The High Court in the Eka Noodles Berhad v Norhayati binti Tukiman (grounds of judgment dated 21 August 2021) decided that a single member of the company can put in the request for the directors to hold a company general meeting.
Summary of the Decision and Significance
Decision by: Liza Chan JC
This case involved the public-listed company, Eka Noodles Berhad (Eka Noodles). The Defendant is a shareholder of Eka Noodles, holding 15.77% of the shares of the company. She issued a notice under section 311 of the Companies Act 2016 (CA 2016) to the company. The notice requested for a general meeting to be held to remove all the directors and company secretaries, and to appoint new directors and a new company secretary.
The wording of section 311 of the CA 2016 uses the phrase “members of a company may require the directors to convene“. Nonetheless, the Court interpreted the term “members” to mean the plural or the singular. Cases decided under the Companies Act 1965 (CA 1965) had made a similar interpretation under the equivalent section 144 of the CA 1965.
Hence, the Defendant, as a single member, had validly issued the notice under section 311 of the CA 2016 to request for a meeting. The case also touched on other alleged defects in the notice and the steps taken by this shareholder. The issues are useful in a company law and meeting law context.
Background Facts
On 31 May 2021, the Defendant issued a notice of general meeting to the company. The Defendant holds more than 15.66% of the shares of Eka Noodles.
The Defendant’s notice requested for the general meeting to be held on 29 June 2021 to pass certain resolutions. The resolutions were for the removal of directors, removal of the two company secretaries, and to appoint new directors and a new company secretary.
The notice was issued pursuant to section 311 of the CA 2016. Section 311 of the CA 2016 is to be read together with sections 312 and 313.
Essentially, section 311 allows “the members of a company” (section 311(1)(a) of the CA 2016) to require the directors to hold a general meeting. This request must come from “members representing at least ten per centum of the paid up capital of the company” (section 311(3)(a) of the CA 2016). We will call this the Request Date.
Once the directors receive the request notice under section 311 of the CA 2016, section 312 of the CA 2016 comes into play. The directors must themselves issue a notice of general meeting within 14 days of the Request Date (section 312(1)(a) of the CA 2016) and for this general meeting to be held within 28 days of the notice of general meeting (section 312(1)(b) of the CA 2016).
If the directors fail to do this, there is the self-help remedy via section 313 of the CA 2016. The members who put in the request can then themselves issue a notice of general meeting in order to fix the date and time of the general meeting. The caveat is that this self-help general meeting must now be held within 3 months from the Request Date.
Returning to the facts, two days after the Defendant’s request notice, on 2 June 2021, Eka Noodles filed the legal action to essentially seek declarations to invalidate the request notice and to invalidate the holding of the general meeting on 29 June 2021 is invalid, null and void.
Eka Noodles’ arguments to invalidate the notice were:
- The request notice was brought by only a single member of the company. Section 311(3)(a) of the CA 2016 expressly uses the word “members“.
- The request notice did not contain or attach any written consent of the proposed new directors.
- The Defendant did not have the power to request the removal of the company secretary. That is a power that resides with the board of directors.
- The issuance of the request notice does not allow the Defendant to fix the date and venue of the general meeting.
- The intended removal of all the company’s directors would breach the CA 2016 where a public listed company must have a minimum of two directors.
- The procedure for calling such a general meeting must be adhered to strictly.
On 16 July 2021, the Court dismissed the legal action.
Decision
The Court rejected Eka Noodles’ argument that the use of the word “members” in section 311 of the CA 2016 meant that there must be plurality.
First, one of the key changes in the CA 2016 allows for the incorporation of a company with only one member. The provisions of the CA 2016 must be read harmoniously and to not discriminate between companies with a single member and those with more than one member. If Eka Noodles’ argument was correct, it would mean that section 311 of the CA 2016 cannot apply to companies with a single shareholder.
Second, the Court can utilise the Interpretation Acts which provide that words and expressions in the plural include the singular.
Third, the Court applied decisions under the previous section 144 of the CA 2016 where the word “members” can be construed to refer to “member” in the singular (see for instance, the Court of Appeal decision in Kwan Hung Cheong & Anor v Zung Zang Trading Sdn Bhd [2018] 4 MLJ 773, the Australian decision of South Norseman Gold Mines [1937] SASL 53 and Granasia Corp Bhd [2008] 4 CLJ 893).
Fourth, the Court considered the other objections and dismissed them.
The request notice was not in breach of the CA 2016 for not attaching the written consent and declaration of the new directors. There is no requirement for such consent and declaration to be delivered together with the request notice under section 311 of the CA 2016.
The Defendant’s request for the removal of the company secretary did not invalidate the request notice. This proposed resolution may be excluded by not putting it to a vote by the shareholders during the general meeting. The removal of the company secretary is indeed within the remit of the Board.
The Defendant’s request notice was still valid despite the Defendant having fixed the date and venue of the general meeting. The directors were still at liberty to fix any date and venue they deemed fit. In any case, the directors did not give any reasons on the non-suitability of the date or venue, nor was there any evidence of prejudice simply because the request notice fixed a date and venue.
The Defendant’s request notice was valid even with the removal of all the directors. There was nothing to prevent the resolutions on the appointment of the three new directors to be voted upon first before the resolutions to remove the existing directors. The removal and appointment need not follow the sequence set out in the general meeting notice.
Comments
Ultimately, the Court concluded that the directors had a statutory obligation to hold the general meeting. This is notwithstanding the fact that the Defendant was seeking to remove all of them. Instead, the directors refused to call the general meeting and to rely on their own wrong to frustrate the Defendant’s right as a shareholder to reconstitute the Board of the company.
The Court emphasised that the right of a shareholder to convene a general meeting is an unfettered right, jealously guarded and given effect by the courts in a plethora of cases.