LAW 580

LAW OF ASSOCIATION II
GROUP ASSIGNMENT
PAST YEAR QUESTION

JANUARY 2018
PART B

PREPARED BY: GROUP 2

1. NUR FADHLIN BT MOHD FADZLI 2015675536

2. NURSYAFIQAH BINTI MOHAMAD 2015675868
3. CORRINA BINTI MOHD FAIRUZ AZLI 2015694852

GROUP: LWB06K
LECTURER’S NAME: MADAM HAMSIAH BINTI OMAR
QUESTION:

Nini and Nana are the directors of Sogood Sdn. Bhd. (Sogood). They each hold 20%
of the company’s issued shares. The constitution of the company state, inter alia that
“Directors may, in their absolute and unfettered discretion, refuse to register a transfer of
shares.” Jack, a member, wishes to transfer the shares to her cousin Johnny. However, the
directors have, in exercising their discretion under the constitution, refused to approve the
transfer saying that Johnny is a member of the opposition political party.

Further, Jack’s sister, Maya, who is also a member of the company, had lost her share
certificate. It is now discovered that it was in fact stolen by a thief who managed to forge
Maya’s signature on a transfer from and have had the shares transferred to an unsuspecting
buyer, Madoo.

Last year, the company purchased a piece of land in Banting with a view to build a
hotel on it. This land was bought from Rajoo at a price of RM2 million. Rajoo is the brother-
in-law of Nana. None of these were disclosed to the members, nor was any approval sought
from the members in a general meeting for the sale purchase. Jack wants to know whether the
purchase of this land can be invalidated under the Companies Act 2016.

Two months ago, the company placed an order for the supply of uniforms for its
workers. The contract, which is worth RM300,000 was made with a company called Sofast
Sdn Bhd. Nini is the majority shareholder of Sofast Sdn Bhd. This fact was not made known
to the company. It is also learnt that Nana received RM20,000 from Sofast Sdn Bhd as a
token of appreciation for approving the contract. Jack wishes to know whether the contract
can be rescinded by the company on any grounds as well as whether the company can recover
the amount of RM20,000 from Nana.

Finally, Jack also want to know whether he could institute an action on behalf of the
company to seek the relevant remedies in the event the company itself does not do so.

With reference to decided cases and the Companies Act 2016, advise Jack and Maya.

(40 Marks)

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 The first issue is whether Jack can challenge the decision of the directors, in
exercising their discretion under the constitution, in refusing to approve Jack’s transfer of
shares to Johnny on the ground that Johnny is a member of the opposition political party.

Under the previous Companies Act 1965, the company must either issue the new
share certificate or reject the transfer within one month from the date the instrument of
transfer was lodged with the company as stated under Section 107(1). In the event of the
company were to reject the transfer, the company should notify both the transferor and
transferee also within that one month period under Section 105(1). While under the current
Companies Act 2016, Section 106(1) stated that the company shall register the transfer
within 30 days from the receipt of the instrument of transfer unless the following conditions
are present: The Companies Act 2016 or the company’s constitution expressly permits the
directors to refuse or delay the registration for such reasons stated; the directors have passed a
resolution to refuse or delay the registration of the transfer within 30 days from the receipt of
the instrument of transfer and the resolution states the reasons for the rejection or delay, as
the case may be; and the notice of the resolution is sent to both transferor and transferee
within seven days of the resolution, and where the company is a public company, the notice
of resolution must also include the reasons for the rejection or delay. Section 107 provided
that the transferor or transferee may apply to the court for an order to compel the company to
register the transfer.

Further, Section 42(2) requires a private company to restrict the transfer of its shares.
A private company can do so as according to Section 106(1), only in its constitution. It
appears that any restriction stated in other documents cannot be relied on by the directors in
rejecting or delay the registration of transfer. The constitution may provide that directors in
their absolute and unfettered discretion, refuse to register a transfer of shares. Under Section
106(2), subject to constitution, the directors may refuse or delay the registration of transfer of
shares under subsection (1) where the shareholders fail to pay the company an amount due in
respect of those shares, whether by way of consideration for the issue of the shares or in
respect of sums payable by the shareholder in accordance with the constitution.

