Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2024 MarsdenLR 2318

HIGH COURT MALAYA KUALA LUMPUR
ATAN MUSTAFFA YUSSOF AHMAD, J
LIM SWEE CHAI – Appellant
Versus
ADVANCECON HOLDINGS BHD & ANOR – Respondent
[Originating Summons No: WA-24NCC-123-03-2023]

Petitioner Advocates:Beh Chee Wei ,Respondent Advocate: Eric Tan,Jamie Chan

The right to requisition a company meeting under the Companies Act 2016 is not contingent on meeting the 10% shareholding threshold, which only applies to directors' obligations to convene such meetings.

Headnote:(A) Companies Act 2016 - Sections 206, 207, 310, 311, and 582 - Extraordinary General Meeting (EGM) - Validity of requisition notice and EGM challenged - Court ruled that the second defendant, as a registered member, was entitled to requisition a meeting despite holding only 0.22% of shares - The 10% threshold applies only to directors' obligations to convene a meeting, not to a member's right to requisition - Plaintiff's claims of invalidity rejected as he failed to demonstrate substantial injustice resulting from procedural irregularities. (Paras 36-62)

Facts of the case:
The plaintiff, a co-founder of Advancecon, challenged the validity of an EGM convened to remove him as director, claiming the requisition notice was invalid due to the second defendant's insufficient shareholding. (Paras 1-12)

Findings of Court:
The court found the EGM validly convened and the requisition notice proper under the Companies Act 2016, emphasizing the majority shareholders' rights. (Paras 63)

Issues: The main issues were the validity of the notice of requisition and whether the EGM was properly convened under the Companies Act 2016. (Paras 36-62)

Ratio Decidendi: The court ruled that the second defendant's right to requisition a meeting was not contingent on meeting the 10% threshold, which only applies to directors' obligations. The plaintiff's lack of timely objection and failure to show substantial injustice undermined his claims. (Paras 36-62)

Result: Originating summons dismissed with costs of RM15,000.00 awarded to each defendant. (Paras 63)

Judgement Key Points

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What is the effect of the 10% shareholding threshold in s 311 CA 2016 on a member's right to requisition a meeting?

What is the proper interpretation of sections 311(1) and 311(3) CA 2016 in relation to requisitioning meetings and directors' duty to convene?

What are the standards for substantial injustice under s 582 CA 2016 when opposing irregularities in a requisition, EGM, or removal proceedings?

JUDGMENT

Atan Mustaffa Yussof Ahmad J:

Introduction

[1] In the tapestry of corporate law, the threads of director-shareholder relationships, statutory interpretation, and the sanctity of democratic decision-making often intertwine in complex and unexpected ways. The present originating summons, filed by the plaintiff, Lim Swee Chai, against the first defendant, Advancecon Holdings Berhad ("Advancecon"), and the second defendant, Phum Ang Kia, presents this court with one such intricate knot to unravel. At its heart, lies a challenge to an extraordinary general meeting ("EGM") of Advancecon convened on 9 August 2022 and a resolution passed thereat to remove the plaintiff as director, which the plaintiff contends are invalid, null and void. The plaintiff's attack is premised on the alleged invalidity of the notice of requisition dated 25 June 2022 ("the notice of requisition") issued by the second defendant to requisition the EGM, owing to the second defendant's purported lack of the requisite shareholding. The defendants, in turn, stoutly defend the validity of the notice of requisition, the EGM, and the impugned resolution, arguing that the second defendant, as a member of Advancecon, was entitled to request a meeting, and that the Board of Directors acted within its powers to convene the EGM, at which the majority shareholders validly exercised their right to remove the plaintiff as director.

Background Facts

[2] The plaintiff and the second defendant are the co-founders of the first defendant, Advancecon. Advancecon was incorporated in Malaysia on 9 April 1997 and was listed on the Main Market of Bursa Malaysia in July 2017.

[3] At the material time, the plaintiff was a shareholder and non-executive director of Advancecon, while the second defendant was an executive director, shareholder and the group chief executive officer. Advancecon has more than 3,300 shareholders.

[4] The second defendant is the most substantial shareholder of Advancecon, holding 97,563,750 shares representing approximately 20.18% of the total issued shares of Advancecon, held either under his own name or through various nominee companies. The plaintiff is the second most substantial shareholder, holding 54,038,250 share, representing approximately 11.18% of the total issued shares of Advancecon.

[5] On 25 June 2022, the second defendant issued the notice of requisition to Advancecon to requisition the Board of Directors of Advancecon ("the Board") to convene an EGM for the purpose of moving an ordinary resolution to remove the plaintiff as a director of Advancecon with immediate effect. The notice of requisition was made pursuant to s 311 of the Companies Act 2016 (" CA 2016") and cl 72 of the Advancecon's constitution.

[6] On 29 June 2022, the Board passed a directors' circular resolution ("first directors' resolution") resolving pursuant to Advancecon's Constitution to hold an EGM, with the venue, date and time to be determined later.

[7] On 8 July 2022, the Board passed a further Directors' Circular Resolution ("second directors' resolution") resolving pursuant to Advancecon's Constitution that the EGM will be held virtually on 9 August 2022 at 10am for the purpose of considering the ordinary resolution to remove the plaintiff as director.

[8] On 12 July 2022, the company secretary of Advancecon issued a notice of EGM to the shareholders pursuant to the second directors' resolution.

[9] The EGM was duly held virtually on 9 August 2022 and was chaired by Yeoh Chong Keat, the independent non-executive chairman. It was attended by 96 members, including the plaintiff. At the EGM, the plaintiff was invited to provide oral representations on the proposed resolution for his removal. The second defendant also addressed the EGM. After a question- and-answer session, the members voted and the poll results showed that 77.83% voted in favour of the ordinary resolution to remove the plaintiff as a director with immediate effect.

[10] Following the EGM, Advancecon made th

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