Directors must obtain shareholder approval for loans and remuneration; failure to do so constitutes oppression against minority shareholders under Section 346 of the Companies Act 2016.

JUDGMENT

Atan Mustaffa Yussof Ahmad J:

Introduction

[1] Before the court is an oppression action under s 346 of the Companies Act 2016 brought by a minority shareholder against the majority shareholder-directors of a family-owned investment holding company. At issue are allegations of oppressive conduct including substantial interest-free loans taken by directors without proper approval, payment of excessive remuneration, non-declaration of dividends, and failure to provide information or hold meetings - all allegedly designed to benefit the majority at the expense of minority interests. The case requires examination of the distinction between corporate wrongs and genuine oppression, the legal requirements governing directors' loans and remuneration in private companies, and the obligations directors owe to shareholders regarding corporate governance and transparency.

Background Facts

[2] The 1st Defendant, GL Property Management Sdn Bhd ("the Company"), was incorporated on 2 August 1984 as an investment holding company. The Company owns one property located at No 72, Ground Floor, 1st Floor, 2nd Floor and 3rd Floor, Jalan SS2/67, 47300 Petaling Jaya, Selangor, from which it derives rental income.

[3] Initially, the Company's shares were held by Tan Gaik Lan and her sister Tan Gaik Sim, with one share each. In 1993, Tan Gaik Sim's share was transferred to Lee Pin Nah @ Lee Kim Nier. In 2012, following Tan Gaik Lan's death, her share was transferred to Lee Hiong Kiat, the 2nd Defendant.

[4] The directorship of the Company from its incorporation until 2018 was as follows: Tan Gaik Lan (2 August 1984 - 27 July 2011), Lee Pin Nah (4 May 1993 - 19 October 2017), and Ronny Tan @ Tan Lip Ping (6 June 1994 - 2 February 2018).

[5] Lee Pin Nah passed away on 19 October 2017, leaving a will dated 25 June 2015. Under the will, his one share in the Company was to be distributed among his children as follows:

a) The 2nd Defendant, Lee Hiong Kiat (50%);

b) The Plaintiff, Lee Tin Hui (25%); and

c) Lee Tin Nee (25%).

[6] Upon Lee Pin Nah's death, the 2nd Defendant was appointed as a director of the Company on 19 October 2017. Subsequently, his wife Kee Chai Hong, the 3rd Defendant, was appointed as a director on 30 January 2018, following Ronny Tan's resignation which took effect from 2 February 2018.

[7] The original executors named in Lee Pin Nah's will were Yuen King Mun and Ong Kok Bin. However, they renounced their executorships on 15 March 2018 and 27 March 2018 respectively. Subsequently, Pacific Trustees Berhad was appointed as the administrator and trustee of Lee Pin Nah's estate on 15 September 2020 pursuant to Letters of Administration with Will annexed.

[8] On 4 May 2021, Lee Pin Nah's share in the Company was transmitted to Pacific Trustees Berhad to be held in trust for the beneficiaries. The share was eventually transferred to the respective beneficiaries on 20 December 2022, at which point Lee Tin Hui became a registered shareholder of the Company.

[9] Between 2018 and 2021, the directors withdrew various sums as loans from the Company totalling RM925,101.00. The loans were interest-free and repayable on demand. The directors also began drawing remuneration from 2019, starting at RM30,000.00 in 2019, increasing to RM60,000.00 in 2020, and then to RM180,000.00 in 2021, 2022 and 2023.

[10] On 15 October 2021, the Plaintiff filed her first oppression action (WA-24NCC-468-10/2021) against the defendants. This action was struck out on 2 March 2022 as she was not yet a registered shareholder of the Company at the time.

[11] The Company declared an interim dividend of RM50,000.00 for the financial year ending 31 December 2023. As of 31 December 2023, the Company had retained earnings of approximately RM1.2 million but recorded an operating loss of RM62,806.00 for that financial year.

[12] On 23 July 2024, the Plaintiff commenced the present oppression action under s 346 of the Companies Act 2016 . The current shareholding of the Company stands at:

a