It is to be noted too that the directors’ resolution must state reasons for the refusal or
delay to register the transfer of shares and this is applicable to both public and private
company. Where there is such discretion, it must be exercised bona fide for the interest of the

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company as a whole. If it does not benefit the company, the director has the right to refuse the
transfer. The guidance as to what amount to bona fide for the interest of the company as a
whole can be seen in the case of Greenhalgh v Arderne Cinemas, Lord Evershed said that it
must apply the hypothetical member test. In this case, the phrase, “the company as a
whole...does not mean the company as a commercial entity, distinct from the corporators: it
means the corporators as a general body. That is to say, the case may be taken of an
individual hypothetical member and it may be asked whether what is proposed is, in the
honest opinion of those who voted in its favour, for that person’s benefit.

If the directors give reasons for the refusal, then the reasons may be challenged for for
unreasonableness. This can be seen in the case of Re Smith & Fawcett, Smith and Fawcett
are two shareholders holding equally 4001 shares each. Both are directors. One of them died
and the son of deceased applied to the company to transfer 4001 shares of his father to him.
The director, having discretion said that 2000 shares must be transferred to somebody else
and the balance transferred to the son. The court held that the son was not able to prove that
the director did not exercise the discretion in bona fide for the benefit of the company. The
principles are the transferee can only compel registration if he can show lack of bona fide and
court will presume that the directors exercised their powers honestly unless it appears
otherwise on the fact of a document or in the confession of the directors. By referring to the
case of Kesar Singh v Sepang Omnibus, where the directors of a company are given by the
Articles of Association absolute and uncontrolled discretion with regard to registering a
transfer of shares, the only limitation on the director’s discretion is that it should be exercised
in bona fide for the interest of the company.

In applying to the question, Jack may challenge the company’s directors in refusing to
transfer the shares to Johnny for the lack of bona fide interest of the company subjected to
Section 106(2). The company, Sogood Sdn. Bhd. (Sogood) is a private company in which it
restricts the transfer of its shares and this is stated in the company’s constitution, “Directors
may, in their absolute and unfettered discretion, refuse to register a transfer of shares.” If the
transfer benefits the interest of the company, the directors shall allow the transfer and register
the transfer within 30 days from the receipt of the instrument of transfer as provided under
Section 106(1). However, if it does not benefit the interest of the company, the directors have
the right to refuse the transfer. This discretion must be exercised bona fide for the interest of
the company as a whole. In the question, directors have, in exercising their discretion under

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the constitution, refused to approve the transfer on the ground that Johnny is a member of the
opposition political party.

By referring to the case of Kesar Singh v Sepang Omnibus, limitation on the

director’s discretion is that it should be exercised in bona fide for the interest of the company.
So, Jack may prove to the court that the directors did not exercise their discretion in bona fide
for the benefit of the company as a whole due to the fact that his cousin, Johnny is a member
of the opposition political party. This reason shows that the rejection of transfer was
unreasonable and was not exercised in good faith contrary to the findings of the case of Re
Smith & Fawcett.  

Thus, Jack may challenge the unreasonableness of the company’s directors in refusing
to transfer the shares to Johnny for the lack of bona fide interest of the company subjected to
Section 106(2).

The second issue is whether Maya can legally challenge Madoo’s title to the shares
and be re-registered as the owner of the share.  

