Economics

Serba Boleh Bhd. (“Serba Boleh”) is a retail company selling sports apparels, equipment and accessories. Siva and Saraju are the directors and each of them holds 20,000 shares whereas Yusri holds the remaining 30,000 shares. The directors and Yusri were not on a cordial term due to several disagreements in the past relating to management decisions and some personal issues. Consider the following separate and independent situations.

a) Yusri decided to transfer 20,000 of his shares to his brother, Yassin. He has submitted the instrument of transfer to Serba Boleh but Siva and Saraju refused to register the transfer. The directors never disclosed to Yusri the reasons for the refusal but Yusri knew it had something to do with the fact that he and the directors had some issues in the past. After 2 months, the transfer was never registered. (13 marks)

(b) Siva and Saraju allotted 40,000 new shares to Priya and Preeti, Siva’s sisters, without obtaining the approval from members in the general meeting. The shares ranked equally to Yusri’s existing shares and the issuance of the new shares will result in the dilution of his voting rights.