Jerry owns a motorcycle repair business. After 5 years, he decided to expand his business to include selling motorcycles and bicycles. He incorporated a company called J&J Motors Sdn Bohdan transferred all the assets of his business to the company.Jerry holds 95% of the shares of the company and his friend, Jenny holds the balance 5%. Consider the following separate and independent situations:

1. To protect the company from any loss against theft, Jerry purchased an insurance policy under his own name to insure all the assets of the company including the motorcycles and bicycles from A Assurance Bhd. 7 months later, the company premise was burgled andsome RM500,000 worth of motorcycles and bicycles were stolen.Advise A Assurance Bhd. whether it can avoid the claim made byJerry on his insurance policy to recover the loss against theassets of the company, from the perspective of company law. (10marks)

2. Jerry and Jenny made a restraint of trade agreement toprohibit either one of them from approaching customers of J&JMotors Sdn. Bhd., after leaving the company. 2 months later, Jennyleft J&J Motors Sdn. Bhd. and sold all her shares to Jerry. Shebegan to set up a similar business by incorporating another company, Jenny Motors Sdn. Bhd. and she started to approach J&JMotors’ customers using her new company. Jerry was furious to knowabout this and he threatened to take legal action against Jenny for breaching their restraint of trade agreement. Jenny claim that shehad not breached her agreement with Jerry on the ground that shedid not personally approach the customers. Advise Jerry whether hecan seek the court to lift veil of incorporation of Jenny MotorsSdn. Bhd. so that he can enforce the agreement?

Answer rating: 100% (QA)

Answer Insurance Policy Claim In this scenario Jerry purchased an insurance policy under his own name to insure all the assets of JJ Motors Sdn Bhd including the motorcycles and bicycles Under company law principles when assets are transferred to a company they become the property of the company not the individual shareholders Therefore any insurance policies taken out to protect those assets should be in the name of the company not the individual shareholders Since Jerry purchased the insurance policy under his own name it may be argued that the insurance contract is between Jerry and A Assurance Bhd not the company As a result A Assurance Bhd may have grounds to avoid the claim made by Jerry on his insurance policy to recover the loss against the assets of the company as the policy was not taken out in the name of the insured entity the company Restraint of Trade Agreement A restraint of trade agreement is a legal contract in which one party agrees to limit their ability to engage in certain activities typically to protect the interests of a business In this scenario Jerry and Jenny made a restraint of trade agreement to prohibit either one of them from approaching customers of JJ Motors Sdn Bhd after leaving the company If Jenny breached the restraint of trade agreement by approaching JJ Motors customers using her new company Jerry may seek legal action against her for breaching the agreement Jerry can potentially seek the court to lift the veil of incorporation of Jenny Motors Sdn Bhd in ... View the full answer