Saneran Suhendran JC:

GROUNDS OF JUDGMENT

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 2016(“the Act”) provides that a JMA may only be made to Court on the pre-conditions that, inter alia, the company or a creditor considers that the company is or will be unable to pay its debts and 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 SA 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 (Sequana (SCt)”). Lord Reed, at [65], recognised that ‘shareholder primacy’ as a common law approach, was retained in the legislation.

“First, the primary duty imposed on directors by section 172(1)is expressed in terms of promoting “the success of the company for the benefit of its members as a whole”. Accordingly, the duty is no longer expressed by reference to the interests of the company, and the previous problem of identifying the interests of an artificial person is side-stepped.

Since the duty under section 172(1)is focused on promoting the success of the company “for the benefit of its members as a whole”, it is clear that, although the duty is owed to the company, the 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 [225]; and comprehensively, by Lady Arden at [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 cl