Professional Documents
Culture Documents
Company Note
Company Note
Company
Limited
Liability
Partnership
(LLP)
Partners
contribution
General
Partnership
Sole Proprietership
Partners
contribution
Own contribution
Capital
contributio
n
Owners
Share capital
Company
(members/
shareholders
according to
own shares)
LLP (partners
have a share in
the capital n
profits of the
LLP)
Partners
Sole Proprietor
Legal
status
Separate legal
entity
Separate legal
entity
Party that
is liable for
debts of
the
business
Responsibi
lity for
manageme
nt of
business
Personal
liability
Company
LLP
Not a
separate legal
entity
Partners
Board of
directors
Partners
Partners
Sole Proprietor
Not personal
liability
Liabilities borne
r to extend of
unpaid shares
only
Not personal
liability, except
for own wrongful
act/ omission
Liabilities borne r
to extend of
unpaid share
capital only
Unlimited
liability
Unlimited liability
No. of
shareholde
rs/
partners
Min 2 n max 50
in private
company
Min 2 n no max
limit
2 to 20
partners
(except for
professional
practice with
no max limit)
Sole Proprietor
ies
Unlimit
ed
compan
ies
None
of the members can hold shares on behalf of a corporation
compan
Is not prohibited from lending money to its directors or persons connected
ies
Is exempted from filing its audited profit n loss accounts n balance sheet
It must be solvent
Public Company other than a private company
compan It may be a limited/ unlimited company. N also may be limited by shares/
guarantee
ies
All companies limited by guarantee r public companies
Does not have the word Sdn
Further subdivided into 2 categories: (i) listed on Bursa Msia; (ii) shares r not
listed on the stock exchange
Related Companies
S6: companies r deemed to be related where a corporation: (i) is the holding company; (ii)
is a subsidiary of another corporation; (iii) is a subsidiary of the holding company
Holding
and
subsidia
ry
compan
ies
Ultimat
e
holding
compan
y
Wholly
owned
subsidia
ry
Promoters
Who
could no longer restore the land, n the rescission of the contract was not
allowed
Rescission also not allowed if a 3rd party has acquired rights over the
property for valuable consideration. Thus, if the land is sold to a third
party, rescission could not be ordered
When rescission is not possible, the court may order the promoter to pay
damages to the company. This was held in Re Leeds and Handley
Theatres of Variety
The company also can choose to recover the secret profit made by the
promoter
In Gluckstein v Barnes, the court held that the company could recover
the profit of L20,000 which was not disclosed in the companys
prospectus by the promoter
A company can rescind or affirm the contract, if there is a difference
between the sale n purchase price paid by the promoter for a property
which he earlier purchased without intention to sell it to a company he
is incorporating. This was held in Tracy v Mandaley
The promoter is deemed to be a constructive trustee of the company he is
promoting, thus he can be compelled to transfer the property to the
company
In Fairview Schools Bhd, the promoter applied for n was issued with a
permit to operate the school. As the company was incorporated to
manage a private school, the promoter was deemed to held the permit
in trust for the company
Reimburse s60(3): the money in the companys share premium account may be used
ment
to write off the preliminary expenses of the company
It does not require the company to reimburse the promoters if they have
incurred costs n expenses wen undertaking their duties to promote the
company
The promoter can only claim reimbursement if the company has agreed to
do so
If there is an agreement to the effect, it is enforceable although it is for
past consideration. S26(b) of Contracts Act has recognized past
consideration, n this was affirmed in Kepong Prospecting Ltd v
Schmidt
Pre-Incorporation Procedure
Effects of Incorporation
A company if incorporated upon the issuance of the certificate of incorporation by the ROC
S16(5): the effects of incorporation
Perpetual
existence
and
separate
legal
entity
Sue and be
sued
Common
seal
Power to
hold land
Liability of
members
H: the members n the company were different entities. As the wrong was committed
against the company, only the company could institute the legal action. The members had
no cause of action against the wrongdoers as the wrong was not committed against them
There is a veil separating the company on one side, n its members n officers on the other
side
Both r separate legal entities, n the debts n obligation of one cannot be imputed on the
other. Therefore, the company, not its members n officers, is liable to pay its debts
The doctrine of privity n the concept of separate legal entity will not protect the
