1MDB is Insolvent: Directors’ Liabilities for the Debts

In a Media Release on 23 May 2018, Malaysia’s Ministry of Finance announced that it had met with 1MDB’s Board of Directors. The directors confirmed that 1MDB was insolvent and was unable to pay its debts. 1MDB’s debts may be in the region of RM42 billion. This figure is based on the declassified Auditor General Report¬† issued in 2015.

 

With this tremendous amount of debt, I touch on one aspect of directors’ liabilities. The directors and other officers of 1MDB, when allowing 1MDB to take on so much debt, can be held personally liable for these debts. Continue reading

Companies Act 2016: Absence of the Security for Costs Provision

The Companies Act 1965 (CA 1965) contained section 351 which allowed for an application for security for costs. The rationale for that section 351 was as follows.

When a company litigates against a party, and if that action were to fail, the defending party could find itself prejudiced if the company did not have enough money to pay the legal costs to that party. Hence, section 351 of the CA 1965 stated that if it appears by credible testimony that there is reason to believe that the company cannot pay the costs of the defendant, then the court can order that the company pay security for those costs.

Unfortunately, section 351 of the CA 1965 was not carried forward under the Companies Act 2016 (CA 2016). It was a useful provision to safeguard the interests of the defendant. Nonetheless, there are still other possible reliefs that a defendant can take to possibly apply for security for costs against a company. Continue reading

Case Update: Federal Court Decides on Extent of Directors’ Duties – Key Lessons for Directors

The Federal Court issued its grounds of judgment in the Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra v Petra Perdana Berhad case. This is a significant decision explaining the scope of directors’ duties. It gives guidance on when a director acts in the best interest of the company and the discretion afforded to a director when the director makes a business judgment.

This case update will set out the brief background facts of the case and the legal principles that were decided by the Federal Court.  I also set out the key takeaways and points that directors should take note of. Continue reading

Case Update: Shareholders’ Oppression Action Extends to Group of Companies

The Malaysian High Court in Tob Chee Hoong v Tob Chee Choong & Ors [2017] MLJU 1303 has confirmed that the shareholders’ oppression remedy (section 181 of the Companies Act 1965, and section 346 of the Companies Act 2016) would extend to both the holding company and the subsidiary company.

An aggrieved shareholder may be a member of only the holding company but the oppressive conduct may only be at the subsidiary level. In line with other jurisdictions, this High Court decision confirms that the aggrieved shareholder can still seek relief. Continue reading

MAICSA Annual Conference 2017: Three Questions Raised

On 12 September 2017, I was invited to be a speaker at the MAICSA Annual Conference 2017. This was on the Plenary Session 2 on Companies Act 2016 – Key Insights and Implications for Directors/Shareholders. It was moderated by my co-author and chartered secretary, Kenneth Foo.

Having delivered my presentation, there were interesting questions from the floor as well as through my interactions with the audience members. I thought it would be useful to highlight 3 of the questions I received. They are an indication of the issues still concerning practitioners and companies . Continue reading