The Court ruled that share allotments not validated by new directors are void under Companies Act provisions, affirming strict adherence to court orders.

JUDGMENT

Ahmad Fairuz Zainol Abidin J:

Introduction

[1] Vide encl 1, the Plaintiff essentially sought for the following reliefs:

(i) a declaration that the allotment of 46, 196, 995 shares of the Plaintiff ("the Shares") to the 1st Defendant is null, void and invalid;

(ii) a declaration that the transfer of the Shares from the 1st Defendant to the 2nd Defendant is null, void and invalid; and

(iii) a declaration that the Notice to convene an Extraordinary General Meeting of the Plaintiff issued by the 2nd and the 3rd Defendants dated 8 September 2020 ("Notice of EGM") is null, void and invalid.

[2] The 1st and the 3rd Defendants subsequently filed encls 24 and 27 to strike out the Originating Summons.

[3] After hearing parties, this Court dismissed the striking out applications and allowed encl 1 with costs. These are the full reasons of this Court's decision.

Background Facts

[4] The background facts have been set out in the submissions. This Court adopts the salient facts as set out herein below:

4.1 As a result of the disputes arising from the Plaintiff's adjourned Extraordinary General Meeting convened on 6 March 2020 ("Adjourned EGM"), the conveners of the said meeting commenced Originating Summons No WA-24NCC-131-03/2020 ("OS 131") while the opposing faction commenced Originating Summons No: WA-24NCC-153-04/2020 ("OS 153");

4.2 On 28 August 2020, OS 153 was dismissed and in respect of OS 131, the High Court inter alia made the following order:

(3) all acts of the Directors of directors and/or directors of the Defendant as comprised prior to the passing of the resolutions on 6 March 2020, and taken subsequent to the passing of the resolution on 6 March 2020, unless validated by Chiew Keong On, Yapp Kiam Yen and Wong Koon Wai, as the validly appointed directors pursuant to the Adjourned Extraordinary General Meeting of Golden Plus Holdings Berhad on 6 March 2020, are null, void and invalid;

(4) Chiew Keong On, Yapp Kiam Yen and Wong Koon Wai are the directors of the Defendant;

(Hereinafter referred to as "the Order").

4.3 Therefore, by the virtue of the Order, the former directors of the Plaintiff, namely Tan Say Han, Mohd Salleh bin Lamsin, Adey bin Liun, Wan Li Jun, Yang Jin, Wang Zhi Yu, Tan Yen Siang and Teh Wei Kian ("Former Directors") were properly removed and replaced by the new Directors ("New Directors").

4.4 On 26 August 2020, two (2) days before the Order was pronounced, allotment of shares to the 1st Defendant was carried out by the Former Directors ("the Allotment"). The Allotment was allegedly pursuant to a settlement agreement dated 25 August 2020 entered into by the Plaintiff with China Idea Development Ltd ("CIDL") and the 1st Defendant ("Settlement Agreement").

4.5 The Settlement Agreement provides amongst others:

i. An acknowledgment of the loan granted to the Plaintiff in 2016 by CIDL and that the Plaintiff therefore owes CIDL a sum of RM 9, 239, 399.00 ("Plaintiff's Debt");

ii. The 1st Defendant was to settle the Plaintiff's Debt to CIDL; and

iii. In return, the Plaintiff will allot the Shares to the 1st Defendant.

4.6 As a result, the 1st Defendant was, on 26 August 2020, recorded as a shareholder of the Plaintiff. Subsequently, on 2 September 2020, the Shares were transferred to the 2nd Defendant ("the Transfer").

4.7 On 8 September 2020, the 1st and the 3rd Defendants as shareholders of the Plaintiff, issued the Notice of EGM to remove the New Directors.

[5] Consequently, the present Originating Summons was filed by the Plaintiff seeking the declaratory orders as previously mentioned. The 1st and the 3rd Defendants then filed applications to strike out the Originating Summons.

Parties' Contention

[6] The Plaintiff submitted that the Allotment is invalidated by para 3 of the Order. Therefore, since the 1st Defendant had no title as a matter of law to the Shares, it follows that he could not confer any title to the 2nd Defendant and hence, the 2nd Defendant was not a shareholder of the Plaintiff. Following therefrom, the 2nd a