wrongdoers in the certain circumstances of statutory exceptions n common law, as the
circumstances will render the veil to be lifted
Statutory
Exceptions
Common
Law
subsidiary company, the court still held that the hotel was liable to pay
termination benefits to the employees
Public policy
In Daimler Co v Continental Tyre and Rubber Co, the court looked
at the identities of the shareholders n held that although the company
was incorporated in England, it was an enemy company because its
shares were held by Germans. At that time, English govt issued a
decree that no business could be conducted with the enemy during the
1st World War
Memorandum of Association
Alternation
S21: the memorandum may be altered to the extent n in the manner provided by this Act
but not otherwise
S21(1A): if a provision in the companys memorandum could lawfully have been contained
in its articles of association, the company may by special resolution alter the
memorandum; unless the memorandum itself prohibits the alternation
Objects Clause
S18(1)(b): every companys memorandum must include a clause on its objects, as it may
important for 3rd parties to know the companys objects b4 they deal with the company or
subscribe in its shares
The courts have classified the objects clause into:
(i)
Independent objects main objects of a company, the business activities which the
company may expressly undertake
(ii)
Dependent objects additional activities, the court can interpret them widely to
avoid the likelihood of a transaction being void
(iii)
Power to achieve their objects. May be found in memorandum or be provided
certain implied powers by Act
Power imputed on a company by Act:
(i)
Have power to make donations for a patriotic or charitable purpose
(ii)
May acquire land if the company is formed with the intent of profit
S20(1): no act or purported act of a company shall be invalid by reason only of the fact
that the company was without capacity or power to do the act
Thus, a company cannot use the lack of capacity as a defence, as the contract is still a
valid contract. They have to perform their obligation under the contract
In Public Bank Bhd v Metro Construction Sdn Bhd, the court held that s20(1) strikes
down the absolute effect of the ultra vires doctrine. A transaction is not invalid by reason
only of the fact that the company was without the capacity or power to enter into the
transaction
There is no need to differentiate between dependent objects, independent objects n
powers of the company
Lack of capacity or power may still be asserted or relied upon by selected persons in
certain circumstances which r prescribed in s20(2). According to Pamaron Holdings Sdn
Bhd v Ganda Holdings Bhd, persons other than those listed in s20, cannot raise the
issue of ultra vires
Section
By whom
Against whom
Consequences
20(2)(a)
Member of
company n
floating chargee
Company
20(2)(b)
Company or
member of
company
Minister charged
with the
responsibility for
companies
Present or former
officer
20(2)(c)
Company
Objects clause may be altered by complying with the procedure laid down in s28
S28(1): by passing a special resolution. 21 days notice of the meeting must be given to:
(i) all members of the company; (ii) all trustees for holders of debentures issued by the
company
The notice of the meeting must specify the intention to propose the special resolution to
alter the objects clause
Must at least 75% of the members present vote in the resolution favour during the
meeting
The alternation only takes effect upon the lodgement of the special resolution with the
ROC. This can be done after the 21 days of passing of resolution
21 days is to allow holders of at least 10% of the companys issued capital or nominal
value of debentures who r not happy with the alternation to apply to the court for its
cancellation
If no application is made to court, then the company shall lodge the resolution with the
ROC not later than 14 days after the expiry of 21 days from the date of the resolution
If there is an application to the court, n court has affirmed the resolution, the company
shall lodge the resolution n the court order with the ROC within 14 days from the court
order
Articles of Association
It is also part of the company constitution. It contains the internal arrangement, rules n
regulations of the company. Thus including matters relating to the transfer of shares,
proceedings at general meetings, appointment of directors n secretary, powers of
directors n payment of dividends
A company limited by shares may adopt the regulations found in Table A of the Companies
Act. S30(2) regulates the company which does not register its articles or companies which
do not exclude the application of the said provisions in Table A
S33(1): articles bind the company n members as though they have signed the document.
