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2025 MarsdenLR 2391
HIGH COURT MALAYA KUALA LUMPUR
WILBUR TOCK BING HENG – Appellant
Versus
TOCK KHEE SONG & ANOR (ENCLS 2 19 23 & 27) – Respondent
[Companies Winding-Up No: WA-28NCC-949-09/2023]
Winding up a company is warranted when there is a breakdown in shareholder trust and the company's substratum is lost, particularly among equal shareholders.
Headnote:(A) Companies Act 2016 - Section 465(1)(f) and (h) - Winding up of company - Petition filed on grounds of breakdown of trust, deadlock at shareholder level, and loss of substratum - The company was dormant after the founder's death, and a conflict arose between equal shareholders regarding management and access to financial documents. (Paras 1-4, 9, 10, 14, 19)
(B) Shareholder Rights - Rights of equal shareholders must be respected; denial of rights constitutes grounds for dissolution - The conduct of one shareholder led to irreparable breakdown of trust and confidence in management, warranting winding-up of the company. (Paras 16-17, 19)
Facts of the case:
This petition seeks to wind up the company due to a breakdown in the relationship between two equal shareholders, following the founder's demise and subsequent mismanagement by one shareholder. (Paras 1-3)
Findings of Court:
The court found that the company’s substratum is lost, as it has not operated since the founder's death and there is a deadlock between shareholders. (Paras 10, 14, 19)
Issues: Whether there was a breakdown in the relationship between shareholders justifying a winding-up order; whether the substratum of the company was lost. (Paras 14-19)
Ratio Decidendi: The court held that it is just and equitable to wind-up the company due to the loss of substratum and the irretrievable breakdown of trust between shareholders, affirming that equal shareholders should not be denied access to company affairs. (Paras 19-20)
Result: Petition allowed and the company ordered to be wound-up with costs of RM20,000.00 to be paid by one shareholder to the other.
| Table of Content |
|---|
| 1. petition for winding up based on shareholder dispute. (Para 1 , 2 , 3 , 4 , 5) |
| 2. arguments related to shareholder rights and document access. (Para 6 , 7 , 8) |
| 3. court's findings on the loss of company substratum. (Para 9 , 10 , 11) |
| 4. analysis of deadlock and loss of trust in management. (Para 12 , 13 , 14 , 15 , 16 , 17) |
| 5. court's reliance on precedent regarding family business breakdown. (Para 18) |
| 6. conclusion to wind up the company. (Para 19) |
Introduction
[1] The Petitioner filed this Petition in encl 2 to wind-up the Second Respondent pursuant to s 465(1)(f) and (h) of the Companies Act 2016 (" CA 2016"). The grounds given by the Petitioner to wind-up the Second Respondent ("R2") are:
a) There is a breakdown of mutual trust and confidence between the Petitioner and the First Respondent ("R1") who happens to be his uncle.
b) There exists a deadlock at the shareholder's level
c) R2 has lost its substratum and is presently dormant and no longer in operation
d) R1 has acted in the affairs of R2 in his own interests instead of the interests of the members as a whole.
Background Facts
[2] R2 was engaged in the business of cleaning and coating services before it stopped providing the services after the demise of the founder shareholder Tong Kai Chok (TKC) who the grandfather of the Petitioner.
[3] The late TKC was the majority shareholder holding 75% of the issued shares and R1 held 25%. Upon the death of TKC, R1 who is TKC's younger son inherited the other 25% making him a 50% shareholder. The Petitioner was given the other 50% from the Last Will of TKC. Thus, at the time of filing this Petition both the Petitioner and R1 hold 50% each making them equal shareholders.
[4] The late TKC allowed R1 to run the business of R2 because he was old and unwell. Sometime in August 2022, about one month before TKC died, R1 unilaterally change the constitution of R2 and made himself the only director of R2 thereby assuming total control of the management of R2.
[5] R1 one was appointed co-executor of the will of TKC, together with two (2) others, ie the Petitioner's father "TKL" and one Teoh Geok May ("Miss Teoh"). 50% of TKC's shares was eventually transmitted to the Petitioner on 10 March 2023 making him a 50% shareholder of R2.
Petitioner's Submissions
[6] To establish a breakdown of relationship between the two (2) equal shareholders the Petitioner submits that it is clear from the Affidavit in Support ("AIS") that R1 had consistently denied the Petitioner's rights as a 50% shareholder of the Company as follows:
a) R1 threatened to report the Petitioner for criminal breach of trust although none has been committed;
[See Tab 2 of Petitioner's Core Bundle of Documents (PCBOD) at p 18-20]
b) R1 denied the Petitioner's right to make any decision in the Company;
[See Tab 3 of PCBOD at pp 21-22]
c) R1 denies the Petitioner's right to inquire into the affairs of the R2;
[See Tab 4 of PCBOD at pp 23-24]
d) TKS informed the Petitioner that he is not a director of R1 therefore he has no right to enquire into the accounts of R1 or to have access to the details monthly transactions in R1;
[See Tab 4 of PCBOD at pp 25-35]
e) R1 rejected the Petitioner's request to be appointed as a director;
[See Tab 6 of PCBOD at pp 36-46]
f) R1 informed the Petitioner that he cannot enquire into the Company's transactions including the RM63,000.00 unaccounted for rentals.
[See Tab 7 of PCBOD at pp 47-49]
g) R1 denied the Petitioner's right to have access to R2's documents without his approval;
[See Tab 8 of PCBOD at pp 50-51]
h) R1 threatened the Petitioner to not mess up his account, which strongly suggest to the Petitioner that R2's accounts is being manipulated.
[See Tab 9 of PCBOD at pp 52-53]
i) R1 informed the Petitioner that he will not agree to the Petitioner checking the bank accounts and invited the Petitioner to sue him if he wants to inspect R1's accounts.
[See Tab 10 of PCBOD at p 54]
[7] In reply to the Petitioner's averments R1 submits as f
