Directors have an absolute right to inspect company records, barring proven ulterior motives harming the company.

[1] The plaintiff is a Director of the 3rd defendant company, Sri Magjuta Sdn Bhd ("Sri Magjuta" or "the company"). She seeks an order under s 167(6) of the Companies Act 1965 for an auditor to inspect the companys accounting and financial records on her behalf. Her co-directors, the 1st and 2nd defendants resist the application.

[2] The scope of the exceptions and limitations of a Directors right to inspect company accounts under s 167(6) is a crucial point that arises for consideration in this application.

The Facts In Brief

[3] The plaintiff is the aunt of the 1st and 2nd defendants. The three of them are the Directors of Sri Magjuta.

[4] Sri Magjuta was incorporated on 7 September 1996, by the plaintiffs father, the late Hoo An Kee @ Ho Fong Shun ("HAK"). The first shareholders and Directors of Sri Magjuta were the plaintiff, her two sisters and her sister- in-law, the mother of the 1st and 2nd defendants. It was a family business that was operated in Simpang Pulai, Perak by HAK, his wife, and the 1st and 2nd defendants father, Ho Yee Chee ("HYC"), who were all undischarged bankrupts at the material time.

[5] The plaintiff resided and worked in Kuala Lumpur and was never involved in the management and running of the company. During that time, the plaintiff was a cheque signatory of the companys bank accounts and at the request of HAK, had signed and approved the company accounts. However, after HAK passed away in 2012, the relations between the plaintiff and the 1st and 2nd defendants deteriorated following the plaintiffs request to examine the company books and accounts.

Grounds For The Plaintiffs Application To Inspect

[6] In support of the application, the plaintiff filed an affidavit stating that she was given a draft "Annual Report And Financial Statements 31 December 2013" to sign and to affirm on oath under a statutory declaration. Upon a perusal of the same, she had some concerns about some of the transactions recorded in the accounts. By a letter dated 9 January 2015, her solicitors sought an explanation from the company but her concerns were not specifically addressed by the latter nor the 1st and 2nd defendants.

[7] The plaintiff also asserts that she is entitled to inspect the accounting records as she is a guarantor of banking facilities for the company and the banking facilities have escalated over time. As such, she would have to be responsible and liable for the financial obligations if the company was not well-managed financially.

The Arguments

[8] Mr Justin TY Voons submission on behalf of the plaintiff was that as a Director, she had an absolute statutory right under s 167(6) of the Companies Act 1965 to inspect the companys accounting and financial records. The only exception which has been recognised to date is that it could be lost if the defendants could show that the purpose for which she sought inspection was to injure the company.

[9] The 1st and 2nd defendants objection to the application was two-fold. First, the plaintiff had no right to inspect the company books of accounts as she was a Director and shareholder in name only. She held the shares on trust for the 1st and 2nd defendants and was for all purposes only a sleeping director in the company and had never been involved in the running and management of the company.

[10] Secondly, the exercise of the plaintiffs right to inspect in this case was for an ulterior or improper purpose, to wit, to further her own personal interest. The counsel for the 1st and 2nd defendants, Mr Peter Ling Cheng Chai contended that the plaintiffs desire to inspect was not to discharge her duties as a Director but to ascertain the value of the company and her 58% share (with her husband) and to liquidat