they r deemed to agree to observe n be bound by the articles
If there is a conflict between memorandum n articles, the memorandum prevails
Contents
Requirement
1st, s29(2): it must be printed n divided into numbered paragraphs. It must also be signed
by each of the subscribers to the memorandum in the presence of at least one witness
(cannot be a subscriber)
2nd, s29(3): an unlimited company with a share capital, it must state its authorized share
capital n its division into shares of a fixed amount
3rd, s29(4): for companies other than share capital, they must state the max number of
members in the company
4th, s15(1): for a private company limited by shares, its memorandum or articles must
state the restriction on the transfer of its shares, not more than 50 members, no invitation
to public
5th, s122(3) n 139(1A): the names of companys first directors n first secretary must be
contained in memorandum or articles
6th, for a public listed company, articles must comply with the mandatory clauses
prescribed in the Listing Requirements
Contract
between
members
Position of
outsiders
Restriction
Effects
Directors: Duties
A company consists of 2 organs, namely the board of directors n the members at the
general meeting. Their duties r prescribed in the companys articles
The directors r agents of the company n thus owe a fiduciary duty towards the company, it
is also stated in the Companies Act
A director is a person who is appointed as a director following the procedure laid down in
the companys articles. Further, s4(1) also defines director as:
(i)
A de facto director: a person occupies the position of director even though he was
not appointed or his appointment was defective
(ii)
A shadow director: a person in accordance with whose directions or instructions the
directors of a corporation r accustomed to act
(iii)
An alternate/ substitute director: a person nominated by another director to attend
meetings or perform duties on his behalf
In Mistmorn Pty Ltd (in liq) v Yassen, the court held that whether a person is a director
or not, does not depend on the title ascribed to him. It is a question in every case of what
his powers, duties n functions r in relation to a particular company
Directors Duties
S131B: to power to manage the companys business is usually vested in the board of
directors
In Great Eastern Ry v Turner, it was said that directors r the mere trustees or agents of
the company, trustees of the companys money n property, agents in the transactions
which they enter into on behalf of the company
Thus, they owe a fiduciary duties to company. They r to act honestly, in good faith for the
benefit of the company. They r not to abuse their power or position. They should also avoid
any conflict or interest. These r codified in s132(1) n (1A)
S132(6) extends these duties to other officers beside of directors. They r persons who r
appointed as directors as employees of the majority shareholders. They r known as
nominee directors. S132(1E) provides that a nominee director has to act in the best
interest of the company which prevails over that to the person who nominated him
S132(1)
Good faith
Proper
purpose
S132(1A)
Business judgment
S132(1B): in making a business judgment, if a director has met the requirement of duty
under s132(1A), then he cannot be sued for breach of his duty
S132(1B) also defines that if the director make the decision: (i) in good faith for a proper
purpose; (ii) does not have material personal interest; (iii) based on information given
which is reasonably believes to be appropriate; (iv) reasonably believes the decision is in
the best interest of the company. Then he is deemed to make a business judgment
Delegation
S132(1F) allows the board of directors to delegate any power of the board to unless
such delegation is prohibited by: (i) Companies Act; (ii) memorandum or articles; (iii)
members resolution
Directors are entitled, subject to the AOA , to delegate particular functions to those below
them in the management chain, and to trust..
their competence and integrity to a reasonable extent. However the exercise of the power
of delegation does not absolve a director from the duty to supervise the discharge of the
delegated function
Whether or not the duty above has been discharged depends on the facts of each case,
including the directors role in the management of the company
Secret
Profits
Competiti
on with
own
company/
rival
company
Corporate Transactions
Pre-incorporation Contract
After
ratification
Before
ratification
Contracting by Companies
(b) In writing by any person acting under the expressed or implied authority of the
company
(c) Orally by any person acting under the expressed or implied authority of the company
Common Seal
Under common law, only common seal is recognized for a company to enter into a
contract
Under the Companies Act, affixation of the common seal on the document is only one of
the ways
A resolution by BOD that the company will enter a particular transaction
A resolution authorising the affixing of the common seal , attested by authorised officers.
