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2022 MarsdenLR 576
HIGH COURT MALAYA SHAH ALAM
GEOINTELLIGENCE SDN BHD – Appellant
Versus
AZHAR HAJI ISMAIL & ANOR – Respondent
[Writ Summons No: BA-22NCVC-509-11/2019]
Directors cannot authorize their fees without proper approval at a general meeting, and failure to meet quorum invalidates such meetings and resolutions.
Headnote:(A) Companies Act 2016 – Sections 245(1), 314; Companies Act 1965 – Articles 46, 47, 70 – Directors' fees – Payment of directors' fees deemed invalid due to lack of quorum at AGM, requiring refund; directors obligated to return company records post-removal – Parties disputed validity of AGM and entitlement to remuneration, with emphasis on statutory compliance and proper approval processes. (Paras 21, 29, 30)
(B)
Directors' Remuneration – Valid payment of directors' fees requires approval at general meeting per company’s constitution; absence of quorum renders AGM and resolutions invalid; fiduciary duties necessitate strict adherence to statutory provisions. (Paras 41, 43, 56)
(C)
Court found adjourned AGM invalid and ordered refunds along with return of financial records. (Paras 56, 54)
(D)
Result:
Claims allowed partly.
JUDGMENT
Introduction
[1] The Plaintiff in this suit sues its former directors for refund of the monies paid to them as directors' fees and for return of the financial records of the company still in the possession of one of them.
Salient Facts
[2] The facts giving rise to the dispute are not disputed.
[3] The Plaintiff is a locally incorporated company. It was incorporated on 15 June 2004 under the name of Prudent E-Factor Sdn Bhd. Its records with the Companies Commission of Malaysia shows that on 10 March 2008, it underwent a name change to Geointelligence Sdn Bhd.
[4] The 1st Defendant, Azhar bin Haji Ismail, together with one Abdul Halim bin Hasan ("Abdul Halim"), the original 2nd Defendant, were the directors of the Plaintiff at the material dates. Subsequent to the filing of this action, Abdul Halim passed away and the Estate of Abdul Halim bin Hasan was then substituted as the 2nd Defendant. His solicitors continued to represent the estate for the purpose of these proceedings.
[5] On 20 April 2018, a Notice of Annual General Meeting ("AGM") of the Plaintiff to be held on 26 April 2018, was issued to the shareholders. The shareholders then were Mohd Zain Al'abidin bin Md Zin (PW1) and the 1st Defendant, who both held shares of 876,250 and 123,750 respectively.
[6] Upon receipt of the notice, PW1, the majority shareholder, objected to the proposed AGM by letter dated 24 April 2018. In the said letter, he informed that the notice of AGM was short notice and that no audited accounts and proxy form were attached to the said notice.
[7] On 8 August 2018, 1st Defendant caused to be issued another Notice of AGM to be held on 30 August 2018. PW1 again objected to the said notice by letter dated 24 August 2018 on the same grounds that no audited accounts and proxy form were provided to him.
[8] On 30 August 2018, the scheduled AGM was formally adjourned due to the absence of PW1. The minutes of the AGM tendered in evidence recorded the attendance of 1st Defendant and Abdul Halim as directors. The 1st Defendant also attended as a shareholder. It was also recorded that the AGM was adjourned as there was a lack of quorum. The meeting was then adjourned to 20 September 2018.
[9] A Notice of AGM was again issued for the adjourned AGM to be held on 20 September 2018. The Notice was signed by the then company secretary (DW2). Although the agenda stated that the meeting was to adopt the audited accounts for each of the financial years ended 30 June 2012 to 30 June 2017, these accounts were not furnished to PW1.
[10] Not surprisingly, PW1 did not attend meeting on 20 September 2018. This time however, the AGM proceeded without his attendance as a majority shareholder. 1st Defendant was the only shareholder who was present. He chaired the meeting. The minutes of the meeting recorded that the meeting proceeded with on the basis of art 50 of the Companies Act 1965 and art 50(d) of the Articles of Association of the Plaintiff.
[11] The AGM meeting and the decision taken is now the subject matter of this dispute. I shall refer to the meeting on 20 September 2018 as the adjourned AGM.
[12] The adjourned AGM resolved to approve the audited financial statements for the financial years ended 30 June 2012 to 30 June 2017, together with the reports of the directors and auditors. In addition, directors' fees of RM336,000 was declared to be paid to the 1st Defendant and Abdul Halim for the financial years ended 30 June 2017 and 30 June 2018. In addition, a further amount of RM318,000 was declared payable to the 1st Defendant for the financial years ended 30 June 2013 to 30 June 2016, which was to be paid within 30 days from the date of the adjourned AGM.
[13] As a result of the adjourned AGM and the resolutions passed, an Extraordinary General Meeting ("EGM") was convened on 5 November 2018, chaired by PW1. The 1st Defendant attended in his capacity as both shareholder and director. Abdul Halim was also present in his capacity as a director.
