Reference no: EM132532938

Kasturi Sdn Bhd, a construction business which was incorporated in 2016 has issued 6,000 shares. The company's director, Lim, owns 2,000 shares. Hamid owns 2,000 shares and the remaining 2,000 shares are owned by a number of investors. The company has run at a loss and has never made any profit since 2016. Hamid thinks that the company's poor performance is due to the poor management by the director. He thinks a change of management can certainly bring profit to the company. Therefore he starts buying the shares held by the investors with a view to vote Lim out of office. Lim knows about the plan. He immediately issued 2,000 new shares and offer to sell them to his friend, Sam. When Hamid realises his plan to remove Lim is not workable, he decides to sell his shares, but he cannot find a buyer. Lim causes the company to buy Hamid's shares to get rid of him for good. Lim also decides to pay dividend out of the money from the new shares the company has issued. Discuss the answer with reference to the following issues;

(a) Who can issue shares?;

(b) Whether the duty of the director to act for proper purpose has been breached?;

(c) Whether share buyback is allowed?;

(d) Whether payment of dividend is lawful?