A forged transfer is a total nullity and the true owner’s name must be restored back to
the register of members. The innocent purchaser without knowledge, in good faith and has
provided valuable consideration cannot acquire better title than the defective title of person
who commits forgery. Under Section 27 of Sales of Goods Act, it upholds the common law
principle of “nemo dat”. In the case of Re Bahia & San Francisco Railway Co, Ms T was a
member of the company. S forged Ms T’s signature on the transfer form and lodged it with
the company. Upon receipt of the new share certificate in his name, S sold and transferred the
shares to B. Ms T obtained a court order to expunge the name of B and to reinstate her name
in the register of members. The court granted the order to Ms T and also ordered the company
to pay damages to B as he had relied on the representation by the company in the share
certificate that S was the owner of the shares. The court held that the true owner’s name must
be restored back to the register of members, as a forged transfer is a total nullity. The
innocent purchaser’s name should be removed from the register and the company is liable to
pay damages because it was estopped from denying that the person who forged the signature
is the true owner. Meanwhile the company may demand indemnity from the person who

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forged the signature of the true owner. The immediate purchaser then may sue the person
who forged the signature of the true owner.

This case has been codified into Section 103 of CA 2016: (1) if the name of a person
is wrongly entered in, or omitted from the register of members the person aggrieved may
apply to the court for rectification of the register of members, compensation for loss
sustainable or both rectification and compensation. (2) On application, the court may order
rectification of the register of members by the company, the payment of compensation by the
company or an officer who has caused the error or omission for any loss sustained; or the
rectification and payment of compensation.

In applying to the current situation, Maya’s had lost her share certificate and
discovered that it was stolen by a thief who managed to forge Maya’s signature on a transfer
form and have had the shares transferred to an unsuspecting buyer, Madoo. Madoo is the
immediate and bona fide purchaser and in this situation, there’s no subsequent purchaser.  By
referring to the case of Re Bahia & San Francisco Railway Co, the title must be transferred
to the true owner, Maya. The company, Sogood must compensate/indemnify to Madoo, the
unsuspecting and bona fide purchaser as he had relied on the representation by the company
in the share certificate that the thief was the owner of the shares. As there’s an absence of
subsequent purchaser, the company cannot demand from Madoo. The company can claim
from Madoo, after Madoo had sue the forger. If he had not manage to trace and sue the thief
who forged Maya’s signature, he does not have to pay to the company. It is thus the
company’s duty to put the proper person name and the company also was estopped from
denying that the person who forged the signature is the true owner. I would advise Maya, the
aggrieved party by following Section 103, to apply to the court for rectification of the register
of members, compensation for loss sustainable by the company or an officer who has caused
the error or omission for any loss sustained or both rectification and payment of
compensation

In conclusion, Maya, as the true owner of the title, can legally challenge Madoo’s title
to the shares and be re-registered as the owner of the share.  

The third issue in this question is whether the purchase of land in Banting by the
company from Rajoo can be invalidated under the Companies Act 2016.

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 Generally, the law presumes that a director is expected to act for a proper purpose and
in good faith for the company as they own fiduciary duty towards the company. Fiduciary is
defined in the case of The Board of Trustees of Sabah Foundation & Ors v Datuk Syed
Kechik bin Syed Muhamed & Anor as someone who has undertaken to act for or on behalf
of another in a particular matter in circumstances which give rise to a relationship of trust and
confidence. Basically, there are four types of fiduciary duties imposed upon the directors of a
company such as duty to act in good faith in the best interest of the company, duty to avoid
conflict of interest, duty to act for proper purposes and duty to retain discretion.

