Saheran Suhendran JC:

INTRODUCTION

[1]This application raises an important issue for which, as advised by counsel, there is no reported decision in Malaysia. The issue is whether shareholders have a sufficient interest in a judicial management application (‘JMA’) so as to give them a right to be heard thereon and thus, a right to intervene.

[2]On the application of the proposed intervener to intervene in the JMA (‘the intervener NoA’), I granted the application. These are my reasons.

[3]The issue must be seen in the context of the interests of shareholders and creditors in a company in or verging on insolvency. This is necessary as s 404(a) and (b) of the Companies Act 2016and there is a reasonable probability of rehabilitation or that the interests of the creditors would be better served than resorting to a winding up.

[4]Insolvency and rehabilitation are therefore the key drivers of a JMA and shareholder rights should be examined in this context. It may also be useful to examine such shareholder rights in other insolvency regimes such as an insolvent winding up and an insolvent scheme of arrangement.

The ordinary rule of the rights and interests of shareholders

[5]As part of this introduction, I start with the ordinary rule as to the interests of shareholders when the company is solvent. David Richards LJ in BTI 2014 LLC v Sequana and others; Sequana v Bat Industries plc and others

[125] Companies registered under the Companies Acts are the principal medium through which business is carried on in this country. Businesses are for the most part carried on for the purpose of making profits for their shareholders and business involves risk-taking, as all who deal with them know (or should know).

[126] Registered companies must have one or more directors and it is their function, subject to the provisions of the company’s articles of association, to carry on the business of the company. They do so ultimately for the benefit of the shareholders, who have the power to appoint and remove directors. ...

[129] Any recognition at common law that consideration of the interests of creditors could in certain circumstances be an element in the duties of directors is remarkably recent.

[6]So, when a company is solvent, the rights and interests of shareholders are ‘primary’. This was confirmed on appeal to the Supreme Court in the monumental decision of BTI 2014 LLC v Sequana SA and others

‘First, the primary duty imposed on directors by section 172(1)

Since the duty under section 172(1)shareholders are the intended beneficiaries of that duty. To that extent, the common law approach of shareholder primacy is carried forward into the 2006 Act.

[7]Further, in Sequana (SCt), ‘shareholder primacy’ was recognised by Lord Hodge at para [225]; and comprehensively, by Lady Arden at paras [243], [265], [332], [374], [375] and [386], noting the caveat that shareholder primacy does not completely override other interests.

[8]Under the English legislation, the rights of creditors are now formally recognised but only as residual claimants. While the legislation may have developed considerably, the common law approach to ‘shareholder primacy’ in a solvent company remains. Although shareholders do occupy a ‘prime position’, other claimants such as creditors, may diminish shareholder primacy. Shareholder interests indeed, actually ‘vanish’ altogether on irreversible insolvency, see paras 53 to 54 below.

[9]In Malaysia, when a company is solvent, the interests of shareholders remain ‘prime’ and the common law is not altered, see the Court of Appeal in Pioneer Haven Sdn Bhd v Ho Hup Construction Co Bhd & Anor and other appeals CIMB Bank Berhad v Jaring Communications Sdn Bhd Dan-Bunkering (Singapore) Pte Ltd v The Owners of The Ship or Vessel ‘Pdz Mewah’ (IMO No 9064009) of Port Klang & Anor

[10]It is in the context of these rights and interests, that shareholder rights in a JMA will be considered.

BACKGROUND FACTS

[11]Maju-TH Sdn Bhd (‘Maju-TH’) was a wholly owned subsidiar