( see A 96 Table A)
See s121, name and (former name-12 months ss(1A) shall appear on seal ; if not ss(2)
officer/person is personally liable unless company pays.
Agent
Actual
authority
Apparent or
ostensible
authority
was liable as the manager usually have such authority. D should have
made known the prohibition to P
There r also cases where a person has not been appointed as an
agent but held himself out as an agent. Whether his acts binds the
person on whose behalf he acted?
Freeman & Lockyear v Buckhurst Park Properties Ltd, 4
conditions need to be fulfilled:
a. There was representation that the agent had the authority to
enter the contract
b. The representation was made by person who has actual quthority
c. The outsider relied on the representation n enter the contract
d. The company was not prohibited to enter the contract or delegate
the authority to that person
Thus, the agents must have representation from the person who had
actual authority, n has the support by the action of the principal
Chew Hock San v Connaught Housing Development Sdn Bhd
F: D was a housing developer. P gave deposit to Ds secretary
although the project was not launch
H: D did not represent to P that the clerk was authorized, thus D was
not bound by the clerks act
Now, the four conditions are codified in s20(1)
In the 4th condition, if the delegation of authority is contrary to the
memorandum or articles, then doctrine of constructive notice applies,
n the agent act cannot bind the principal
As companys memorandum n articles r lodged with the ROC, they r made available for
inspection by public
3rd party dealing with the company r deemed to have read n understood the contents of
the companys memorandum n articles, following the doctrine of constructive notice
3rd party r deemed to know of any restriction to the capacity n powers of the company, its
agents, directors n members
If a person enters into an agreement on behalf of company which is contrary to the
companys constitution, the company is not bound; unless the contract is beyond the
companys object s clause according to s20(1), then the company is still bound
The doctrine of constructive notice- an outsider dealing with the company is deemed to
have constructive notice of its public documents lodged with the Registrar; whether you
actually read it or not.
Outsiders can be saved by the common law principles just discussed on contracts by
agents or purported agents that do not have express authority or limited express authority
by stating the law on:
1. Implied actual authority
2. Apparent/ ostensible authority
Next, the Turquand Rule / Indoor Management Rule also mitigates the harsh effect of the
constructive notice doctrine.
Loan Capital
A company needs funding, n usually from two sources: issuing shares n borrowings
As security for the loan, the lender will usually require the company to create charges over
its assets in favour of the lender, n the charge can be fixed or floating
Power to Borrow
Every company has the power to borrow according to s19(1)(c), unless it does not have
the word Berhad as part of its name; or the said power has been excluded by the
companys constitution
A trading company has implied power to borrow for the purpose of its business
It is important to determine:
i.
Whether the company has the power to borrow. If the borrowing is outside objects
clause, it is still enforceable, s20(1)
ii.
