Case Update: Resignation of Directors Does Not Require Acceptance or Consent by the Company

I set out a case update on two recent High Court cases relating to the resignation of directors and on section 208 of the Companies Act 2016 (CA 2016) on giving the written notice of resignation as a director.

In the first case of Wong Kok Meng, the Court confirmed that a director’s resignation need not be accepted by the company and there need not be a resolution accepting such a resignation.

In the second case of Tan Kei Vin, it also dealt with the issuance of a director’s notice of resignation. That written notice took effect immediately when delivered to the company’s registered office.

I explain more on the two cases below.

The Case of Wong Kok Meng

In Wong Kok Meng v Preserver Bina Sdn Bhd [2019] 7 AMR 302, the plaintiff, Wong Kok Meng, was one of the three directors of the company, Preserver Bina.

The plaintiff tendered his resignation but the company refused to accept the resignation. Further, the company refused to lodge the Notification of Change in the Register of Directors, Managers and Secretaries under section 58 of the CA 2016.

The company gave the reason that the plaintiff’s cooperation was still required to clarify matters in the audited accounts which had yet to be signed. The plaintiff’s case was that upon submitting the resignation letter, his resignation had become effective. Pursuant to section 208(2) of the CA 2016, the company’s consent was not required.

The High Court agreed with the plaintiff’s arguments. First, the law does not require the consent of the company for the director to tender his resignation. All that was required of a director was to resign in accordance with section 208(2) of the CA 2016. Section 208(2) states: “a director may resign his office by giving a written notice to the company at its registered office.”

Second, it was then for the company pursuant to section 57(1)(a) and (4) of the CA 2016 to lodge the necessary notice within 14 days from the director’s resignation. Section 57(4) reads: “If there is any change in the particulars of a director, manager or secretary the company shall effect the change in the register within fourteen days from the change.” Further, section 58 of the CA 2016 requires the company to notify the Registrar of Companies within 14 days from the date the change in particulars of a director or when a person ceases to be a director.

Therefore, the Court granted a mandatory injunction against the company to compel the company to lodge the notice of change under section 58 of the CA 2016.

The Case of Tan Kei Vin

In the case of Tan Kei Vin & 2 Ors v Feed Me Love Sdn Bhd & 2 Ors [2019] 7 AMR 623, it was a situation of a race to resign first.

The three plaintiffs were directors of the company, Feed Me Love Sdn Bhd. At the time, there were four directors: the three plaintiffs and the second defendant in this case. The plaintiffs had tendered their resignations as directors through their written notices dated 15 March 2019 and delivered to the company’s registered address.

Three days later, the three plaintiffs were informed by the company secretary that she could not lodge the Return Giving Particulars in Register of Directors, Managers & Secretaries and Changes of Particulars with the Registrar of Companies in the absence of a board resolution. This was due to the second defendant having also resigned her office as director on 18 March 2019.

The plaintiffs’ case was that they had validly resigned on 15 March 2019. They wanted the records of the company and with the Companies Commission of Malaysia to reflect that. They argued that the second defendant was the sole remaining director after that date and could not effectively resign.

The second defendant resisted the court application. Some of the grounds she raised was that there was no acknowledgement of receipt of the notices of resignation and that she, as a director, had not received the notices of resignation.

The Court held that there was no requirement of acknowledgement of receipt of such written notice. There is also no requirement that the notice of resignation must be served on the remaining directors, or that the resignation is subject to being accepted by the board of directors.

The Court held that the three plaintiffs had validly resigned their office of director of the company on 15 March 2019. With the second defendant being the sole remaining director, the second defendant has not resigned as director on 18 March 2019.

Commentary

I make two observations. The first is that like in the case of Tan Kei Vin, it is common to have a company secretary or a board of directors to insist that there must be a board resolution passed to accept the resignation of a director. It is also common to have a delay before the company formally updates its records and updates the Companies Commission of Malaysia records. If there is a dispute or a delay in the updating of records, the public at large would all assume that the individual is still a director.

Both these cases of Wong Kok Meng and Tan Kei Vin are useful reminders of the position in law. Under section 208 of the CA 2016, the notice of registration given to the company’s registered office would make the registration immediately effective. Company secretaries and directors should then ensure that the 14-day timeline under sections 57 and 58 of the CA 2016 are met.

The second observation is the useful consequential relief and mandatory orders obtained in both decisions.

In Wong Kok Meng, the Court granted an injunction to compel the company to lodge the “Notification of Change in the Register of Directors, Managers and Secretaries” under section 58 of the CA 2016. It would have been also useful to specifically specify a time frame for the company to do so.

In Tan Kei Vin, there were more extensive consequential orders:

  1. A declaration that the company and/or the director lodge with the Registrar of Companies the “Return Giving Particulars in Register of Directors, Managers & Secretaries and Changes of Particulars” to reflect the plaintiffs’ resignation as directors of the company with effect from 15 March 2019 within 14 days from the date of the Court Order.
  2. An order that the company and/or the director shall within 14 days from the date of the Court Order rectify the register of directors, managers and secretaries of the company to reflect the plaintiffs’ resignation as directors with effect from 15 March 2019.
  3. An order that, in the event of non-compliance, the plaintiffs shall be entitled to sign and lodge with the Registrar of Companies the return for the change in particulars, or sign and lodge with the Registrar of Companies such other prescribed form to reflect the plaintiffs’ resignation as directors of the company with effect from 15 March 2019.

 

 

 

 

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