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Advise the concept and the context of ultra vires

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Reference no: EM132960173

Question - Happy Sdn. Bhd. is a private limited company by shares which was incorporated on the 31st of December 2015. The following is stated in the company's Memorandum of Association:

(a) The company is a company incorporated in the food and beverage sector. The company manufactures pre-packaged foods.

(b) The company shall contribute 3% of its annual profit to the charity of its preference.

(c) The company may make investments into research for biodegradable prepackaging of foods.

One year after its incorporation, Happy Sdn. Bhd.'s wholly owned subsidiary named Rockstar Sdn. Bhd. was incorporated in December 2016. Rockstar Sdn. Bhd.'s company objective was to "sell pre-packaged food through the medium of an e-commerce platform". However, since the business had begun, pre-packaged foods were sold through shop houses that the company owns. Shareholders of the subsidiary decides to voluntarily wound up the company as they felt that the current practices have failed to achieve the objectives of the company.

Meanwhile a local company named Lucky Sdn. Bhd. approached Happy Sdn. Bhd. for the investment into the opening of a cookery school. The investment according to Lucky Sdn. Bhd. will yield a substantial profit for Happy Sdn. Bhd.

Happy Sdn. Bhd. seeks your advise on the following issues:

(a) Advise the concept and the context of ultra vires in both Happy Sdn. Bhd. and Rockstar Sdn. Bhd's situation.

(b) Assuming that the investment in (b) is ultra vires, advise Happy Sdn. Bhd. if the investment is possible in reference to the Companies Act 2016.

Reference no: EM132960173

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