Oppressive conduct under Section 346 of the Companies Act 2016 includes denial of access to accounts and diversion of funds. A buy-out at fair value without minority discount is equitable.

Atan Mustaffa Yussof Ahmad J:

Introduction

[1] Before the court is an originating summons filed by the Plaintiff under s 346 of the Companies Act 2016 seeking a declaration that the 1st and 2nd Defendants have conducted the affairs of the 3rd Defendant in an oppressive manner and in disregard of the Plaintiff's interests as a minority shareholder of the 3rd Defendant. The Plaintiff also seeks a buy-out order directing the 1st and 2nd Defendants to purchase his 30% shareholding in the 3rd Defendant company at a fair value to be determined by an independent valuer.

Background Facts

[2] The 3rd Defendant, Enpro Solutions Sdn Bhd ("ESSB"), is a company that provides lightning protection systems to ensure safety of structures against lightning strikes. The 1st Defendant, Lee Seik Fun ("D1"), and the 2nd Defendant, Lim Leong Chuan ("D2"), are directors and majority shareholders of ESSB, holding 40% and 30% of shares respectively. The Plaintiff, Koay Peng Soon, is also a director and holds the remaining 30% of shares in ESSB.

[3] The shareholding structure of ESSB is as follows:

a) D1: 40%

b) D2: 30%

c) Plaintiff: 30%

[4] The Plaintiff joined ESSB as a director and shareholder on 5 May 2022. Prior to joining, the Plaintiff, D1, and D2 were business associates within the lightning protection services industry. The Plaintiff's expertise was primarily in the northern region of Malaysia (Penang, Kedah, and Perlis).

[5] According to the Plaintiff, it was the common understanding between all three shareholders that:

a) While D1 and D2 would be the "maker" and "approval" for financial transactions of ESSB, the Plaintiff would be allowed to examine financial transactions and have access to ESSB's financial accounts;

b) The business and affairs of ESSB would be managed based on mutual trust, confidence, and good faith among the shareholders; and

c) Profits of ESSB would be enjoyed and distributed equally through dividends without any prejudice or discrimination between the three shareholders.

[6] D1 and D2 contend that there was a business arrangement where ESSB would collaborate with the 5th Defendant, Enpro Teknologi Sdn Bhd ("ETSB"), and the 6th Defendant, Enpro Engineering Sdn Bhd ("EESB"). Under this arrangement, the Plaintiff would source customers for ESSB, EESB would handle engineering aspects, and ETSB would supply and deliver lightning protection system materials. Payments received by ESSB from customers would be distributed to ETSB and EESB according to agreed distribution rates for each project.

[7] The 4th Defendant, Abre Engineering Sdn Bhd ("AESB"), is also involved in this matter concerning a specific transaction of RM250,000.00 transferred from ESSB's accounts to AESB on 9 February 2024.

[8] It is undisputed that D1 and D2 are the sole shareholders and directors of ETSB, EESB, and AESB.

The Originating Summons

[9] This Originating Summons is filed by the Plaintiff as a minority shareholder oppression action against D1, D2, ESSB, AESB, ETSB, and EESB. The Plaintiff seeks:

a) a declaration that D1 and D2 are conducting the affairs of ESSB in an oppressive manner and in disregard of his interests as a member;

b) a declaration that transactions totaling RM2,036,673.60