Debentures
S4(1): debenture includes stocks, bonds, notes n any other securities of a corporation
whether constituting a charge on the assets of the corporation or not
According to Bensa Sdn Bhd v Malayan Banking Berhad, debenture includes any
obligation, covenant or acknowledgement of debt. Thus including a loan agreement
The rights of dentures holders include:
(a) Restrain Ultra Vires transaction of the company
(b) Object to the alternation of object clause
(c) Against oppression
(d) Sue for repayment of the loan
(e) Take possession of assets charged
(f) Appoint receiver and/ or manager
Company Charges
A trading company has implied power to borrow n charge its assets as securities
The lender has resource to sell the assets to settle the loan, if the company fails to repay
the loan
S4(1): charge includes a mortgage n any agreement to give or execute a charge or
mortgage whether upon demand or otherwise. It may be legal or equitable
The charges created by a company may be classified as a fixed charge n a floating charge
Fixed Charge
Floating Charge
Re Woodroffes Ltd in the event the company ceases to carry on business, the floating
charge crystallises
UMBC v Official Receiver and Liquidator of Soon Hup Seng Sdn Bhd the floating
charge also crystallises if the company is wound-up n when a receiver/ manager is
appointed
Most lenders will negotiate for the crystallization of the floating service upon service of
notice on the company when certain specified events has happened:
(i)
default in the repayment of the loan
(ii)
breach of covenants on the charge document
(iii)
the value of assets declined to a certain amount
(iv)
other creditors have instituted proceedings against the company
The floating charge only crystallises upon notice from the lender to the company. Thus, the
company still has the freedom to deal with the assets pending the notice
Some lenders have included an automatic crystallization clause, as if the specified event
has occurred, then the floating charge crystallises immediately without the neeed of notice
The problem arises: when the clause triggers without the knowledge of both company n
lender, the issue of competing priorities between the lender n the 3 rd party will arise as the
company continues to deal with the charged assets
The lender may require the company to give an undertaking not to create any further
charges over the assets in favour of another lender, unless the company has obtained the
prior consent of the lender
It is binding on the company. The lender may enforce the charge if there is the breach of
the pledge
It is a contractual promise not a form of security, but entitles the chargee to immediately
recall the loan upon breach of the clause
Due to the advantage enjoyed by fixed charge, some lenders may name the charge given
as a fixed charge even though it has all the characteristics of a floating charge
Re Brightlife
F: the company purportedly created a fixed charge over its book debts in favour of the
lender. It still continued to have the freedom to deal with the proceeds
H: it was a floating charge. The name given to the charge is not conclusive. The court will
determine n construe the charge to see whether it is a fixed/ floating charge
National Westminster Bank: it is important that the lender had control over the book
debts proceeds
Thus, it is important for a lender taking a fixed charge over the companys current assets
to have control over the movement of charged assets. If not, it would render the charge to
be a floating charge notwithstanding the name given
Priority of Charges
If there r same assets subjected to different charges in favour of different lenders, n the
proceeds r insufficient, then the lenders need to compete priority to get back the money
Fixed charge v
Fixed charge
Floating charge v
Floating charge
Fixed charge v
Floating charge
Floating charge v
Fixed charge
priority
The fixed charge even though it is 2nd in time, will have priority
This is due to the nature of the floating charge, which enables ordinary
course of business of the assets, n including the right to charge the
assets as securities
If there is a negative pledge clause in the floating charge document,
the outcome may be different, as it is an undertaking by the company
which enables the lender of floating charge to recall the loan in the
event of breaching
UMBC v Aluminex Sdn Bhd: the floating charge will have priority if:
(i) it contains a negative pledge clause; (ii) the holder of the fixed
charge has actual notice of the negative pledge clause
Registration of Charge
A company consists of 2 organs: board of directors n the members at the general meeting
The board of directors is given power to manage the companys business pursuant to the
articles n s131B
Sometimes, the directors vision n conduct r not aligned with the wishes of the members,
n the members r not in control of company, they r not allowed to effect any of the changes
So long as the wrongdoers r in control, no action will be taken against them as the virtue
of the doctrine of separate legal entity n doctrine of privity
If a wrong has been committed against the company, only the company can take legal
action against the wrongdoers
A derivative action is a company bringing an action on behalf of the company, for a breach
of duty owed to the company
It is opposed to a members statutory right or a personal right where his personal right is
infringed.
2 reasons of the rule:
a) To avoid multiplicity of suits
b) The company is in a better position to decide
This rule is a disadvantage especially when the BOD are controlled by irresponsible
persons, as the wrongdoer will not proceed with the action against himself
General principle: holders of powers should not abuse their power, n this is codified in
s132 which a director should exercise his powers for a proper purpose
The court relax the rule in Foss v Harbottle n allow action to be taken by a member on
behalf of the company against the wrongdoer who r in control of the company
Allen v Gold Reefs of West Africa: the majority must exercise their voting powers bona
fide for the benefit of the company as a whole
Two elements need to be proven:
(i)
Fraud
Abdul Rahin b Aki v Krubong Industrial Park (Melaka) Sdn Bhd.-Gopal Sri Ram JCA
laid down these propositions:
a. The expression is a term of art and has nothing to do with actual fraud or deception at
common law
b. It is not necessary to prove dishonesty before the minority may claim relief under this
doctrine
c. It is sufficient for P to prove that the wrongdoers abused their powers n they r still in
control of the company
The P in the action must show that the majority had abused the powers vested in them ,
they have used the powers for another purpose and not the true purpose for which power
is entrusted to them by the MOA, statutes or general law
(ii)
Wrongdoers in control:
The wrong doer who is in control of the company has obtained benefit at the companys
expense
The wrongdoer has or will exercise his majority votes so as to prevent the company from
suing the wrongdoer.