In relation with duty to avoid conflict of interest, the general rule is that director
should not enter into any engagement where there is a possibility that the directors’ personal
interest could conflict with those of the company which they were bound to protect. Duty to
avoid conflict of interest can also be divided into three such as directors contracting with the
company, directors competing with the company and directors making secret profits using
corporate property, information, opportunities or use of position as directors. In term of the
conduct of directors contracting with the company, a director must not in any way whether
directly or indirectly interested in the contract with the company. In other words, a director
should not put himself in a position where his personal interest conflicts with the company’s
interest. In the case of Aberdeen Railway Co v Blaikie Brothers, the plaintiff argued they
were not bound by the contract entered for the supply of iron chairs with Blaikie Bros as at
the time the contract was made, the Chairman of their board of directors, Sir Thomas Blaikie,
was also the Managing Director of Blaikie Bros. It was later held that the plaintiff was not
bound by the contract as Mr Blaikie’s self-dealing rendered the contract voidable at its suit
due to the existence of conflict of interest. Section 221 of CA 2016 provides that every
director who is in a way whether directly or indirectly interested in contract or proposed
contract with the company shall as soon as possible as practicable after the relevant facts
have come to the director’s knowledge, declare the nature of his interest at the meeting of the
board of directors. However, Section 228(1)(a) of CA 2016 states that a company shall not
enter into any transaction or agreement where a director acquires any benefit from the
company unless the entering into the agreement or transaction is made subject to the approval
of shareholders at a general meeting or the carrying into effect of the arrangement or
transaction has been approved by shareholders at a general meeting.

In applying the law to the situation given, the directors owes fiduciary duty towards
the company as they are the person who act on behalf of the company. The directors need to

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act for a proper purpose and in good faith in the best interest of the company. The general
rule provides that director should not enter into any engagement where there is a possibility
that the directors’ personal interest could conflict with the company’s interest. In the event
where the director directly or indirectly interested in contract or proposed contract with the
company, the director need to disclose the relevant facts and declare the nature of his interest
to the board of directors as affirmed under Section 221 of CA 2016. The company may enter
into such agreement only if the approval of shareholders at a general meeting has been
obtained as accordance to Section 228 of CA 2016.

In the situation given, the company purchased a piece of land in Banting at a price of
RM2 million. The land was bought from Rajoo who is the brother-in-law of Nana. However,
none of these facts were disclosed to the members, nor was any approval sought from the
members in a general meeting for the sale purchase. The directors should not put themselves
in a position where their personal interest conflicts with the company’s interest. The fact that
Rajoo is the brother-in-law of Nana should be disclosed to members of the company and the
approval for entering into such sale and purchase agreement need to be obtained from the
members in a general meeting in order to validate the transaction entered by the company.
However, none of these action is taken by any of the directors. By following the decision in
the case of Aberdeen Railway Co v Blaikie Brothers, the purchase of land in Banting by the
company from Rajoo may be invalidated on the ground that conflict of interest existed in the
sale and purchase agreement. This is because the relevant facts were not disclosed to the
members nor any approval sought from the members. Even though the terms and conditions
of the agreement were fair for both parties, the principle of law should be strictly applied

In conclusion, Jack may challenge the validity of the purchase of land in Banting by
the company from Rajoo as there may be conflict of interest existed in the agreement entered
by the company.

The fourth issue in the situation given is whether the contract between Sogood Sdn
Bhd and Sofast Sdn Bhd can be rescinded on the ground that the directors making secret
profit using corporate opportunities and position as directors.

In relation with directors making secret profit by using corporate opportunities, the
legal principle provides that directors of a corporation must not take for themselves any
business opportunity which may entitle them to receive any that where the benefit directly or
indirectly from the transaction. Section 218(1)(d) of CA 2016 provides that a director of the

8
company shall not without the consent or ratification of a general meeting use any
opportunity of the company which he become aware in the performance of his functions as
director of the company to gain directly or indirectly a benefit for himself or any other person
or cause detriment to the company. In the case of Industrial Development Consultants Ltd v
Cooley, the Eastern Gas Board (EGB) had a project pending, to design a depot in Letchworth.
IDC was interested to enter into a contract with EGB and decided to send Mr Cooley who
was one of the managing director to negotiate with EGB. However, Mr Cooley was told that
the gas board did not want to contract with IDC, but directly with him. Mr Cooley then told
the board of IDC Group that he was unwell and requested he be allowed to resign from his
job on early notice. They accepted his resignation. Mr Cooley then undertook the Letchworth
design work for the gas board on his own account. IDC discovered this and later sued Mr
Cooley for breach of fiduciary duty. It was held that even though there was no chance of IDC
getting the contract but it requires Mr Cooley to disclose information to the company. Roskill
J further stated that a company director owes a fiduciary duty to report relevant information
of concern to the company thus it was his duty to pass the information to his employers and
not to guard it for his own personal purposes and profit. As a result, Mr Cooley was made to
pay the losses to IDC.

