Back
2025 MarsdenLR 3262
HIGH COURT SABAH & SARAWAK KUCHING
CHOON HUA TRADING CORPORATION SDN BHD & ORS – Appellant
Versus
CS MINI MARKET SDN BHD & ORS AND ANOTHER CASE – Respondent
[Originating Summons No: KCH-24NCvC-10/4-2023 & Suit No: KCH-22NCvC-19-6/2023]
The court upheld that a director's resignation is invalid if it reduces the number of directors below the minimum required by law, enforcing statutory compliance in governance.
Headnote:(A) Companies Act, 2016 - Sections 196, 208, and 619 - Corporate governance - Validity of director resignations and enforcement of share subscription agreements - Court found that resignations of certain directors were valid while others were ineffective due to statutory requirements - Establishment of whether subscription agreement was enforceable, which was ruled in the affirmative - Evaluated claims under two loan agreements totaling RM10,000,000, with corresponding decisions on repayment obligations for the directors and firm - Court held the plaintiffs did not assume control over the company management despite allegations to the contrary, contributing to the finding of liability - Resulted in declarations favoring plaintiffs and orders for repayments. (Paras 188-191)
(B) Corporate governance - Director's resignation - Statutory requirement for minimum number of directors - Resignation ineffective if it results in non-compliance with statutory provisions. (Paras 32-34)
(C) Corporate contracts - Conditional contracts and due diligence - Non-compliance with preconditions of share subscription agreement led to plaintiffs’ right to refuse completion. (Paras 187, 105)
| Table of Content |
|---|
| 1. reliefs sought in originating summons. (Para 1 , 2 , 3) |
| 2. loan agreements executed and their purposes. (Para 11 , 12 , 13 , 14 , 15 , 16) |
| 3. issue of due diligence and management responsibilities. (Para 22 , 38 , 62) |
| 4. no estoppel and false understanding. (Para 97 , 102) |
| 5. closure of csmm and responsibilities of directors. (Para 155 , 162) |
| 6. judgment ruling in favor of plaintiffs. (Para 186 , 189 , 190) |
Introduction
[1] There are 2 actions before the Court viz Originating Summons No KCH-24NCvC-10/4-2023(HC4) (Originating Summons) and Suit No KCH-22NCvC-19-6/2023 (Suit). Both actions were ordered to be heard together by an Order of Court dated 25 January 2024 (Enclosure 30 in the Suit).
[2] At the center of both the actions are 3 loan documents, a share subscription agreement and a supplementary agreement which were signed by the parties (save for the 5th Defendant in the Originating Summons-Companies Commission of Malaysia).
[3] By an Originating Summons dated 13 April 2024, the Plaintiffs are seeking for the following reliefs against the Defendants:
(1) A declaration that Lim Jin Wei (LJW) (NRIC No 751117-13-5409), Lim Jin Kiat (LJK)(NRIC No 800309-13-5487) and Lim Jin Siang (LJS)(NRIC No. 830804-135481) have resigned and ceased to be directors of CS Mini Market Sdn Bhd (CCMM) (Company Registration No 201601034824 (1205765-H)) as at 3rd April 2023;
(2) That consequential to item (1) above, the Registrar of Companies and/or Companies Commission of Malaysia of the 1st Defendant do accept and duly register the resignation of Lim Jin Wei (NRIC No. 751117-13-5409), Lim Jin Kiat (NRIC No 800309-13-5487) and Lim Jin Siang (NRIC No. 830804-13-5481) as directors of CS Mini Market Sdn Bhd (Company Registration No 201601034824 (1205765-H));
(3) A declaration that the resignation of Voon Chun Chiang (VCC)(NRIC No 850824-13-5313) and Karen Kho Qiu Ting (Karen) (NRIC No 860208-13-5482) as directors of CS Mini Market Sdn Bhd (Company Registration No 201601034824 (1205765-H)) dated 5 April 2023 are ineffective and invalid and that Voon Chun Chiang (NRIC No 850824-13-5313) and Karen Kho Qiu Ting (NRIC No 860208-13-5482) are the directors of CS Mini Market Sdn Bhd (Company Registration No. 201601034824 (1205765-H));
(4) That the 1st, 2nd and 3rd Defendants, CS Mini Market Sdn Bhd, and/or Voon Chun Chiang, and Karen Kho Qiu Ting respectively do specifically perform cl 7.1(a) of the Shares Subscription Agreement dated 18 May 2022 in particular, Choon Hua Retail Group Sdn Bhd.(CHRG) do transfer the 1,096,500 ordinary shares in CS Mini Market Sdn Bhd to Voon Chun Chiang at the consideration of RM1.00;
(5) In the event 1st, 2nd and 3rd Defendants, CS Mini Market Sdn Bhd, and/or Voon Chun Chiang, and Karen Kho Qiu Ting respectively fail to cause or effect the transfer of the 1,096,500 ordinary shares in CS Mini Market Sdn Bhd as stated in prayer (4) above within 5 days from the date of the Order, that the Registrar of Companies and/or Companies Commission of Malaysia of CS Mini Market Sdn Bhd do accept and duly register the transfer of 1,096,500 ordinary shares in CS Mini Market Sdn Bhd from Choon Hua Retail Group Sdn Bhd to Voon Chun Chiang;
(6) That 1st, 2nd and 3rd Defendants, CS Mini Market Sdn Bhd, and/or Voon Chun Chiang, and Karen Kho Qiu Ting respectively do specifically perform cl 7.1(b) of the Shares Subscription Agreement dated 18 May 2022 in particular, CS Mini Market Sdn Bhd shall pay to Choon Hua Trading Corporation Sdn Bhd.(CHTC) the loans in the sums of RM1,000,000.00 and RM5,000,000.00 totaling RM6,000,000.00 on or before 21 September 2023;
(7) Interest at the rate of 5% per annum on the sum of RM6,000,000.00 from 22 September 2023 until full and final settlement;
(8) In the event the 1st Defendant, CS Mini Market Sdn Bhd fails to pay the total sum of RM6,000,000.00 on or before 21 September 2023 to Choon Hua Trading Corporation Sdn Bhd., the 2nd, 3rd and 4th Defendants, Voon Chun Chiang, Karen Kho Qiu Tin