Tan Guan Eng v Ng Kweng Hee: the control can be determined from the shareholding
Ting Chong Maa v Chor Sek Choon: the court went behind the apparent ownership of
the shares in order to determine whether the wrongdoers do in fact control the company.
In this case, although P n D had equal shares, D was the managing director, thus he was in
control
OPPRESSION
Applicable to all types of companies.but research has shown that generally used by
members in small private companies-issues of management & termination as an officer;
restriction on the sale of their shares unlike a public company
S218(1)(f ) and S218(1)(i)- winding up the company because it is just and equitable to do
so or because the directors of the company are acting in their own interest.
Soh Jiun Jen V Advance Colour Laboratory Sdn Bhd: Ps benefits as a Director was
removed, and he alleged oppression, s181. It was held that oppression is only applicable if
his rights as a member is infringed, not his privileges as a Director.
S181(1)(a): allows the court to provide remedy to a member where: the affairs of the
company are being conducted; or the powers of the directors are being exercised; either
(i) in an oppressive manner to one of the members including the petitioner; or (ii) in
disregard of the member or other members interests
S181(1)(b): allows the court to provide remedy to a member where: an actual or proposed
act by or on behalf of the company; or a resolution, or a proposed resolution, of members ,
debenture holders or a class of members of the company; is either (i) unfairly
discriminatory to a member or members, shareholders or debenture holders including the
petitioner; or (ii) prejudicial to , a member or members, shareholders or debenture holders
including the petitioner
4 main elements emerge from s181(1): (a) oppression; (b) disregard of interests; (c) unfair
discrimination; (d) prejudice
Origins of s181
Re Kong Thai Sawmill: to strengthen the position of minority shareholders in limited
companies
Owen Sim Liang Khui v Piasau Jaya Sdn Bhd: the powers of our Malaysian statute to
grant relief to shareholders are wider than in UK, Australia, New Zealand and even
Canada. The decisions of the courts of these countries upon pieces of such legislation,
though often helpful, especially in the absence of local authority, must be applied with
caution
4 main elements:
(a) (b) Oppression & Disregard
Re Harmer Ltd: company formed to conduct the long established philatelic business of
Mr Harmer , then aged 77 years. Shares owned by senior Mr Harmer his wife and their 2
sons and their wives. Senior Mr Harmer owned 78.6 % of voting shares ( 10 % of the share
capital)when petition was heard, Mr Harmer, 88 years , very deaf, difficulty
comprehending words put to him during hearing-often acted against Boards wishes to the
detriment of the company and acted foolishly, because of his advancing age. The court
ruled that Mr Hamer is lack of probity or fair dealing
Re Kong Thai Saw Mill: there must be a visible departure from the standards of fair
dealing and a violation of the conditions of fair play which a shareholder is entitled to
expect before a case of oppression can be made. Disregard means something more than
a failure to take into account of the minoritys interest: there must be awareness of that
interest and an evident decision to override it or brush it aside or to set at naught the
proper company procedure.
Ng Chee Keong v Ng Teong Kiat Highlands Plantation Ltd: The companys assets
consisted of a tea plantation-the directors neglected the plantation & as a result the state
government indicated that the property will be forfeited. The court held that there was
oppression because the directors had conducted the affairs of the company in disregard of
members interest.
The companys decision not to declare dividends in itself is not oppressive unless it is
accompanied by acts done by the directors for improper purpose or not in the best interest
of the company.
