Case Update: Fraudulent Trading Rebooted

The High Court in the Sulaiman & Taye decision (see the grounds of judgment dated 8 July 2020 of Ong Chee Kwan JC) deals with very significant issues in relation to fraudulent trading. Fraudulent trading is where directors of a company have to bear personal liability for the debts of a company in winding up. This is because the directors carried on the business of the company with the intent to defraud its creditors. In particular, whether the delinquent directors bearing personal liability then has to pay directly to the aggrieved applicant or to pay into the wound up company’s assets for the general benefit of all the creditors. Continue reading

Talk – Reliefs and Risks for Companies and Directors: COVID-19 Temporary Measures

I have been invited to speak at the Malaysian Institute of Accountants‘ webinar on Wednesday 17 June 2020. It is titled Reliefs and Risks for Companies and Directors: COVID-19 Temporary Measures. My co-speaker is Kenneth Foo, both of us being the authors of Companies Act 2016: The New Dynamics of Company Law in Malaysia. Here is the registration form for the two-hour webinar. Fees are RM150 for MIA members and RM195 for non-members.

This seminar will cover all the common practical issues for companies arising from the movement control restriction. With the heightened risk of solvency-related issues, directors must also be aware of their responsibilities and the risks of personal liability.

 

Case Update: Golden Plus Decision – Removal of Directors under the Companies Act 2016

In the Golden Plus Holdings decision, the High Court sets out give important points relating to the removal of directors under the Companies Act 2016 (CA 2016).  You can read the grounds of judgment dated 14 January 2020.

The decision deals with the issues relating to requisitioning an EGM, the unavailability of some directors to attend a Board meeting, whether there can be first a requisition and then a convening of an EGM, the special notice requirement for removal of a director, and whether there can be improper motives to invalidate the removal of a director.

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Case Update: The MARA Decision on Appointment of Directors and Management Review

The High Court decision in Majlis Amanah Rakyat (MARA) v Dato’ Abd Rahim Adb Halim & Ors [2018] 8 CLJ 738; [2018] MLJU 1008 touched on some important points on the appointment of directors. It is also the first decision to briefly deal with the new right of management review under section 195 of the Companies Act 2016 (CA 2016).

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This dispute arose from the boardroom and shareholder tussle where MARA had requisitioned for an EGM of the company, Med-Bumikar. Med-Bumikar held a substantial stake in the listed entity, MBM Resources Bhd (MBMR). UMW had tabled an offer to purchase Med-Bumikar’s stake in MBMR. The crown jewel at the heart of the dispute was essentially MBMR’s 20% stake in Perodua. UMW already had approximately 38% interest in Perodua and this would allow UMW to have control over Perodua. Continue reading

Shareholders’ Agreement to Appoint a Director: Not an Absolute Right

Shareholders’ agreements and joint venture agreements usually contain provisions that allow for a shareholder to appoint a certain number of directors to the Board of the company. This allows for the balancing of the rights and commercial interests of the shareholders. For example, a minority shareholder may want to ensure that there is a guaranteed minimum Board representation that the minority shareholder can have.

The question is whether this contractual right to appoint a director is an absolute right and what is the legal nature of this power to appoint a director. Could there be situations where the board of directors will refuse to recognise the appointment of a director under a shareholders’ agreement? How is this interpreted in Malaysia under the Companies Act 2016?

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Bankruptcy and Directors: Vacating Seat and Potential Illegality

There can be legal repercussions to a company when one of its directors is adjudged bankrupt. It is common in the constitution or articles of association to provide that the office of the director will become vacant if the director becomes bankrupt. I set out below three interesting legal issues that arise from bankruptcy and directors.

First, I will deal with the potential adverse impact of bankruptcy on directors’ resolutions and legal proceedings. This in light of the recent Court of Appeal decision in Sazean Engineering & Construction Sdn Bhd v Bumi Bersatu Resources Sdn Bhd [2018] 5 AMR 443; [2018] MLJU 839. This decision was under the Companies Act 1965 (CA 1965). Secondly, I interpret these issues in light of the Companies Act 2016 (CA 2016). Thirdly, potential ways to overcome such arguments. Continue reading