The right of a director to inspect a company’s accounting records under Section 245 of the CA 2016 is absolute, dependent on proper exercise in the company’s interest, and cannot be denied without clear proof of ulterior motives.

JUDGMENT

Liza Chan Sow Keng JC:

Introduction

[1] By the Originating Summons ("OS"), the 1st Plaintiff and the 2nd Plaintiff in their capacity as director and shareholder respectively of the Defendant company (interchangeably, "the Defendant" or "the Company"), sought an Order that the Company's accounting and other records required to be kept by the Company be open to inspection by Andrew Heng, an approved company auditor and a partner/director of Baker Tilly Monteiro Heng PLT acting for the Plaintiffs; and the said accounting records as set out in Annexure B to the OS be available for copies and/or extracts to be made by said auditor and/or his colleagues.

[2] After having read the cause papers, considered the submissions and heard oral arguments of the parties, I had allowed the OS. This judgment contains the reasons for the decision delivered on 10 June 2022.

Background Facts

[3] Pursuant to a Subscription Agreement dated 25 July 2016 entered into between the 2nd Plaintiff, the Company and one Lim Chang Huat ("LCH"), the 2nd Plaintiff subscribed for a 20% stake in the Company at a subscription price of RM60,000,000.00. Clause 10 of the Subscription Agreement provided that in consideration of the 2nd Plaintiff entering into the said Subscription Agreement and as "part of the inducement" for the 2nd Plaintiff to make the investment, LCH guaranteed that the audited consolidated net profit after tax of the Company for the financial year ending 30 June 2017 shall not be less than RM40,000,000.00 and in the event that the audited net profit after tax of the Company for the financial year ending 30 June 2017 is below RM40,000,000.00, LCH shall reimburse the 2nd Plaintiff for the shortfall.

[4] On the same day, the 2nd Plaintiff also entered into a Shareholders' Agreement dated 25 July 2016 with the Company, one Lim Chee Kon ("LCK") and LCH ("the Shareholders' Agreement").

[5] The Shareholders' Agreement inter alia provided that:

5.1 so long as the 2nd Plaintiff holds at least 5% of the ordinary shares or any other classes of shares of the Company, the 2nd Plaintiff is entitled to appoint one (1) director to the Board of Directors of the Company termed as the Investor Director of the 2nd Plaintiff - clause 7.1.1;

5.2 the 2nd Plaintiff will be given full access to the records, financial statements and information of the Company and further the Company shall deliver to the 2nd Plaintiff the documents and information set out in cls 7.8.1(a) to 7.8.1(e) of the said Shareholders' Agreement, in such manner as the 2nd Plaintiff may determine - clause 7.8.1; and

5.3 the audited financial statements to be provided to the 2nd Plaintiff under cl 7.8.1 shall include those of the Company's subsidiaries and shall be provided on a consolidated basis - clause 7.8.2.

[6] Following the Shareholders' Agreement, the 1st Plaintiff was nominated by the 2nd Plaintiff and was appointed a director of the Company on 25 July 2016.

[7] As at date of the OS, the 2nd Plaintiff continues to hold a 20% shareholding in the Company. This translates into the 2nd Plaintiff being entitled to a board seat in the Company.

[8] The 1st Plaintiff is not involved in the day-to-day management and business operations of the Company.

The Plaintiffs' Case For Inspection

[9] The 2nd Plaintiff argued that:

9.1 the Company is contractually bound to furnish to the 2nd Plaintiff its Accounting Records including those of its subsidiaries pursuant to the expressed terms of cls 7.8.1 and 7.8.2 of the Shareholders' Agreement;

9.2 the 2nd Plaintiff had through its previous solicitors, Messrs Radhi Azizan ("RA") by letter dated 15 April 2021 had expressed concern over the Company's affairs and demanded from the Company unhindered full access to the records, financial statements and information of the Company. The Defendant in response on 21 April 2021 acknowledged the right of the 2nd Plaintiff's nominee on the board ie the 1st Plaintiff to access "all documents and accounts" of the Company and its subsidi