Re Coliseum Stand Car Service Ltd: the Director managed the business himself and
did not consult the shareholders or the other directors in the company. There was no
declaration of dividends even though the company had profits. He authorised loans by the
company to himself and his son. The court held that there was Oppression and disregard
of members interest.
(c) Unfair Discrimination or Prejudice
Prejudicial: causing prejudice detrimental, damaging (to rights, interest etc) or to cause
detriment to some rights or interests)
The word unfair is missing before the word prejudicial; in the English Act requires it to
be unfairly prejudicial.
J Norma Yaakob in Jaya Medical Consultants Sdn Bhd v Island & Peninsular Bhd &
Ors- the essence of the wrong done to the member is unfairness of discrimination or
prejudice..mere discrimination or prejudice is not sufficient.
In the same case, J Norma Yaakob examined the test to be used for unfairness, it is an
objective test..
The court must determine whether reasonable directors possessing any special skill,
knowledge or acumen possessed by the directors and having in mind the importance of
furthering the corporate object on one hand and the disadvantage, disability or burden
which their decision will impose on a member on the other, would have decided that it
was unfair to make that decision.
In the eyes of the commercial bystander test-is this what reasonable directors would
do?????
TB- p745- The court will normally be reluctant to accept that managerial decisions can
amount to unfairly prejudicial conduct. However more recent cases, have demonstrated
that in cases where what is shown is mismanagement, rather than disagreement in
managerial decisions, and the mismanagement is sufficiently serious, it may constitute
conduct which is unfairly prejudicial to the interest of the members for the purposes of s
181.Reason: when members acquire shares, its value to some extent depends on
competent management. See also S132(1B)- business judgment
A strict interpretation of S 181(1)(a) would mean that the petitioner must prove that the
conduct complained of exists and continuing when the petition was filed usually easier
when it is a continuing state of affairs. This does not mean that past conduct cannot be
relied on for oppression.
On the other hand, the wording of S 181(b) deals with future or threatened conduct that
may amount to acts which unfairly discriminate or unfairly prejudice members
S 181 should not be grammatically interpreted literally. What is important is that the effect
of the conduct persists at the date of presentation (Kong Thai Sawmill)
Kong Thai Sawmill: The company was a family business where the elder brothers were
the majority shareholders, and directors. It was alleged they abused their powers as
directors when they withdrew company funds for private purposes. It was also alleged that
there was oppression because they gave donations to political parties and advanced
company funds for investment purposes. However all the transactions were duly
authorised by board meetings and the sum taken from the company funds were treated as
loan and was repaid. There was no oppression.
Once a case has been made out under either paragraph (a) or (b) of subsection (1) of
section 181, the High Court may grand appropriate relief as mentioned in section 181 (2).
Voluntary Winding-Up
The directors are acting in their own interest rather than in the companys interests or are
acting in a way that is unfair or unjust to members, S 218(1)(f)
Since the facts for an application under S 181 and S218 sometimes overlap, there have
been some instances where the petitioner brought 2 action simultaneously.
Oon Ah Baa, Dato @Boon Pak Leong v Eagle & Pagoda Brand Teck Aun Medical
Factory Sdn Bhd - The application to wind up the company on allegation of oppression.
Hendrick International Hotels and Resorts Pte Ltd v YTL Hotels & Properties Sdn Bhd
However if a winding up order has been made under S218, an application under s 181
cannot be
Joint venture between H and YTL. Hedrick wanted YTL to purchase shares in this company,
the petition for oppression presented before winding up petition. Trial judge made an error
thinking oppression was filed after winding up and struck off oppression
petition.company in liquidation. Hedrick appealed to COA.
COA: Oppression order cannot be heard when a winding up order is already made.
Both the sections-does the petitioner have clean hands, based on the concept of fairness
and justice.
Fraud or misconduct-Loch v John Blackwood [1924] AC 783- the minority members were
not given financial reports because those in control wanted to buy their shares below
market value.
Tahansans case- Chairman of BOD removed, there was a legitimate expectation that all
directors be involved in the management of the company.