Boardroom Tussles

and Shareholder
Oppression
 8 Legal Trends
1. Removal of directors
2. Suspension of directors
3. Chairperson’s conduct of general
meeting
4. Chairperson’s adjournment of meeting
5. Oppression relief extending to third
parties
6. Oppression relief vs Shareholders’
Agreement
7. Share Issuance and Pre-emptive Right
8. Derivative action: Exhaust internal
remedy or not
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 RIGHTS OF MEMBERS
• Constitution specific.
• Voting Rights:
1. Convene - s.310(b) – “any member”
2. Requisition - s.311 – “members”
3. Procedural challenges to meetings.

• Court remedies:
1. Oppression remedy – s.347 – member and being
oppressed in capacity as member.
2. Statutory derivative action – bringing an
action on behalf of company.
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 #1: Removal of Directors - Issues
1. Requisition under s.311: “members” – can be single member (Eka
Noodle Bhd [2021] MLJU 1586).

2. Convening under s.310(b): “any member” – can be several members

aggregated (Golden Plus Holdings Bhd [2021] 7 MLJ 852).

3. Removal of director: under constitution or under s.206(1)(a)? (Low

Thiam Hoe [2020] 10 MLJ 137).

4. Removal under s.206(1)(a) then requires meeting and special notice.

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 #2: Suspension of Directors
• Dato’ Shun Leong Kwong v Menang Corporation [2021] MLJU
870 and Insulflex Corporation [2018] 2 CLJ 335.

• There cannot be suspension of director. Left open the

question whether constitution can provide for that.

• CA 2016 does not provide for suspension of a director. SSM

and 3rd parties also would not be aware, that individual still
listed as a director.

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 #3: Chairperson’s Conduct of Meeting

• Safari Alliance Sdn Bhd [2021] MLJU 1600.

• No oppression relief against conduct or rulings made by

Chairperson of the AGM.

• Oppression relates to “affairs of the company” or “powers of the

directors”.

• Generally, Chairperson appointed under the constitution, and the

powers and duties were as set out under the constitution.

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 #4: Chairperson’s Conduct: Challenged
• Teo Kim Hui v Golden Plus Holdings [2021] MLJU 863.

• Chairperson’s conduct of adjourning a meeting – set aside where it

disregarded the will of the majority. Authority of chairperson comes from
the meeting – representative of the members at the meeting.

• Chairperson’s power to adjourn – residual power when the company

machinery breaks down. Seen in light of giving the members reasonable
opportunity to hear and be heard, and to then vote.

• Here, adjournment set aside. Had injurious effect on the members’

right to vote.
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 Other Issues
• Adjourned meeting: no need to issue a
fresh special notice for the removal of
directors. Continuation of earlier meeting.
• Notice of general meeting – notice
required to be given to the auditor s.321.
Here, the Court cured the defect as there
was nothing at the meeting that required
presence of auditors e.g. nothing financial
staetments related.
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#5: Oppression Remedy
against Third Parties
• Auspicious Journey [2021] 3 MLJ 549, FC.
• Oppression is wide enough to attach liability on directors of
the company as well as other 3rd parties (i.e. not directors or
members).
• “one of the broadest and most comprehensive statutory
shareholder remedies available in the common law world”
• The test:
1. Director or 3rd party’s deliberate involvement to the
oppressive conduct.
2. That it would be fair and just to impose liability on that
party for such conduct. Liability may be easier to find –
where director breached duties, acquired personal
benefit or acts or omission will prejudice the other
shareholders. 14
#6: Oppression vs
Shareholders’ Agreement
• Shareholders’ Agreement prevails?
Jet-Tech Materials [2013] 2 MLJ 297,
FC.
• A move away from Jet-Tech?
Oppression remedy still available.
- Gue See Sew [2020] MLJU 46 –
the breaches in the case not mere breaches
of shareholders’ rights alone (or breaches of
the shareholders’ agreement alone).

- ISM Sdn Bhd [2021] 7 MLJ 506.

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 #7: Share Issuance and Pre-Emptive
Right
“85(1) Subject to the constitution, where a company issues shares which
rank equally to existing shares as to voting or distribution rights, those shares
shall first be offered to the holders of existing shares … maintain the relative
voting and distribution rights of those shareholders.”

“Subject to any direction to the contrary that may be given by the Company in
general meeting, all new shares or other convertible securities shall be
offered to such persons … in proportion … to the amount of the existing
shares …”

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#7: Share Issuance and Pre-Emptive Right
• Concrete Parade Sdn Bhd [2021] MLJU 1540,
CA.
• First, constitution must deal with pre-emptive
right. If not, s.85 applies.
• Second, “direction to the contrary”
- Cannot completely displace pre-emptive
rights.
- Prior “direction to the contrary” must first
be obtained.
- Must fully explain to shareholders they are
waiving statutory right under s.85
• Third, directors’ power to allot under s.75
cannot bypass s85 requirement
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 #8: Derivative Action: Exhaust
Internal?
• Two conflicting approaches: Suhaimi
bin Ibrahim [2015] 2 MLJ 669, CA and
Abdul Rahim bin Suleiman [2016] 6 MLJ
449.
• Suhaimi: failed to exhaust internal
process. CA directed for a Board
meeting as the Board had to first
decide on whether to maintain the
suit filed by the company or not.
• Abdul Rahim: nothing in the CA 2016
that requires complainant to exhaust
company’s internal process here.
Nonetheless, complainant had tried
13 various means already.
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