The document discusses a proposed acquisition by XYZ Berhad, a listed company, of ABC Sdn Berhad, a private company in a related business. There is a conflict of interest as the shareholders of ABC are related to Encik Abas, the MD of XYZ Berhad. As the acquisition is over 30% of XYZ's NTA, it is considered material. XYZ Berhad must make proper disclosures and announcements, seek shareholder approval, and comply with relevant sections of the Companies Act and Listing Requirements regarding interested parties and material transactions. The document also provides examples of past cases where directors were criminally prosecuted and imprisoned for breaching their fiduciary duties and failing to disclose interests under Sections 131 and 132 of

1. CA 1965- FORMATION OF COMPANY
INJECT CAPITAL
SOLOMON VS SOLOMON (1897)
APPOINT
FIDUCIARY DUTY
TO ACT BONA FIDE IN THE BEST
INTEREST
OF THE COMPANY AS A WHOLE
POWER OF DIRECTOR : ARTICLE 73

2. COMPANY
FIDUCIARY DUTY
TO ACT BONA FIDE IN THE BEST INTEREST
OF THE COMPANY AS A WHOLE
SECTION 132 OF CA 1965
BREACH OF SECTION CRIMINAL LIABILITY
CASE : RE KIE HOCK SHIPPING 1971 PTE LTD 1985
1 MLJ 411

3. APPLICATION OF S 131 & 132 OF CA 1965
Note : * Alif, Alia and Anisa is Encik Abas’s children

4. FACTS OF THE CASE
XYZ Berhad is proposing to acquire ABC Sdn. Berhad, a private
company which is in the business of chicken rearing (i.e related to
the current principal activity of XYZ Berhad)
The proposed acquisition of ABC Sdn. Berhad would be at a price
of more than 30% of XYZ Berhad’s NTA
The acquisition of ABC Sdn. Berhad will be financed by XYZ Berhad
via internal generated fund and borrowings
The shareholders of ABC Sdn. Berhad is related to En Abas, who is
the MD of XYZ Berhad and at the same time a shareholder of XYZ
Berhad (holding 24% shareholding)

5. ISSUES OF THE CASE
1. Conflict of interest – Whether XYZ Berhad is allowed
to acquire a company (i.e ABC Sdn. Berhad) whose
shareholders are related to Encik Abas, the MD of XYZ
Berhad of ABC Sdn. Berhad would be at a price of more
than 30% of XYZ Berhad’s NTA
2. Whether the proposed acquisition of ABC Sdn. Berhad
by XYZ Berhad is a material transaction

6. SOLUTION
XYZ Berhad is a listed company, therefore the followings
are applicable to the company :-
1. COMPANIES ACT 1965
2. MAIN MARKET LISTING REQUIREMENTS OF BURSA
MALAYSIA SDN BERHAD
3. MEMORANDUM AND ARTICLES AND ASSOCUATION
OF XYZ BERHAD

7. ISSUE 1 : CONFLICT OF INTEREST
YES, THERE IS A CONFLICT OF INTEREST AS SHAREHOLDERS OF ABC SDN.
BERHAD IS THE CHILDREN OF ENCIK ABAS, THEREFORE HE IS DEEMED TO HAVE
AN INDIRECT INTEREST.
SECTION 131 – DISCLOURE OF INTEREST IN
CONTRACTS
SECTION 131(4) – COMPANY SECRETARY TO
RECORD THE DECLARATION IN MINUTES OF
THE BOARD MEETING
SECTION 131A – INTERESTED PARTY NOT TO
PARTICIPATE OR VOTE
CAN PROCEED TO ACQUIRE SUBJECT TO CHAPTER
10 OF MAIN MARKET LISTING REQUIREMENT AND
SECTION 132C AND 132C(1A) OF CA 1965
CASE : REGAL HASTINGS LTD VS. GULLIVER 1942 1 ALL ER 378 – DIRECTORS COULD PROTECTED THEMSELVES
BY MAKING FULL DISCLOSURE TO AND HAVING THEIR ACTIONS RATIFIED BY GENERAL MEETINNG AS
DIRECTORS CONTROL THE VOTING OF GENERAL MEETING

8. ISSUE 2 : MATERIAL ACQUISITION
1. THE THRESHOLD FOR MATERIAL ACQUISTION IS SET
OUT IN S132C(1A) OF CA 1965.
2. BEING LISTED ALSO FURTHER SUBJECT TO CHAPTER 10
OF THE MARKET LISTING
3. AT 30% OF NTA, HENCE CONSIDERED SUBSTANTIAL

