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2025 MarsdenLR 2871
HIGH COURT SABAH & SARAWAK KOTA KINABALU
NGEE SIE SIK – Appellant
Versus
LEE UK TEUNG & ORS – Respondent
[Case No: BKI-24NCvC-193-11/2023]
Corporate governance requires fair dealing in shareholder actions; actions deemed oppressive to minority shareholders violate statutory rights under the Companies Act.
Headnote:(A) Companies Act 2016 - Section 346 - Share allotment and corporate resolutions - Plaintiff sought to set aside the allotment of 700,000 shares in the 6th Defendant company to the 1st to 4th Defendants and declaration that the EGM resolutions are null and void - Allegation of oppressive conduct against the Plaintiff's rights as shareholder. (Paras 1, 2, 4, 28)
(B) Oppression of minority shareholders - Defined as conduct departing from fair dealing and prejudicial conduct, as established in prior cases - Court found defendants' actions oppressive and unfair, constituting disregard for the Plaintiff's interests. (Paras 29, 43)
Facts of the case:
The Plaintiff sought to annul the allotment of shares and certain company resolutions that he claimed were oppressive, given the family ties between the parties. The Plaintiff and the 1st Defendant were previously equal shareholders in the 6th Defendant, a family business. (Paras 1-8, 10-11)
Findings of Court:
The court cancelled the resolution for share allotment and declared the EGM resolutions null and void, reaffirming the equal shareholding status prior to the resolutions. The actions of the Defendants were found to be oppressive under the Companies Act. (Paras 58-59)
Issues: The central issues addressed were whether the shared allotment and EGM resolutions constituted acts of oppression against the Plaintiff’s rights as a shareholder, as defined by the legislation. (Paras 28, 44)
Ratio Decidendi: The court highlighted the need for corporate actions to align with fair play, determining that the actions taken by the Defendants were oppressive and unjustifiable as they disregarded the Plaintiff's interests within the company. (Paras 30, 43)
Result: Resolutions annulled; equal shareholding restored; costs awarded to the Plaintiff. (Paras 58-60)
| Table of Content |
|---|
| 1. plaintiff seeks to set aside share allotments. (Para 1 , 2 , 3 , 4 , 5) |
| 2. parties involved are family members. (Para 6 , 7 , 8 , 9) |
| 3. background on founding, shares, and management. (Para 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23) |
| 4. court highlights document management issues. (Para 24 , 25 , 26 , 27) |
| 5. definition of oppression under companies act. (Para 28 , 29 , 30) |
| 6. justification and necessity of share allotment contested. (Para 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43) |
| 7. payment of directors' fees questioned as oppressive. (Para 44 , 45 , 46 , 47) |
| 8. oppressive conduct regarding company management changes. (Para 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56 , 57) |
| 9. court orders share allotment cancellation and costs. (Para 58 , 59) |
Introduction
[1] The amended Originating Summons ("OS") at hand was filed by the Plaintiff pursuant to s 346 of the Companies Act 2016 .
[2] The Plaintiff sought to set aside the allotment of 700,000 shares in the 6th Defendant company (Yun Chung Property Sdn Bhd) to the 1st to 4th Defendants as follows:
(i) the 1st Defendant: 490,000 shares
(ii) the 2nd Defendant: 70,000 shares
(iii) the 3rd Defendant: 70,000 shares
(iv) the 4th Defendant: 70,000 shares
[3] The allotment of shares was dated 18 May 2023, and the document was conveyed to the Plaintiff on 1 June 2023.
[4] The Plaintiff also sought a declaration that the resolutions passed at the Extraordinary General Meeting ("EGM") held on 8 April 2024 is null and void. Among the resolutions passed were that the 2nd and 3rd Defendants were to be paid monthly directors' fees of RM5,000.00 each, and that K2 Lighting Sdn Bhd, S2 Lighting Sdn Bhd, Evolusi Handal Sdn Bhd were associate business partners.
[5] The Plaintiff contended that the allotment of shares, and the resolutions passed at the EGM were oppressive acts perpetrated against him as a shareholder in the 6th Defendant company, Yun Chung Property Sdn Bhd.
Parties
[6] The Plaintiff and the individual Defendants are related.
[7] The Plaintiff's wife is a sister of the 5th Defendant.
[8] The 1st Defendant is the husband of the 5th Defendant. The 2nd, 3rd and 4th Defendants are their children.
[9] The 6th Defendant is the company over which the parties are having a tussle in the instant proceedings. It is a nominal Defendant, added so as to be bound by any orders that the Court may make. The real dispute is between the Plaintiff and the individual Defendants.
Context Of The Dispute
[10] The Plaintiff and the 1st Defendant were founding members of the 6th Defendant which was incorporated in 2001.
[11] They were equal shareholders before the impugned resolutions were passed. Both then had 250,000 shares each in the issued and paid-up shares in the 6th Defendant.t that time, the Plaintiff and the 1st Defendant were directors, along with their spouses, in the 6th Defendant.
[12] The alternate directors then were Ngieng Ngee Seng @ Ngee Seng Seng (PW1) and Lee Kian Sing (the 3rd Defendant), the sons of the Plaintiff and the 1st Defendant respectively.
[13] Digressing for a while, the Plaintiff and the 1st Defendant also founded and are shareholders in 4 other companies: DM Hotel Sdn Bhd, Yun Chung Lighting Sdn Bhd, Yun Chung Electrical Sdn Bhd, and K2 Lighting Sdn Bhd.
[14] It is also an agreed fact that there was an understanding between the Plaintiff and the 1st Defendant that the Plaintiff would manage DM Hotel Sdn Bhd and Yun Chung Lighting Sdn Bhd, while the other 3 companies (including the 6th Defendant) would be under the 1st Defendant's management. These were essentially family businesses. See SAF.
[15] The 6th Defendant owns the premises on which DM Hotel Sdn Bhd and Yun Chung Lighting Sdn Bhd carry on business, and collects rental from these companies. The 2 properties are 4-storey buildings, viz, lots 27 and 37 at Damai Plaza, Phase 1, Kota Kinabalu ("the Damai properties").
[16] On 1 July 2022, a board meeting of the 6th Defendant
