing Director of the company, is in the process of getting a
personal loan from MUI Development Bank and the bank would like Halim to
provide security for the loan. Halim has approached the board of directors
indicating that he would like the company to pledge the company’s multi-storey
building located at Jalan Kilang to secure his personal loan.
(5 marks)
Required:
Advise the board of directors and briefly discuss the statutory provisions of the
Companies Act 2016 that would affect the above situations.
(Total: 20 marks)
ANSWER 1
a. The proposal for the loan is valid (√) because the loan provided to a director is
to meet expenditure incurred or to be incurred by her for the purposes of the
company or for purpose of enabling her to perform her duties as an officer
of the company (√)
Section ___ (√) states that a company (other than an exempt private company)
shall not:
Make a loan to a director of the company or
Make a loan to a director of a company which is deemed to be related to
the company
Enter into any agreement or provide any security in connection with a loan
made to such director
However, there is exception to the rule states that, any funds provided to
a director to meet expenditure incurred or to be incurred by him for the
purposes of the company or for purpose of enabling him to perform his duties
as an officer of the company is sanctioned. (√√)
(5√ x 1 mark = 5 marks)
b. The proposal for the loan is invalid (√) because the loan provided to a director
is not to meet expenditure incurred or to be incurred by her for the purposes
of the company or perform his duties as an officer of the company (√).
Furthermore, exception to the rule states that, funds given by the company to
a director who is engaged in the full time employment (√) of the company to
meet expenditure incurred or to be incurred by him in purchasing a home.
Related to the case, he is a non-executive director (not working full time)
for the company, therefore he is not eligible for the loan. (√)
Section ____ (√) states that a company (other than an exempt private
company) shall not:
Make a loan to a director of the company or
Make a loan to a director of a company which is deemed to be related to
the company
Enter into any agreement or provide any security in connection with a loan
made to such director
(5√ x 1 mark = 5 marks)
c. The proposal for the loan is valid (√) because the recent Annual General
Meeting of the company has approved scheme of loan to employees (√)
to purchase shares of the company and director is engaged in a full-time
employment of the company.(√)
Section ___(√) states that a company (other than an exempt private company)
shall not:
Make a loan to a director of the company or
Make a loan to a director of a company which is deemed to be related to
the company
Enter into any agreement or provide any security in connection with a loan
made to such director
However, there is exception to the rule states that, any loan given to a
director who is engaged in the full-time employment of the company where the
company has at a general meeting approved of a scheme for the making of
loans to employee of the company and the loan is in accordance with that
scheme. If the approval of loan is not given as aforesaid, the directors
authorizing the making of the loan shall be jointly or severally liable to
indemnify the company against any loss arising there from. The loan shall
be repaid within 6 months from the conclusion of that meeting (√)
(5√ x 1 mark = 5 marks)
d. The proposal for the loan is invalid (√) because the security provided in
connection with a loan made to Salim is for his personal loan which
obviously not to meet the expenditure incurred (√) or to be incurred by him
for the purposes of the company. Therefore, the board of directors cannot
approve such loan since it will contravene section ___ (√).
Section ____ (√) of the Companies Act 1965 states that a company (other than
exempt private company) shall not enter into any agreement or provide any
security in connection with a loan made to such director (√).
(5√ x 1 mark = 5 marks)
(Total: 20
marks)
JUNE 2018 - QUESTION 3
ERA Digital Bhd (ERA) is a company listed on the ACE Market of Bursa Malaysia since
2010. Tan Sri Fakhrul Ahmad who was recently appointed as Chairman of the Board
of Directors has asked you several questions regarding the way in which board
appointments are made.
The following events have recently occurred with respect to the directors of the
company:
Datuk Harith, was recently appointed an independent non-executive director of ERA.
Datuk Harith was formerly an executive director of the same company eighteen (18)
months ago.
Tan Sri Fakhrul noticed that some of the directors have to attend to some urgent
business on a short notice and has asked whether it would be possible to appoint
alternate directors.
Mr Robert Lim, another independent non-executive director, has been absent from
board meetings without permission for seven consecutive months as he likes to go on
long holidays.
Advise Tan Sri Fakhrul on the following:
(a) Five (5) characteristics of an independent non-executive director as defined by
the Listing Requirements of Bursa Malaysia Bhd.
(5 marks)
SUGGESTED ANSWER:
Among the characteristics of an independent non-executive director as
defined by MICG is an independent non-executive director is
• An officer of the listed corporation or its related corporation √
• A substantial/major shareholder of the listed corporation or its related
corporation√
Any person who is not a relative of any executive director, officer or
major shareholder of the listed corporation√
A person who is not acting as a nominee or representative of any
executive director or major shareholder of the listed corporation. √
• A person connected to the Executive Director, officer or
substantial/major shareholder√
• A professional adviser engaged by the listed corporation or any of its
related corporation √
• Any person who has not been within the last two years and is not an
officer of the listed corporation.
(Any 5 √ x 1 mark = 5 marks)
(b) The appointment of Datuk Harith as an independent non –executive director of
the company. Provide comments and justify your answer.
(5 marks)
SUGGESTED ANSWER:
From the scenario above, Datuk Harith had been an executive director of
the company one and the half years ago, after which he was appointed an
independent non-executive director of the same company. √√
An independent director is one who should be independent of
management and free from any business or other relationship which
could interfere with the exercise of independent judgement or the ability
to act in the best interest of the company. √
It is clear that Datuk Harith did not fulfill one of the characteristics of an
independent non-executive director which requires a person who has not
within the last two years and is not an office of the listed corporation. √√
(5 √ x 1 mark = 5 marks)
(c) The appointment of an alternate director, including the rights and
responsibilities of an alternate director.
(6 marks)
SUGGESTED ANSWER:
Any non-executive director may appoint an alternate director as his
alternate subject to the approval of the Board. √
An alternate director must then complete Form 48A and lodge with CCM
within one month. √
Form 49 particulars of Directors, Managers and Secretaries must be
completed and lodged with CCM within one month. √
Register of Directors, managers and Secretaries must be updated. √
An alternate director carries the same rights and responsibilities of a
principal director. √√
(6 √ x 1 mark = 6 marks)
(d) Tan Sri Fakhrul is annoyed with Mr Robert Lim for his lack of commitment and
has asked you whether there are any provisions under either the
Constitution/Articles of Association or the Companies Act 2016 to remove him.
(4 marks)
SUGGESTED ANSWER:
As ERA has been listed on Bursa Malaysia since 2010, the assumption is
ERA has adopted the articles of association in Table A of the 4th Schedule
of CA 1965. It is also assumed that ERA has not passed a resolution to
modify its constitution. √
The Articles of Association/Constitution provides that a director who is
absent without permission for 6 consecutive months will be disqualified
from becoming a director of the company. √ √
In this regard Robert Lim is disqualified from being a director of the
company. √ √
(Any 4 √ x 1 mark = 4 marks)
(Total: 20 marks)