9. ISSUE 2 : MATERIAL ACQUISITION
1. XYZ BERHAD NEED TO UNDERTAKE THE FOLLOWINGS:-
a) IMMEDIATE ANNOUNCEMENT OF THE PROPOSED
ACQUSITION AS SOON AS THE TERMS IS AGREED
a) A SEPARATE LETTER TO BURSA MALAYSIA SETTING OUT THE
APPLICABLE PERCENTAGE RATIO
a) A CIRCULAR TO SHAREHOLDERS INCLUDES INFORMATION AS
APPENDIX 10B OF THE MAIN MARKET LISTING
REQUIREMENTS
a) GENERAL MEETING NEED TO BE CONVENED TO SEEK
SHAREHOLDERS APPROVAL

10. CASE : BREACH OF SECTION 131 AND 132
Section 132(1) of Companies act 1965 - Failure to exercise power as director of a company in
the best interest of the company 14 CASES
KUALA LUMPUR HIGH COURT SENTENCED COMPANY DIRECTOR COMPANY DIRECTORS LEE YEW KAY & KOO KOK BUN SENTENCED TO TWO MONTHS
TO ONE (1) YEAR IMPRISONMENT FOR MISAPPROPRIATING IMPRISONMENT IN A LANDMARK DECISION FOR FAILING TO DISCLOSE INTEREST TO
COMPANY’S MONEY BOARD OF DIRECTORS
Monday, 19 November 2012 - Noorhamizam bin Hamid, the Monday, 7th May 2012: The Kangar Sessions court today sentenced Lee Yew Kay and
director of Rebana Emas Sdn Bhd was sentenced to one (1) year Koo Kok Bun to two (2) months imprisonment and fined RM60,000 each in default 24
imprisonment by the Kuala Lumpur’s High Court for committing months imprisonment for contravening section 131(1) Companies Act 1965 (‘CA
an offence under section 132(1) of the Companies Act (CA) 1965. 1965’).
The Sessions Court ruled that the Prosecution had proved its case beyond reasonable
Noorhamizam bin Hamid had previously on 23 February 2012 doubt against the both directors that they have failed to disclose about the RM1.6
pleaded guilty to the charge in the Sessions Court and was million contract entered into with Isuretek Construction which they have direct
sentenced to pay fine of RM12,000.00 in default five (5) months interest to the board of Penasuria Corporation Sdn Bhd.
imprisonment. Suruhanjaya Syarikat Malaysia (SSM) dissatisfied Section 131(1) CA 1965 provides that every director of a company who is in any way
with the decision of the Sessions Court filed an appeal to the High whether directly or indirectly, interested in a contract or proposed contract with the
Court. company must declare the nature of his interest as soon as possible at the directors’
The charge against Noorhamizam read that he did not exercise meeting. If convicted a director can be sentenced to a maximum seven (7) years
his powers for a proper purpose and in good faith in the best imprisonment or fine RM150,000 or both.
interest of the company as he had misappropriated company’s Lee Yew Kay and Koo Kok Bun were also convicted for committing an offence under
money of RM160,000.00 into his personal bank account. section 132(1) CA 1965 and were fined RM15,000 each in default 15 months
SSM hopes the aforesaid landmark decision serves as a reminder imprisonment. Section 132(1) provides that a director shall at all times act honestly
to all company directors that they have to perform their duties and use reasonable diligence in the discharge of the duties of his office.
with high integrity and exercise the highest quality of good Encik Mohamad Azies Han Mohd Fadzil prosecuted on behalf of SSM.
governance. The above landmark custodial sentence imposed by the Sessions Court Judge clearly
Deputy Public Prosecutor, Puan Nur Izzaini Ishak appeared on demonstrates the seriousness of the offences committed by the both directors. SSM
behalf of the Public Prosecutor. hopes the deterrent sentence above will send out a clear message to all directors in
ISSUED BY : SURUHANJAYA SYARIKAT MALAYSIA (SSM) Malaysia that they have a great responsibility and an important role in promoting good
DATED : 20 NOVEMBER 2012 governance. SSM will continue its enforcement action so as to encourage and promote
proper conduct amongst directors, secretaries, managers and other officers of a
corporation in Malaysia.
ISSUED BY: SURUHANJAYA SYARIKAT MALAYSIA
DATED : 7 MAY 2012.

11. CONLCLUSION
1. BREACH OF THE ACT IS VERY SERIOUS CRIME WHICH CAN
AMOUNT TO CRIMINAL