Lecture 2 Revision - Part 1
Revision on lecture week 2 for Company Law.
- 1.
What is an unlimited liability company? Refer slides 22-23, can choose more than 1 answer
- A.
A Company that has an unlimited liability
- B.
A Company that has a separate legal personality and perpetual succession
- C.
It is a private unlimited company.
- D.
A company where members' liability is limited to the amount unpaid on their shares
- E.
A private unlimited company's name ends with "Sendirian" or "Sdn".
- F.
Like other companies, it is also used for trading.
Correct Answer(s)
B. A Company that has a separate legal personality and perpetual succession
E. A private unlimited company's name ends with "Sendirian" or "Sdn".Explanation
Liability of Co is unlimited. Members' liability is also unlimited. It can be either a private unlimited Co or a public unlimited Co. It is rarely used for trading, usually used to hold assets as investment and divide the income from the assets among the members. E.g. a family has 6 members (father, mother, 2 daughters and 2 sons). There are 4 big warehouses that can be rented out to get income. An unlimited Co can be incorporated to hold those warehouses and to collect rentals. After payment of overheads, expenses and other taxes, the rental amounts can be divided among the 6 family members. Whatever liabilities left, members are prepared to bear in full.Rate this question:
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- 2.
What is meant by conversion from an unlimited company to a limited company? Refer slide 24, can choose more than one answer.
- A.
If convert an unlimited Co to a limited Co, it is an advantage to creditors.
- B.
If convert a limited Co to an unlimited Co, it is an advantage to creditors.
- C.
To convert an unlimited Co to a limited Co, members must pass an ordinary resolution and lodge a notice of conversion with SSM.
- D.
Legal actions or contracts may still continue despite a conversion.
- E.
To convert a limited Co to an unlimited Co, follow the procedure in s.40 CA 2016.
Correct Answer(s)
B. If convert a limited Co to an unlimited Co, it is an advantage to creditors.
D. Legal actions or contracts may still continue despite a conversion.Explanation
If convert an unlimited Co to a limited Co, members' liability will then be limited, so this is a disadvantage to creditors.
To convert an unlimited Co to a limited Co, must pass a special resolution and lodge a notice FOR conversion with SSM.
No provision for conversion from limited Co to an unlimited Co.Rate this question:
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- 3.
Choose the correct statements. Refer to the mind-map in slide 25. Can choose more than 1 answer.
- A.
Unlimited company includes only private companies.
- B.
A company limited by guarantee is a public listed company.
- C.
A Co limited by share is a private Co, a Co limited by guarantee is a public company.
- D.
A public company can be a Co limited by shares or a Co limited by guarantee
- E.
A non-listed public company is a private company.
- F.
An unlimited Co needs not lodge its audited financial statements with SSM.
- G.
An unlimited Co is a partnership.
- H.
A private Co is a Co limited by shares.
Correct Answer
D. A public company can be a Co limited by shares or a Co limited by guaranteeExplanation
Unlimited company includes both private and public unlimited companies.
A company limited by guarantee has no share capital, so no shares to be listed.
A Co limited by share can be both private and public Co. A Co limited by guarantee must be a public Co.
A non-listed public company is a public Co, but its shares are not listed on Bursa Malaysia.
Only exempt private companies need not lodge its audited financial statements with SSM. Unlimited Co must still do so because all companies except EPCs must lodge their financial statements with SSM every year.
An unlimited Co is a company, with separate legal entity and perpetual succession.
A private Co can be a Co limited by shares and an unlimited Co.Rate this question:
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- 4.
Explain what is a private company. Refer slides 26-28, can choose more than 1 answer.
- A.
It cannot be a Co limited by guarantee.
- B.
It can have an unlimited number of members.
- C.
If a block of 20,000 shares are in Luke and Rey's names jointly, both of them are counted as 2 members.
- D.
Transfer of shares can be made freely.
- E.
It cannot raise capital from members of the public.
- F.
It must have a spread of public shareholders, i.e. a group of shareholders must be members of the public.
- G.
