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2022 MarsdenLR 728
HIGH COURT MALAYA KUALA LUMPUR
SUTHAN MOOKAIAH & ANOR – Appellant
Versus
ZED MOBILE MALAYSIA SDN BHD PERTAMA & ANOR – Respondent
[Originating Summons No: WA-24NCC-220-06/2020]
The validity of shareholder resolutions was upheld, confirming that procedural irregularities do not invalidate corporate actions when the shareholder's rights are clearly established.
Headnote:(A) Companies Act 2016 – Section 310, 311, 316 – Plaintiffs challenged the validity of the Notices and resolutions related to their removal as directors by the shareholder Zed Worldwide, following its insolvency, claiming lack of authority and procedural irregularities. The court examined the appointment of Felix as Corporate Representative and the legitimacy of the EGM Notices. (Paras 1-128).
(B) Corporate Governance – Shareholder's Rights – The court emphasized that a shareholder's right to convene meetings and pass resolutions is paramount and must be respected, dismissing the claims against the validity of notices issued by a corporate representative of a sole shareholder. (Paras 120, 124)
(C) Procedural Compliance – The court found that any alleged procedural irregularities did not substantially affect the outcome, hence validating the resolutions passed in the EGM. (Paras 94-107)
Facts of the case: The plaintiffs, former directors of two private limited companies, sought to invalidate the notices and resolutions concerning their removal after Zed Worldwide Holdings SL was declared insolvent and assigned an authorized representative. (Paras 3, 45).
Findings of Court: The court validated the authority of Zed Worldwide's corporate representative and ruled that all actions pertaining to the removal of the plaintiffs from directorship were legally sound and correctly executed. (Paras 113-124).
Issues: Whether the corporate representative acted with valid authority, if the EGM complied with statutory requirements, and the necessity for Zed Worldwide to be named in the suit. (Paras 68-81).
Ratio Decidendi: The court determined that the legitimate actions by Zed Worldwide's representative were beyond reproach, upholding the resolutions made regarding the plaintiffs' removal as directors. (Paras 122-124).
Result: The Originating Summons was dismissed with costs awarded to the defendants.
Key Points: - The court held that the corporate representative’s authority to issue notices and resolutions was valid and lawful. (!) (!) - The court found that any alleged procedural irregularities did not substantially affect the outcome, validating the EGM notices and resolutions. (!) (!) (!) (!) - The plaintiff’s reliefs against the acts of Zed Worldwide as sole shareholder, and the need to name Zed Worldwide (and possibly Felix) as parties, were discussed as central to the action; ultimately the matter was decided on the validity of the notices and resolutions. (!) (!) (!) (!)
How to determine whether a corporate representative appointed by a shareholder has valid authority to issue notices and pass resolutions?
How to assess whether procedural irregularities in convening an EGM affect the validity of notices and resolutions?
What are the rights and obligations of the sole shareholder in convening meetings and removing directors, and whether non-parties should be joined?
JUDGMENT
[1] This was an application by the plaintiffs by way of Originating Summons dated 18 June 2020 for, inter alia, the following reliefs:
"(1) Suatu deklarasi bahawa segala Notis-Notis Rekuisisi Ahli-Ahli (Requisition Notices of the Members) bagi mengadakan Mesyuarat Agung Luar Biasa (Extraordinary General Meeting) bertarikh pada 24 Mac 2020 dan/atau 27 Mac 2020 masing-masing ("Notis-Notis Rekuisisi"), Notis-Notis Mesyuarat Agung Luar Biasa (Extraordinary General Meeting) bertarikh pada 7 April 2020 dan/atau 13 April 2020 masing-masing ("Notis-Notis EGM"), Resolusi-Resolusi Ahli-ahli (Member's Written Resolutions) bertarikh 12 Mac 2020 dan/atau 30 Mac 2020 ("Resolusi-Resolusi Ahli-Ahli") kesemuanya adalah tidak sah dan batal.
(2) Suatu deklarasi bahawa segala hasil daripada Notis-Notis Rekuisisi, Notis-Notis EGM dan/atau Resolusi-Resolusi Ahli-Ahli, termasuk perlantikan Pengarah-Pengarah Enrique Urbaneja Moreno, Christina Faci Lobera, Francisco Javier Andres Santamarina dan Mohamed Ariff Bin Tar Mohamed, perlantikan setiausaha-setiausaha syarikat Eng Bee Hong dan Woo Chooi Yoke, penyingkiran plaintif-plaintif sebagai Pengarah-Pengarah defendan-defendan dan/atau penukaran penandatangan diberikuasa kepada akaun-akaun Maybank syarikat defendan-defendan adalah tidak sah dan batal.
(3) Suatu deklarasi bahawa segala hasil-hasil, notis-notis, langkah-langkah dan/atau tindakan-tindakan susulan dan/atau lanjutan yang telah dan/atau akan diambil oleh defendan-defendan, sama ada melalui diri sendiri, ejen-ejen, pengkhidmat-pengkhidmat, wakil-wakil atau mana- mana berkenaan dengan Notis-Notis Rekuisisi, Notis-Notis EGM dan/ atau Resolusi-Resolusi Ahli-Ahli adalah tidak sah dan terbatal.
(4) Suatu Perintah bahawa lembaga Pengarah defendan-defendan adalah dihalang, samada melalui diri-sendiri, ejen-ejen, pengkhidmat- pengkhidmat, wakil-wakil, setiausaha syarikat (company secretary) atau mana-mana berkenaan daripada mengambil sebarang langkah dan tindakan lanjut dan/atau susulan berkenaan dengan urusan-urusan syarikat sehingga Perintah Mahkamah ini selanjutnya."
[2] Essentially the plaintiffs sought to declare invalid the Notices of Requisition and Notices of Extraordinary General Meeting ("EGM Notices") (referred to in para (1) of the Originating Summons (collectively "the Notices") and the resolutions were passed.
[3] The plaintiffs sought to challenge the locus standi of a Spanish individual, Felix Sanchez Echevarria ("Felix"), whom represented himself as the Authorised Corporate Representative ("Corporate Representative") of Zed Worldwide Holdings SL ("Zed Worldwide") to issue the Notices and arising therefrom the validity of the Notices, the Extraordinary General Meeting ("EGM") that was held and/or various resolutions passed.
[A] Salient Background Facts
[4] The defendants are private limited companies incorporated in Malaysia on 12 March 2003 and 12 December 2001 respectively.
[5] Zed Worldwide is, at all material times, the sole shareholder of both the defendants.
[6] The 1st plaintiff was appointed as a director of the 1st defendant on 19 September 2016 and the 2nd defendant on 30 December 2016.
[7] The 2nd plaintiff was appointed as a director of the defendants on 2 March 2011.
[8] The plaintiffs are not shareholders of the defendants.
Winding Up/Voluntary Insolvency Of Zed Worldwide
[9] On 17 October 2016, the Commercial Court No 9 of Madrid declared Zed Worldwide's voluntary insolvency. The Spanish Insolvency Court also appointed Jordi Albiol Plans ("Jordi") from Rousaud Costas Duran Concursal SLP ("RCD") as Zed Worldwide's Sole Insolvency Administrator ("Insolvency Administrator").
[10] As a result of this appointment, Jordi has the legal obligations, among others, to administer and dispose of Zed Worldwide's assets.
Purchase of Zed Worldwide's Shares by Newry
[11] On 3 December 2018, as part of the liquidation process, Zed Worldwide entered a Deed of Sale with a Spanish company known as Newry Global Media SLU
