Question 1

Mr X, Mr Y and Mr Z are a partners in a firm that sells shoes in Kuala Lumpur. They want to set up the factory in Shah Alam in January 2020 and plan to start operations manufacturing sport shoes in July 2020. Mr X owns an empty factory in Shah Alam and wants to sell it to the proposed company for the sum of RM1 million; Mr X signed the sale and purchase agreement on 3 January 2020, as the vendor and Mr Y and Mr Z signed on behalf of the company. They wish to form a private limited company. Mr X , Mr Y and Mr Z will be the Directors of their company; and their friends Mr M and Mr P want to just contribute to the equity capital of the company. They wish to register the company and name it 'Bata Sdn Bhd'. Next, they applied to Rich Bank for a loan of RM700,000 to buy machinery to equip the factory.

(a) Discuss the following:

(i) The benefits of changing this conventional partnership to a private limited company. (10marks)

(ii) What are the steps and restriction to register this company in accordance with the Companies Act 2016? (10marks)

(iii) What steps should the proposed company and Mr X take to make sure the sale and purchase agreement for the land binds the parties? (5 marks)

(b)The company was registered on 8 July 2020 and the notice of registration issued by the CCM(SSM). Thereafter Mr X, Mr Y and Mr Z signed the loan agreement with Rich Bank. The loan agreement with Rich Bank has a term that states that "In the event of any dispute the borrowers cannot seek remedy in a court of law".

(i) Is this term enforceable? (10 marks)

(ii)Meanwhile Mr Y plans to form another company with Mr M and Mr P selling sports shoes in Penang. Can he (do this)? (15 marks)