A bank is usually a private company
Correct Answer(s)
A. It cannot be a Co limited by guarantee.
E. It cannot raise capital from members of the public.Explanation
It can only have maximum 50 members. Luke and Rey, who are joint-holders of the 20000 shares, will be counted as 1 member. Transfer of shares are restricted. Only a public-listed company is required to have a spread of public shareholders. A bank must be a public Co since banks usually invite members of the public to deposit their money with the banks.Rate this question:
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- 5.
Explain the compulsory conversion of a private company to a public Co. Refer slide 29, can choose more than one answer.
- A.
Happens when it ceases to restrict transfer of its shares.
- B.
Happens wWhen it offers its shares to the public
- C.
Happens when it ceases to have a share capital.
- D.
Happens when it has more than 50 shareholders.
- E.
Its shares will be listed on Bursa Malaysia.
- F.
Securities Commission will serve a notice that the Co has ceased to be a private Co from date of notice.
Correct Answer(s)
A. Happens when it ceases to restrict transfer of its shares.
C. Happens when it ceases to have a share capital.
D. Happens when it has more than 50 shareholders.Explanation
It will not be compulsorily converted to a public Co when it offers its shares to the public.
It is the CCM that will serve a notice to the Co.
It must lodge a statement in lieu of prospectus, but its shares will not be listed on Bursa Malaysia.Rate this question:
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- 6.
Explain an exempt private company. Refer slides 30-31, can choose more than 1 answer.
- A.
It is exempted from having to lodge its audited financial statements and reports with the SSM.
- B.
Maximum number of members is 50.
- C.
A holding company can make any of its subsidiaries an exempt private company.
- D.
Its accounts need not be audited.
- E.
Members will not have access to its audited accounts.
- F.
The Co shall lodge a certificate signed by a Director, Auditor and Secretary; and also a certificate signed by the Auditor.
Correct Answer(s)
A. It is exempted from having to lodge its audited financial statements and reports with the SSM.
F. The Co shall lodge a certificate signed by a Director, Auditor and Secretary; and also a certificate signed by the Auditor.Explanation
Maximum number of members is 20. It must not have a company as its shareholder. So a subsidiary cannot be an EPC because it has the holding company as its shareholder. Its accounts must still be audited and circulated to all members.Rate this question:
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- 7.
What are the characteristics of a public company and public-listed company? Refer slides 32-33, can choose more than 1 answer.
- A.
It is a Co limited by guarantee
- B.
It has 51 to unlimited number of shareholders.
- C.
It can offer its shares to the public
- D.
A public Co must have “Bhd” as part of its name.
- E.
A public Co's shares are listed on Bursa Malaysia.
- F.
An unlisted public company refers to a private company.
Correct Answer
C. It can offer its shares to the publicExplanation
It can be a Co limited by guarantee, limited by shares and an unlimited Co. It has 1 to unlimited number of shareholders. Only a public limited Co must have “Bhd” as part of its name; a public unlimited Co will not have "Bhd". Not all public Co's shares are listed on Bursa Malaysia - only for public-listed Co. An unlisted public company is a public limited company whose shares are not listed on Bursa Malaysia, or a public unlimited Co.Rate this question:
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- 8.
What are the similarities and differences between a public company and a private company? Refer slides 34-35, can choose more than 1 answer.
- A.
All public companies' names end with "Bhd", all private companies' names end with "Sdn Bhd".
- B.
A public limited Co can offer its shares to the public; a private limited Co cannot do that.
- C.
A private Co has a limit of 50 members; a public Co has no limit on members.
- D.
Both public and private companies can have minimum of 1 share and 1 director.
- E.
Both public and private companies must hold Annual General Meeting in every calendar year.
- F.
In a public Co, members’ resolution is to be passed in a meeting; in a private Co, members' resolution can be passed through a written resolution.
Correct Answer(s)
B. A public limited Co can offer its shares to the public; a private limited Co cannot do that.
C. A private Co has a limit of 50 members; a public Co has no limit on members.
F. In a public Co, members’ resolution is to be passed in a meeting; in a private Co, members' resolution can be passed through a written resolution.Explanation
Only public limited companies' names end with "Bhd", and only private limited companies' names end with "Sdn Bhd".....Public unliimted Co will not have "Bhd", while private unlimited Co will end with "Sendirian" only, without Bhd. Both public and private companies can have minimum of 1 share...but a public company requires minimum 2 directors. Private companies no longer need to hold AGM every year.Rate this question:
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- 9.
