LGV7024: Syarikat Advanze Thermo Sdn Bhd (“Advanze Thermo” or “the company”) is a private company that was incorporated in 2010: corporate law Assignment, MMU, Malaysia

Event 5
Thava, Ushalini and Vinod are shareholders of Advanze Thermo (“the three shareholders”). They also hold shares in other companies. Thava holds 80% of the shares of Syarikat Windform Sdn Bhd (“Windform”), which in turn holds 30% of the shares of Syarikat XP Energy Sdn Bhd (“XP Energy”). Ushalini holds 25% of the shares of XP Energy.

Meanwhile, Vinod used to be a director and shareholder of XP Energy. He resigned his directorship and sold off his shares in 2022. Although XP Energy’s board regularly consults Vinod’s advice, the board largely acted on its own, and Vinod’s advice carried little weight in the board deliberations. The three shareholders wish to know whether they have obligations to disclose their Beneficial Ownerships (BOs) in Syarikat XP Energy.

Event 6
Advanze Thermo has a warehouse which is currently rented to Syarikat Yprez Lumber Sdn Bhd (“Yprez Lumber”), a manufacturing and trading company dealing with sawn timber, door and window frames. It has been defaulting in its payment of rent to Advanze Thermo.
During a recent board meeting, the directors discussed whether to commence a distress proceeding to recover the rental sum of RM50,000/- from Yprez Lumber. Beatrice and Chitra estimated Yprez Lumber’s office equipment and stock-in-trade (“the assets”) to be worth around RM1.5 million. However, Chitra stated that Yprez Lumber’s Managing Director, Zuraidah, had mentioned to her (Chitra) before that Yprez Lumber’s assets were charged to Bank Awam by way of two floating charges. Chitra is concerned that Advanze Thermo, being a landlord, would not have priority over Bank Awam with regard to the proceeds of sale of Yprez Lumber’s assets.

Event 7
In 2022, Advanze Thermo collaborated with Syarikat Grade Plastics Sdn Bhd (“Grade Plastics”) to hold shares in a joint venture company, Syarikat I-Power Sdn Bhd (“I-Power”), a Main Market-listed company that is engaged in construction and engineering. Two directors of Grade Plastics, James and Kenneth, became the only two directors of I-Power. In July 2022, Syarikat I Power was offered an opportunity to purchase the quarry business of a public listed company, Syarikat Timur Quarry Bhd (“Timur Quarry”). James and Kenneth proposed that Advanze Thermo and Grade Plastic jointly come up with RM10 million, the purchase price fixed by Timur Quarry. Several rounds of discussion between Advanze Thermo’s board, James and Kenneth turned out inconclusive. Advanze Thermo was unable to come up with its share of the purchase price.

In February 2023, Advanze Thermo came to know that Grade Plastics collaborated with another company, Syarikat Laman Technologies Sdn Bhd (“Laman Technologies”), to purchase Timur Quarry’s business, resulting in a huge loss of corporate opportunity for IPower. Advanze Thermo’s board felt that Syarikat Grade Plastics, James, Kenneth and the directors of Laman Technologies had engaged in an act of oppression against Advanze Thermo. Meanwhile, regarding Timur Quarry, for the financial year ending 2022, its auditor, Mannings PLT, indicated doubts about the veracity of Timur Quarry’s transactions with three (3) customers. The auditor was suspicious of the authenticity of the confirmation letters that it received. Mannings PLT was also suspicious about the existence of four (4) suppliers since these suppliers had the same business addresses and shareholders. As such, the auditor’s report contained a disclaimer.

The auditor reported the matters to the independent directors, the Companies Commission of Malaysia and the Securities Commission. Syarikat Timur Quarry’s board (“the board”) were dissatisfied with the auditor’s action because it felt that there was no issue with regard to the legitimacy of the sale and purchase transactions. The board felt that the auditor’s action was unfair for not highlighting the audit issues to the board and instead causing the company to be investigated by the regulatory bodies.

Required: Discuss the issues arising from the above events.

(1) In relation to Event 1, explain whether the court will lift the veil of incorporation between Advanze Thermo and PT Hydrochem; and whether the Pontianak landowners are able to enforce the judgment against Advanze Thermo. (10 marks)

(2) In relation to Event 2, describe the potential legal liabilities for Advanze Thermo and its directors. Identify the possible defences that they may argue.

(3) In relation to Event 3, explain the disclosure obligations of Deric arising from the proposed contract with OPVC Industries. Discuss also whether Deric may participate in any discussion or vote on the proposed contract at the next board meeting. (12 marks)

(4) In relation to Event 4:
(a) Discuss whether Advanze Thermo’s board has absolute discretion to reject the proposed transfer without assigning any reason. Explain why Stanley advised the board to make a decision fast and to provide a reason for any rejection. (15 marks)
(b) Explain whether a company needs to issue a share certificate and state how a shareholder may obtain a share certificate for himself. (5 marks)
(5) In relation to Event 5, discuss whether Thava, Ushalini and Vinod have obligations to disclose their Beneficial Ownerships (BOs) in Syarikat XP Energy. (10 marks) (6) In relation to Event 6:
(a) Explain whether Advanze Thermo, as a Landlord, will have priority over a
floating chargee like Bank Awam. (9 marks)
(b) Discuss the following different situations:
Assume that on 3-4-2023, Yprez Lumber took a loan of RM1 million from Bank
Awam and two floating charges were created on the same day (3 April). A few days earlier (20-3-2023), Bank Awam advanced RM200,000/- to Yprez Lumber. Bank Awam subsequently disbursed the rest of the sum (RM800,000) on 3 April.