A complainant may initiate derivative proceedings on behalf of a company if they demonstrate good faith and a prima facie case in the company's best interest, as per the Companies Act 2016.

[1] This is an application by the Plaintiff under s 347 of the Companies Act 2016 (" CA 2016") for leave to commence derivative proceedings on behalf of the Defendant, Cellpro Consultancy Sdn Bhd ("the Company") against Chua Meng Hua, Siaw Mun Sin, Tan Eng Shin and Yew Chak Hua (collectively "the Proposed Defendants") ("this Application").

[A] Salient Background Facts

[2] The Company was incorporated on 24 February 2022 with five equal shareholders, each holding 20% of the shares: the Plaintiff, Chua Meng Hua, Siaw Mun Sin, Tan Eng Shin, and Yew Chak Hua.

[3] The Plaintiff resigned as director on 6 October 2023, leaving Chua Meng Hua as the sole registered director.

[4] The Plaintiff alleges that between March and July 2024, he discovered that the Proposed Defendants had:

(i) Incorporated Rejuv Premium Sdn Bhd ("Rejuv Premium") on 5 March 2024, using the Company's brand, premises, and equipment;

(ii) Directed customer payments that should have gone to the Company to Rejuv Premium instead;

(iii) Transferred RM70,000.00 from the Company to Green Matrix Technologies Sdn Bhd ("Green Matrix") as "capital injection"; and

(iv) Established and/or participated in another competing entity, Revine Sdn Bhd.

[5] The Plaintiff served the requisite 30-day notice under s 348(2) CA 2016 dated 30 September 2024 and a supplementary notice dated 16 October 2024. The Proposed Defendants, through their solicitors, responded with letters dated 28 October 2024 and 29 October 2024, essentially denying the allegations without taking any remedial action.

[6] The Company, under the control of the Proposed Defendants, contends that the Plaintiff's application is motivated by vengeance after the Company filed a counterclaim for RM5.95 million against the Plaintiff in Writ Summons No: WA-22NCC-298-05/2024.

[B] Applicable Legal Principles

[7] Section 347 CA 2016 provides that a complainant may, with leave of the Court, initiate proceedings on behalf of a company. The requirements for granting leave are set out in s 348(4) 2016, which requires the Court to consider:

(i) whether the complainant is acting in good faith; and

(ii) whether it appears prima facie to be in the best interest of the company that the application for leave be granted.

[8] As highlighted in the Federal Court decision in Dato' Seri Timor Shah Rafiq v. Nautilus Tug & Towage Sdn Bhd And Another Appeal 2024 MarsdenLR 375 ; [2024] 3 MLJ 433; [2024] 4 CLJ 499 leave is "not intended to be given lightly" and requires "strict compliance with the statutory requirements." However, the Court should not delve into the merits of the substantive issues at this stage or turn the application into a mini trial.

[9] The Court of Appeal decision in Celcom (Malaysia) Bhd v. Mohd Shuaib Ishak 2010 MarsdenLR 1352 ; ; [2010] 3 CLJ 808 (applied in Dato' Seri Timor (supra)) explains the good faith test as two-fold:

(i) an honest belief that a viable cause of action exists with reasonable prospect of success (subjective limb); and

(ii) absence of collateral purpose (objective limb).

[C] Issues For Determination

[10] The issues for determination in this Application are as follows:

(i) Whether the Plaintiff has locus standi and has complied with the procedural requirements;

(ii) Whether the Plaintiff is acting in good faith;

(iii) Whether there is a prima facie cause of action with reasonable prospects of success; and

(iv) Whether it appears prima facie to be in the best interest of t