CORPORATE LAW - LAW 485

TEST 1
BUSINESS ENTITIES, FORMATION
& SEPARATE LEGAL ENTITY

ANSWER ALL QUESTIONS

1) The members of a social club wish to form a legal entity. There must be no
commercial risk but they do not wish too much disclosure of their affairs to the public.
What type of company suitable for their purpose. Give reason for your answer. Create
a name for this company according to the type of company that you have picked.

2) Advise the above parties as to how to incorporate their desired company.

3) Elaborate 2 statutory exceptions and one judicial exception to the principle of separate
legal entity.

The biggest obstacle on your road to success is yourself!!

ANSWERS TO QUIZ 1

1)

Private and limited by guarantee

2)

Limited company is different from any other company because the liability of
member towards the companys debt is limited other by shares of by guarantee.

3)

The fact that member is not liable for the co.s debt can be manipulated by
businessman.

4)

Because the court believed that the co is the alter ego of its controller i.e. Lorent
Osman.

CORPORATE LAW LAW 485

TEST 1
BUSINESS ENTITIES & SLE
ANSWER ALL QUESTIONS:
1) Until 1990, Ali carried on a radio and television repair business as a
sole trader. In that year, he expanded into radio and television sales
and incorporated the business, transferring the whole of its assets to
the company known as Brightscreen Sdn. Bhd. Ali and his wife are
the only shareholders of the company. Ali continued to insure the
assets of the business in his own name as he had done before the
incorporation of the company. This year the premises of the
company were burgled and some RM50,000 worth of audio
equipments were stolen. Ali made a claim on his insurance policy but
the insurance co. refuses to pay.
Advise Ali.
(50 marks)
2) Give 5 differences between company and partnership.
(25 marks)
3) Explain one instance where the court curbs the misuse of the
concept of SLE.
(25 marks)

GOOD LUCK!!!
ANSWER

1)

Issue
Define SLE
Salomon v Salomon & Co
Macaura v Northern Assurance
Application
Conclusion

2)

a)
b)
c)
d)
e)
f)

3)

Statutory exceptions
- S36, S121(1), S303(2), S304(1) & S365

members
loan
liabilities of members
assets
winding up
action under the law

Common Law exceptions

- alter-ego, evade legal obligations, sham, attribute mental or
physical state.