Explain the conversion of companies from private to public and public to private. Refer slide 36, can choose more than 1 answer.
- A.
"Going public" means a private company is compulsorily converted into a public company.
- B.
"Taking private" means a public limited company is converted to a private limited company.
- C.
Conversion will affect the company's identity, legal rights and obligations.
- D.
Conversion will affect the company's name.
Correct Answer(s)
B. "Taking private" means a public limited company is converted to a private limited company.
D. Conversion will affect the company's name.Explanation
Going public" means a private company is converted to a public company by having its shares being offered to the public and sometimes with listing in Bursa Malaysia. Compulsory conversion happens only in 3 ways as stated under s.42(4).
Conversion will not affect the Co's identity, legal rights and obligations.
Conversion will affect the company's name - through the addition of "Sdn" to the name of a private company, and the deletion of "Sdn" from the name of a public Co.Rate this question:
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- 10.
What is a holding Company and what is a subsidiary company? Refer slides 37-39, can choose more than 1 answer.
- A.
If Jumanji Bhd holds more than 50% of the shares of Jedi Sdn Bhd, Jumanji is the Holding Co of Jedi.
- B.
If Jumanji Bhd can appoint and dismiss directors of Jedi Sdn Bhd, Jumanji is the Holding Co of Jedi.
- C.
If Jedi Sdn Bhd holds more than 50% of the shares of Star Wars Sdn Bhd, and Jumanji Bhd holds more than 50% of the shares in Jedi, all these companies are related corporations.
- D.
A Holding Co must be a public limited Co; while a subsidiary Co must be a private limited Co.
- E.
If Jedi Sdn Bhd holds more than 50% of the shares of Star Wars Sdn Bhd, and Jumanji Bhd holds more than 50% of the shares in Jedi, Star Wars' holding Co is Jumanji Bhd.
Correct Answer(s)
A. If Jumanji Bhd holds more than 50% of the shares of Jedi Sdn Bhd, Jumanji is the Holding Co of Jedi.
B. If Jumanji Bhd can appoint and dismiss directors of Jedi Sdn Bhd, Jumanji is the Holding Co of Jedi.
C. If Jedi Sdn Bhd holds more than 50% of the shares of Star Wars Sdn Bhd, and Jumanji Bhd holds more than 50% of the shares in Jedi, all these companies are related corporations.Explanation
If Jedi Sdn Bhd holds more than 50% of the shares of Star Wars Sdn Bhd, and Jumanji Bhd holds more than 50% of the shares in Jedi, Star Wars' holding Co is Jedi Bhd, and the ultimate Holding Co is Jumanji Bhd. All 3 companies are related corporations. It is not necessary that a holding Co must be a public limited Co or a subsi must be a private limited co......sometimes a holding Co can be a private ltd Co and the subsidiary can be a public ltd Co.Rate this question:
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- 11.
Refer to the mind-map in slide 40 and choose the correct answer(s) regarding a wholly-owned subsidiary. Can choose more than 1 answer.
- A.
If Jumanji Bhd holds 100% of the shares of Star Wars Sdn Bhd, Star Wars is a wholly-owned subsidiary of Jumanji.
- B.
If Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jumaji Bhd, Star Wars is a wholly-owned subsidiary of Jumanji.
- C.
If Jumanji Bhd holds 100% of the shares of Jedi Sdn Bhd, and Jedi holds 100% of the shares of Star Wars Sdn Bhd, both Jedi and Star Wars are wholly-owned subsidiaries of Jumanji.
- D.
If Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jedi Sdn Bhd, and Jumanji Bhd holds 100% of the shares of Jedi, both Jedi and Star Wars are wholly-owned subsidiaries of Jumanji.
Correct Answer(s)
A. If Jumanji Bhd holds 100% of the shares of Star Wars Sdn Bhd, Star Wars is a wholly-owned subsidiary of Jumanji.
B. If Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jumaji Bhd, Star Wars is a wholly-owned subsidiary of Jumanji.
C. If Jumanji Bhd holds 100% of the shares of Jedi Sdn Bhd, and Jedi holds 100% of the shares of Star Wars Sdn Bhd, both Jedi and Star Wars are wholly-owned subsidiaries of Jumanji.
