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2013 MarsdenLR 700
HIGH COURT MALAYA KUALA LUMPUR
RAHYA TRADING SDN BHD – Appellant
Versus
TONG KHIN COMPANY SDN BHD & ANOR – Respondent
[Suit No: 24NCC-96-03-2013]
Section 181 of the Companies Act 1965 provides grounds for minority shareholders to seek relief against oppressive conduct that disregards their interests, leading to orders for share valuation and purchase.
Headnote:(A) Companies Act 1965 - Section 181 - Minority oppression - Plaintiff holding 14% shares alleged oppression by majority shareholder - Court finds admission of oppression and disregard of interests - Court highlights indecision and inaction of company on business venture - Orders for valuation and purchase of shares, and reduction of capital. (Paras 1, 21, 26, 88, 90)
(B) Oppression - Court emphasizes the need to consider the conduct of directors in evaluating oppression - The actions or inactions leading to disregard for minority shareholder's interests may constitute oppressive conduct. (Paras 71, 84)
(C) Winding up - Court declines winding up request due to ongoing business decisions but orders share purchase instead to address oppression. (Paras 18, 19, 64)
The part of the document that discusses the transfer of shares as an act of oppression is found in the plaintiff's submission, specifically where they state that the second defendant thwarted the plaintiff's attempt to sell its shares to other parties. This conduct is characterized as an act of oppression and disregard for the plaintiff's interests. The relevant excerpt is:
"the second defendant had thwarted even the attempt to sell the plaintiff's shares to persons or other companies other than the existing shareholders and immediate family of persons registered as shareholders" (!) .
This indicates that preventing the shareholder from transferring or selling their shares to third parties is considered an act of oppressive conduct under the context of minority oppression.
| Table of Content |
|---|
| 1. minority oppression claim outlined. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. plaintiff's submission on oppression. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16) |
| 3. defendants argue for majority interests. (Para 17 , 18 , 19 , 20) |
[1] This case relates to allegations of minority oppression where the plaintiff as minority shareholder says it is being oppressed and its interest is being disregarded by the second defendant the majority shareholder in the first defendant ('company') and therefore seeks an order from this court pursuant to the oftquoted s 181 of the Companies Act 1965 .
[2] At the outset, it is most appropriate to state that the above provision reads:
(1) Any member or holder of a debenture of a company or, in the case of a declared company under Part IX, the Minister, may apply to the Courts for an order under this section on the ground:
(a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or holders of debentures including himself or in disregard of his or their interest as members, shareholders or holders of debentures of the company; or
(b) that some act of the company has been done or is threatened or that some resolution of the members, holders of debentures or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or holders of debentures (including himself).
(2) If on such application the court is of the opinion that either of those grounds is established the court may, with the view to bringing to an end or remedying the matters complained of, make such order as it thinks fit and without prejudice to the generality of the foregoing the order may:
(a) direct or prohibits any act cancel or vary any transaction or resolution;
(b) regulate the conduct of the affairs of the company in future;
(c) provide for the purchase of the shares or debentures of the company by other members or holders of debentures of the company or by the company itself;
(d) in the case of a purchase of shares by the company provide for a reduction accordingly of the company's capital; or
(e) provide that the company be wound up.
(3) Where an order that the company be wound up is made pursuant to subsection (2)(e) the provisions of this Act relating to winding up of a company shall, with such adaptations as are necessary, apply as if the order had been made upon a petition duly presented to the court by the company.
(4) Where an order under this section makes any alteration in or addition to any company's memorandum or arts, then, notwithstanding anything in any other provision of this Act, but subject to the order, the company concerned shall not have power without the leave of the court to make any further alteration in or addition to the memorandum or arts inconsistent with the order; but subject to the foregoing provisions of this subsection the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the company.
(5) An office copy of any order made under this section shall be lodged by the applicant with the Registrar within fourteen days after the making of the order.
[3] The plaintiff owns 14 percent of the company issued and paid up shares ('shares') and the second defendant owns 53.2 percent of the shares.
[4] The company owned certain premises and its sole business was the letting of these premises.
[5] Through a directors' resolution on 28 June 2011 and approved by a shareholders' resolution on 19 July 2011 the premises were sold off for RM25 million gaining substantial profit in 2011 and therefore the company ceased to have a business.
[6] Subsequent to the sale of the premises, the plaintiff wanted to dispose of its shares and was not interested to continue with any other businesses that the company may want to venture into.
[7] The plaintiff then attempted to sell its shares to the second defen
