The court affirmed that quorum provisions cannot be used to obstruct majority shareholders' rights, and the existence of pending legal actions does not prevent the convening of a meeting under Section 314 of the Companies Act 2016.

JUDGMENT

Ong Chee Kwan J:

Introduction

[1] Section 314 of the Companies Act 2016 provides the Court with the powers, either on its own motion or on the application of a director or a member of a company who would be entitled to vote at the meeting of the company to order for a meeting to be called, held and conducted in any manner the Court thinks fit.

[2] The section applies if for any reason it is impracticable to call for a meeting of members of a company in any manner in which meetings of that company may be called.

[3] Enclosure 1 is an application made pursuant to s 314 of the Companies Act. The primary contention was that the Court ought not to order the meeting which includes a proposal to remove a director when the said director has commenced a separate and pending action to restrain the company from convening the very meeting and to remove him as a director.

[4] Further, it was contended that this Court should take cognizance of the fact that the 1st Defendant, as a member of the company, has filed a winding up petition against the company, being the 2nd Defendant herein, on the 'just and equitable" ground and as such, this Court ought not to order the proposed meeting as it would prejudice the 1st Defendant's interests in the company if the director, who is the representative of the 1st Defendant on the board of directors of the company, is removed.

[5] On 26 September 2024, after hearing submissions from counsel, I allowed the Plaintiff's application under encl 1. I now render my full grounds.

Background Facts

[6] The 2nd Defendant is a company incorporated on 23 July 2023. The shareholders since its inception, are the Plaintiff and the 1st Defendant. The Plaintiff holds 55% and the 1st Defendant holds 45% of the shareholdings of the 2nd Defendant.

[7] On the board level, the Plaintiff and one Chew Kit Seng (who is a director and shareholder in the 1st Defendant) ("CKS") were and are the directors since the inception of the 2nd Defendant. It is not in dispute that CKS is the 1st Defendant's representative on the board of directors of the 2nd Defendant.

[8] The 2nd Defendant is in the business of massage and wellness centre which is the same nature with the 1st Defendant. Between the 1st and 2nd Defendants, there is a licensing agreement dated 1 August 2023 executed between them ("Licensing Agreement").

[9] The Plaintiff's and the 1st Defendant's rights as shareholders were governed by the Licensing Agreement cum shareholder agreement until the termination on 23 August 2024.

[10] Uncontrovertibly, dispute arose between the parties in the course of conduct of the 2nd Defendant's affairs. On 28 May 2024, the Plaintiff requisitioned for a members' meeting to be convened on 25 June 2024 for the following agendas:

(i) an ordinary resolution be passed that Chew Kit Seng (NRIC No.:930114-14-5015) (CKS) be and is hereby removed as the director of the 2nd Defendant with immediate effect;

(ii) To fix the first financial year ended of the 2nd Defendant for the lodgement of the financial statements;

(iii) To deliberate on the proposal of directors' fees; and

(iv) To structure the 2nd Defendant's business progress and future plan.

("the proposed EGM")

[11] Consequential to the proposed EGM, there were two proceedings commenced by the 1st Defendant and CKS.

[12] Firstly, there is a winding up petition moved on a just and equitable ground, taken out by the 1st Defendant predicated on an alleged breakdown of mutual trust and confidence and deadlock between the shareholders who the 1st Defendant claimed are quasi partners (which the Plaintiff denies). This petition is registered as Shah Alam High Court Civil Suit No:: BA-28NCC-354-06/2024 ("WUP 354"). WUP 354 is currently fixed for hearing on 18 October 2024.

[13] Secondly, is the Originating Summons No BA-24NCC-71-06/2024 ("OS 71"), which is an application for an injunction filed by CKS in his capacity as a director of the 2nd Defendant, seeking an order to prohibit the convening of a memb