Burgundy Bhd., whose business is selling furnitures, has borrowed RM500,000 from one of its

shareholder, Crimson Bhd. Sapphire Bhd., whose board of director was controlled by Burgundy, has

passed a resolution to cause Sapphire to pay off Burgundy's debt to Crimson and in return, 1 million

of Crimson's shares in Burgundy to be transferred to Violet and Magenta, Sapphire's long serving

employees, as fully paid up shares.

On the other hand, Emerald has a very limited funds but is keen on purchasing Burgundy's shares.

Thus, Emerald obtained a loan from Tuscany Bank for the purpose of purchasing 20,000 shares in

Burgundy and 50,000 shares from Hibiscus Bhd., whose 64% of shares were held by Sapphire. Upon

knowing this, Sapphire quickly provided guarantee for Emerald's loan since the Chairman of the

Board in Sapphire is Maya, one of Emerald's friends.

You are the general counsel of Sapphire Bhd. You have been approached by one of the officers,

Lavender, to give your opinion on whether Sapphire Bhd. had contravened any provisions under the

Companies Act 2016.

[40 marks]