Pasir Sdn Bhd vs$.$ Serai and Kunyit under the Companies Act $2016($Malaysia$)$

Pasir Sdn Bhd potentially has legal recourse against both Serai and Kunyit based on the Malaysian Companies Act $2016($CA $2016).$

Here's a breakdown of the situations and potential claims:

I$)$ Serai's Conflict of Interest and Breach of Duty $($Sections $168$ & $177,$ CA $2016)$

$>$ Facts: Serai prepared proposals for both the company and his friend Halia, a competitor, and received an undisclosed financial incentive.

$>$ Potential Claim: Conflict of interest and breach of duty. Serai had a duty to act in the best interests of Pasir Sdn Bhd $($Section $168(1),$ CA $2016).$ By preparing a proposal for a competitor and accepting a bribe, he breached this duty $($Section $177,$ CA $2016).$

Explanation:

$>$ Authority: Section $168(1)$ states a director's duty to act in good faith and in the best interests of the company. Section $177$ prohibits directors from placing themselves in a situation where their duty to the company conflicts with their personal interests.

II$)$ Loss of Tender Due to Serai's Actions

$>$ Facts: The company lost the tender due to Serai's inferior proposal for the company and potentially sharing confidential information with Halia.

$>$ Potential Claim: Negligence and Misfeasance. Serai's actions might be considered negligent, causing the company to lose the tender $($Section $212(1)($b$),$ CA $2016).$ Additionally, his actions could be seen as misfeasance or abuse of power $($Section $213(1),$ CA $2016).$

Explanation:

$>$ Authority: Section $212(1)($b$)$ allows the company to take legal action against a director for negligence or default in duty. Section $213(1)$ empowers the company to seek compensation for loss caused by a director's misfeasance or breach of trust.

III$)$ Debu Sdn Bhd $($Conflict of Interest and Potential Fraud$)$

$>$ Facts: Serai joined Debu Sdn Bhd$,$ a company formed with Halia while he was still a director of Pasir Sdn Bhd$.$ Debu Sdn Bhd won a tender after Serai left Pasir Sdn Bhd$.$

Explanation:

$>$ Potential Claim: Conflict of interest and potential fraud. Serai's involvement in Debu while a director of Pasir could be considered a conflict of interest $($Section $168,$ CA $2016).$ Additionally, if Debu gained an unfair advantage through Serai's knowledge of Pasir's business, it could be considered fraud.

$>$ Authority: As mentioned above, Section $168$ prohibits directors from conflicts of interest. Depending on the circumstances, Malaysia's common law principles on fraud might also apply.

$>$ Facts: Kunyit, a bankrupt director, signed contracts worth RM$50$ million on behalf of Pasir Sdn Bhd$.$

Explanation:

$>$ Potential Claim: Disqualification as a director. Under Section $133(1)($a$),$ CA $2016,$ Kunyit's bankruptcy disqualifies him from being a director. Any contracts he signed during this period could be challenged based on his lack of capacity to act $($Section $134,$ CA $2016).$

$>$ Authority: Section $133(1)($a$)$ disqualifies undischarged bankrupts from being directors. Section $134$ allows the company to take legal action to set aside contracts entered by a disqualified director.

Recommendations:

Pasir Sdn Bhd should consult with a lawyer specializing in company law to assess the specific facts and evidence. The lawyer can advise on the most appropriate course of action, which may include:

Demanding compensation from Serai for the lost tender and breach of duty.

Investigating the formation of Debu Sdn Bhd and potentially pursuing legal action against Serai and Halia.

Declaring the contracts signed by Kunyit as void due to his disqualification.

Taking steps to remove Kunyit from the company's directorate.

conclusion and introduction for this question