Some Recent Developments in Shareholder Meetings in Malaysia

Shareholder meetings are an important platform to allow for members to debate and vote on matters affecting the affairs of a company. Case law has held that the holding of the general meeting, and the right to vote, are a fundamental right of the members.

Hence, it is particularly important to meet all legal requirements for such meetings. A technical non-compliance may result in the meeting being invalid and void.

I wanted to touch on three recent legal developments on shareholder meetings. The issues range from whether there is a need to second a proposed resolution, the powers of the corporate representative, and the ability to requisition a general meeting.

Issue 1: Is there a need for a proposed resolution to be seconded?

It is a common practice at annual general meetings for the chairman of the meeting to go through the proposed resolutions . Each proposed resolution is explained and then the chairman asks a member to second that proposed resolution.

One possible reasoning behind the need for a seconder is that without the seconder, that shows the lack of support for the proposed resolution. That may result in the chairman to withdraw that proposed resolution or to not put that resolution to a vote.

But in law, is there a requirement to second the proposed resolution?

Firstly, this will depend on the wording of the company’s constitution. The typical constitution modelled after the Table A Articles of Association does not require a seconder. The Companies Act 2016 is also silent on the need for a seconder. The proposed resolution will then just require to be voted on by show of hands or by poll.

Secondly, under case law, there is also no requirement for a proposed resolution to be seconded. In the English Court of Appeal case of Horbury Bridge Coal Co (1879) 11 Ch D 109, a meeting of members was held to consider a special resolution for the winding up of the company. It was asked whether the amendment for the proposed resolution could be put to the members at the meeting without it being seconded. It was held that there is no such requirement under law that the motion required a seconder.

Issue 2: Extent of Corporate Representative’s Powers

Next, the issue of a corporate representative. This is an individual appointed by a corporate shareholder in order to be the representative to attend and vote at genering meetings.

The recent Court of Appeal decision in the Zung Zang Trading case (Kwan Hung Cheong & Anor v Zung Zang Trading Sdn Bhd [2018] MLJU 213; [2018] 1 LNS 257) dealt with the extent of the corporate representative’s powers.

The case referred to section 147(3) of the Companies Act 1965 (CA 1965) which states that a corporation may authorise a person to act as its representative “at a particular meeting or at all meetings of the company“. The Court of Appeal noted that the corporate representative under section 147(3) of the CA 1965 only acts at a particular meeting. Section 147(3) does not refer to issuing notices or doing things outside of the meeting or meetings or the company.

Here, the corporate representative had purported to sign on the notice to requisition the directors to hold a meeting of members under section 144 of the CA 1965. This was therefore invalid.

The Zung Zang Trading case also referred to the case of Drico Ltd [2011] MLJU 439; [2011] 1 LNS 488. In Drico Ltd, the individual purported to be a corporate representative of Drico Ltd and had signed certain documents and agreements on behalf of Drico Ltd. It was held that “the statute itself makes it clear that a corporate representative is only authorised to attend meetings on behalf of its appointer. This authority does not extend to executing agreements on behalf of the appointer.

This principle on the corporate representative is maintained under the Companies Act 2016 (CA 2016). The relevant section is now section 333 of the CA 2016 which allows a corporation to authorize “a person or persons to act as its representative or representatives at any meeting of members of the company.” Hence. the extent of the powers of the corporate representative is to merely to act at any meeting of members of the company. Nothing more.

Issue 3: A Single Member Can Requisition a Meeting of Members

Section 311 of the CA 2016 allows members of a company to require the directors to convene a meeting of members. This is subject to the other requirements in section 311. In contrast, section 310(b) of the CA 2016 allows any member to convene a meeting, and again subject to the other requirements in section 310.

Would a single member nonetheless still be able to requisition the directors under section 311 of the CA 2016? The predecessor provision to section 311 is section 144 of the CA 1965.

In the Zung Zang Trading case, the Court of Appeal interpreted the term “members” and “requisitionists” under section 144 of the CA 1965. Under this section, the directors must convene a meeting of members upon the requisition of the “members”. Would a single member be sufficient?

The Court of Appeal relied on the Interpretation Act where words in the plural mean the singular, and vice versa. Therefore, it was held that the words “members” and “requisitionists” may be construed to refer to “member” and “requisitionist” in the singular, as the case may be.

This is the first Malaysian appellate decision that has confirmed this interpretation of section 144 of the CA 1965.

Therefore, we look at the successor provision in section 311 of the CA 2016. The Zung Zang Trading case would be authority to allow for a single member to also issue the requisition under section 311 of the CA 2016.

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