D. If Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jedi Sdn Bhd, and Jumanji Bhd holds 100% of the shares of Jedi, both Jedi and Star Wars are wholly-owned subsidiaries of Jumanji.Explanation
The correct answer is that if Jumanji Bhd holds 100% of the shares of Star Wars Sdn Bhd, Star Wars is a wholly-owned subsidiary of Jumanji. This means that Jumanji has complete control and ownership over Star Wars. Similarly, if Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jumaji Bhd, Star Wars is still a wholly-owned subsidiary of Jumanji because Luke is acting on behalf of Jumanji. Additionally, if Jumanji Bhd holds 100% of the shares of Jedi Sdn Bhd, and Jedi holds 100% of the shares of Star Wars Sdn Bhd, both Jedi and Star Wars are wholly-owned subsidiaries of Jumanji. This is because Jumanji has full ownership of Jedi, which in turn has full ownership of Star Wars. Finally, if Luke holds 100% of the shares of Star Wars Sdn Bhd as a nominee of Jedi Sdn Bhd, and Jumanji Bhd holds 100% of the shares of Jedi, both Jedi and Star Wars are also wholly-owned subsidiaries of Jumanji.Rate this question:
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- 12.
Distinction between Sole Proprietorship, Partnership and Co limited by shares. Refer to slide 42, pick the correct answer(s). Can choose more than 1 answer.
- A.
A partnership has minimum 2 and maximum 20 partners.
- B.
A private company has 2 to maximum 50 members.
- C.
A public company has 51 to unlimited number of members.
- D.
Sole-proprietorship, partnerships and limited companies must be with the purpose of profit-making.
Correct Answer
B. A private company has 2 to maximum 50 members.Explanation
A professional partnership has no maximum number of partners, only a general partnership will have a limit of 20 members.
A public company needs only minimum 1 member. Sole-proprietorship & limited company need not with the purpose of profit-making.Rate this question:
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- 13.
Distinction between Sole Proprietorship, Partnership and Co limited by shares. Refer slide 43 and choose the correct answer(s). Can choose more than 1 answer.
- A.
A Partnership must dissolve upon retirement, death and bankruptcy of partners.
- B.
A company has perpetual succession.
- C.
A partnership can take legal action in its own name.
- D.
Generally, if a wrong is done to a company, only the company can sue.
Correct Answer(s)
B. A company has perpetual succession.
D. Generally, if a wrong is done to a company, only the company can sue.Explanation
There can be an agreement to the contrary where retirement, death and bankruptcy of partners will not affect the partnership. A partnership's legal action is taken in the names of all partners.Rate this question:
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- 14.
Distinction between Sole Proprietorship, Partnership and Co limited by shares. Refer slide 44 and choose the correct answer(s). Can choose more than 1 answer.
- A.
A Co can own properties in its own name, and members cannot take out insurance over Co's properties.
- B.
In a partnership, partners' liability is unlimited, while in a company, the members' liability is limited.
- C.
In a partnership, a partner cannot assign his shares without other partners' consent, while in a company, members can freely transfer their shares.
Correct Answer
A. A Co can own properties in its own name, and members cannot take out insurance over Co's properties.Explanation
The 2nd sentence contains inaccuracy...In a company limited by shares, members' liability is limited to the amount unpaid on their shares, while in a company limited by guarantee, members' liability is limited to the amount they have guaranteed to pay in a liquidation.
The 3rd sentence contains inaccuracy....In a private limited company, there are restrictions on the members' freedom to transfer shares.Rate this question:
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- 15.
Distinction between Sole Proprietorship, Partnership and Co limited by shares. Refer slide 45 and choose the correct answer(s). Can choose more than 1 answer.
- A.
A company must have external Auditor and Company Secretary, while a partnership needs not appoint these 2 persons.
- B.
In a partnership, the accounts need not be audited, but in a company, the accounts must be audited.
Correct Answer
A. A company must have external Auditor and Company Secretary, while a partnership needs not appoint these 2 persons.Explanation
The 2nd sentence contains inaccuracy...In a professional partnership, the clients' account must be audited.Rate this question:
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