The court confirmed that the company's Articles of Association prevails over the Companies Act in matters of director appointments requiring strict adherence to constitutional provisions.

[1] The plaintiff by an Originating Summons applied to this court to declare the appointment of the 1st defendant as a director of the 3rd defendant null and void. The basis of the application stems from the plaintiff's contention that the manner in which the appointment was made, ie vide a circular resolution, contravenes s 302(2)(a) of the Companies Act 2016 ("the Act") as the company's constitution requires a general meeting to be convened for such appointments. The defendants argued otherwise, stating that there was justification to employ the manner in which the resolution was passed and there was no contravention of the Act.

[2] This court allowed the application and ruled that there was a breach of the Act when the 1st defendant was appointed vide a written resolution. This is contrary to an express provision under the constitution of the company which provides for the appointment of directors to be carried out via a general meeting. This had attracted the prohibition contained under s 302(2)(a) of the Act.

Background

[3] The plaintiff, a Syrian national with a permanent residency in Malaysia is a director and a 40% minority shareholder in the 3rd defendant. The 2nd defendant is a director and 60% majority shareholder of the 3rd defendant. Both were the founding directors of the 3rd defendant. The 3rd defendant is a private company limited by shares that was incorporated in Malaysia in 1999. Its business is related to the process, manufacture and export of upstream and downstream palm oil and other edible oil products.

[4] The 1st defendant was appointed as director in the 3rd defendant on 4 September 2018. The 4th defendant is the Company Secretary who was appointed by the 3rd defendant's board after the appointment of the 1st defendant on 6 September 2018.

[5] Sometime in 2015, relationship between the plaintiff and the 2nd defendant turned sour. It led to a situation where there was deadlock at the Board of Director's level. Both the plaintiff and 2nd defendant no longer could cooperate together. The company's financier filed a lawsuit against the 3rd defendant which resulted in the relationship between the two founding members of the company to deteriorate even further. The deadlock resulted in the company not being able to function in its ordinary course of business.

[6] It was explained in the Affidavit-in-Reply of the 2nd defendant that as a result of the deadlock, he had to act in the best interest of the company. This led to the passing of the resolution dated 4 September 2018 (the "Written Resolution") which appointed the 1st defendant.

[7] The plaintiff refused to recognise the appointment of the 1st defendant. The subsequent appointment of the 4th defendant as Company Secretary was also disputed by the plaintiff. This led to the filing of the application before this court.