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2025 MarsdenLR 5556
HIGH COURT SABAH & SARAWAK KOTA KINABALU
NGEE SIE SIK – Appellant
Versus
LEE UK TEUNG & ORS – Respondent
[Case No: BKI-24NCvC-193-11/2023]
The court established that oppressive conduct against minority shareholders is actionable under Section 346 of the Companies Act 2016, highlighting unfair disregard and necessity in corporate governance.
Headnote:(A) Companies Act 2016 - Section 346 - Share allotment and directors' fees - The Plaintiff sought to set aside the allotment of 700,000 shares to the Defendants and declare resolutions passed at an EGM as null and void on grounds of oppression - The Court found that the allotment was unnecessary and constituted oppressive conduct against the Plaintiff's rights as a shareholder - Resolutions regarding directors' fees and business partnerships were similarly oppressive. (Paras 28-60)
(B) Oppression of Minority Shareholders - The court emphasized that oppression refers to unfair disregard of interests, and the definition is applicable under Section 346, reinforcing that conduct undermining fair dealing violates shareholders' rights. (Paras 29-30)
Facts of the case:
The Plaintiff, a founding member and equal shareholder in the 6th Defendant company, contested the allotment of shares to the individual Defendants and subsequent resolutions passed at the EGM. The Plaintiff claimed these actions were taken without notice and diluted his shareholding. (Paras 10-24)
Findings of Court:
The allotment was deemed unnecessary and executed without a bona fide rationale, constituting oppression; the resolutions regarding directors' fees and business partnership declarations were also voided due to the Plaintiff's unfair treatment. (Paras 35-56)
Issues: Whether the share allotment and resolutions constituted oppressive conduct and disregard for the Plaintiff's rights as a shareholder. (Paras 28, 35)
Ratio Decidendi: The Court ruled the share allotment served no legitimate business purpose and was thus oppressive, highlighting that actions departing from fair dealing principles are unacceptable under Section 346 of the Companies Act 2016. (Paras 35-40)
Result: Allotment of shares canceled; resolutions at EGM declared null and void; costs awarded to the Plaintiff.
| Table of Content |
|---|
| 1. overview of plaintiff's claims regarding share allotment. (Para 1 , 2 , 3 , 4 , 5) |
| 2. parties' relationships and connections. (Para 6 , 7 , 8 , 9) |
| 3. background of the disputes and management structure. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19) |
| 4. events leading up to the contested share allotment. (Para 20 , 21 , 22 , 23 , 24 , 25 , 26 , 27) |
| 5. legal definitions of oppression in shareholder context. (Para 28 , 29 , 30) |
| 6. analysis of the necessity and justification for share allotment. (Para 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43) |
| 7. examination of the egm resolutions and their implications. (Para 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57) |
| 8. final court order and costs determination. (Para 58 , 59) |
Introduction
[1] The amended Originating Summons ("OS") at hand was filed by the Plaintiff pursuant to s 346 of the Companies Act 2016 .
[2] The Plaintiff sought to set aside the allotment of 700,000 shares in the 6th Defendant company (Yun Chung Property Sdn Bhd) to the 1st to 4th Defendants as follows:
(i) the 1st Defendant: 490,000 shares
(ii) the 2nd Defendant: 70,000 shares
(iii) the 3rd Defendant: 70,000 shares
(iv) the 4th Defendant: 70,000 shares
[3] The allotment of shares was dated 18 May 2023, and the document was conveyed to the Plaintiff on 1 June 2023.
[4] The Plaintiff also sought a declaration that the resolutions passed at the Extraordinary General Meeting ("EGM") held on 8 April 2024 is null and void. Among the resolutions passed were that the 2nd and 3rd Defendants were to be paid monthly directors' fees of RM5,000.00 each, and that K2 Lighting Sdn Bhd, S2 Lighting Sdn Bhd, Evolusi Handal Sdn Bhd were associate business partners.
[5] The Plaintiff contended that the allotment of shares, and the resolutions passed at the EGM were oppressive acts perpetrated against him as a shareholder in the 6th Defendant company, Yun Chung Property Sdn Bhd.
Parties
[6] The Plaintiff and the individual Defendants are related.
[7] The Plaintiff's wife is a sister of the 5th Defendant.
[8] The 1st Defendant is the husband of the 5th Defendant. The 2nd, 3rd and 4th Defendants are their children.
[9] The 6th Defendant is the company over which the parties are having a tussle in the instant proceedings. It is a nominal Defendant, added so as to be bound by any orders that the Court may make. The real dispute is between the Plaintiff and the individual Defendants.
Context Of The Dispute
[10] The Plaintiff and the 1st Defendant were founding members of the 6th Defendant which was incorporated in 2001.
[11] They were equal shareholders before the impugned resolutions were passed. Both then had 250,000 shares each in the issued and paid-up shares in the 6th Defendant.t that time, the Plaintiff and the 1st Defendant were directors, along with their spouses, in the 6th Defendant.
[12] The alternate directors then were Ngieng Ngee Seng @ Ngee Seng Seng (PW1) and Lee Kian Sing (the 3rd Defendant), the sons of the Plaintiff and the 1st Defendant respectively.
[13] Digressing for a while, the Plaintiff and the 1st Defendant also founded and are shareholders in 4 other companies: DM Hotel Sdn Bhd, Yun Chung Lighting Sdn Bhd, Yun Chung Electrical Sdn Bhd, and K2 Lighting Sdn Bhd.
[14] It is also an agreed fact that there was an understanding between the Plaintiff and the 1st Defendant that the Plaintiff would manage DM Hotel Sdn Bhd and Yun Chung Lighting Sdn Bhd, while the other 3 companies (including the 6th Defendant) would be under the 1st Defendant's management. These were essentially family businesses. See SAF.
[15] The 6th Defendant owns the premises on which DM Hotel Sdn Bhd and Yun Chung Lighting Sdn Bhd carry on business, and collects rental from these companies. The 2 properties are 4-storey buildings, viz, lots 27 and 37 at Damai Plaza, Phase 1, Kota Kinabalu ("the Damai properties").
[16] On 1 July 2022, a board meeting of the 6th Defendant was held to resolve the r
