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Candy and Caramel, two good friends, had been discussing starting a confectionary business. After some thought, they decided to start a chocolate manufacturing business with the niche of using only “environmentally friendly” raw materials. The focus of the proposed business was to sell these chocolates to an exclusive high-end market. Candy was extremely excited at the prospect of the business and soon arranged for a large order of assorted nuts from Brazil at a cost of RM 25,000. She signed the agreement as “Candy, acting solely on behalf of Chocolicious Sdn. Bhd.” In early August 2020, Caramel and Candy successfully incorporated Chocolicious Sdn. Bhd., with an initial investment of 500,000 fully paid up shares of RM 1 each. Both Candy and Caramel were directors of the company. Later that month, Candy sold the consignment of nuts to Chocolicious Sdn. Bhd. for RM 50,000 as she claimed that the price of nuts had gone up. At the first board meeting, Caramel and Candy ratify the purchase of the nuts. The business was a success and in October 2020, Candy and Caramel felt confident enough to proceed with exploring new markets and products. They decided to venture into making bath products from the surplus nuts not used in the chocolate business. This new business venture is not specifically stated in the company constitution. This part of the business failed and soon the company owed large amounts of money to suppliers and contractors. Last week, Bohlui Bank purchased all the shares in Chocolicious Sdn. Bhd. from Candy and Caramel. Subsequently the Bank replaced them with their own directors. The newly appointed directors have now discovered that the nuts from Brazil were actually only worth RM 20,000.00 and have also just received letters of demand from suppliers and contractors for the outstanding amounts owed.Advise the newly appointed directors of Chocolicious Sdn. Bhd as to what is the best of cause of action they have against Candy and Caramel. Further, consider whether the company is obliged to pay the contractors and suppliers.
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