Secret profit is a profit or advantage made by a promoter, director, or officer of a

corporation because of his official position. In relation with directors making secret profit by
using position as directors, once the director received a secret profit, the law presumes that he
has been affected by the payment to the detriment of his company. It does not have the
necessity to prove dishonest action or improper use of position of the director. However, in
the event where the company knows about the extra profit and agree to it, then only the
director is entitled to keep the profit. If the profits are not disclosed, then the following
remedies are available to the company. Section 218(1)(c) of CA 2016 provides that a
Director shall not without consent of a general meeting use his position as a director to gain
directly or indirectly a benefit for himself or any other person or cause detriment to the
company. This principle of law can be seen in the case of Mahesan v Malaysia Government
Officers Co-operative Housing Society. In this case, the appellant was a director and
secretary of the respondent co-operative society. He brought land at a price of $944,000 from
the vendor who had earlier paid $456,000 for it. The appellant knew of this fact however he
failed to inform the society. The society discovered the fact only after the sale was done and
discovered the appellant had received $122,000 as secret commission from the vendor. As a

9
result, the Privy Council held that the respondent could recover either bribe or the amount of
the actual loss suffered by it as a consequence of entering into the contract.

In the situation given, the fact that Nini is the majority shareholder of Sofast Sdn Bhd
was not made known to the company. The contract entered by Sogood Sdn Bhd with Sofast
Sdn Bhd for the supply of uniforms for its workers may entitle Nini some benefits as she was
the majority shareholder of the company. Due to the position of Nini as one of the director of
Sogood Sdn Bhd, it can be argued that Nini was also aware of such business opportunity
which resulted the contract to be contracted with Sofast Sdn Bhd. By following the decision
laid down in the case Industrial Development Consultants Ltd v Cooley the fact that Nini is
the majority shareholder of Sofast Sdn Bhd need to be disclosed as a company director owes
a fiduciary duty to report relevant information of concern to the company. Furthermore, the
directors of Sogood Sdn Bhd need to obtain the approval from a general meeting before they
use such business opportunity to gain profit as accordance to Section 218(1)(d) of CA 2016.
However in the situation given, there was no consent or approval of a general meeting is
obtained before the contracts is entered by the company. It can be concluded that Nini had
breached her fiduciary duty as the fact that she is the majority shareholder of Sofast Sdn Bhd
was not disclosed to the company and she was aware of such business opportunity which
resulted the contract offered by Sogood Sdn Bhd was made with Sofast Sdn Bhd.

Next, it is also learnt that Nana received RM20,000 from Sofast Sdn Bhd as a token of
appreciation for approving the contract. The amount of money may be regarded as secret
profit as it is a profit received by Nana who used her position as director for approving the
contract made with Sofast Sdn Bhd. By virtue of Section 218(1)(c) of CA 2016, Nana shall
not without consent of a general meeting use her position as a director to gain directly or
indirectly a benefit for herself. Nana can only keep the money which she received RM20,000
from Sofast Sdn Bhd if she disclose about it to the company about it. In the event where the
profits are not disclosed to the company, the company is entitled for the following profits.

By following the decision laid down in the case Mahesan v Malaysia Government
Officers Co-operative Housing Society where the Privy Council held the appellant breached
his duty as he received a secret portion from the price of the land, it may be argued that Nana
had also breached her fiduciary duty for approving such contract made with Sofast Sdn Bhd.
This is because Nana had also received RM20,000 as a token of appreciation from Sofast Sdn
Bhd.

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As to the issue whether the company can recover the amount of RM20,000 from Nana, by
following to the judgment delivered by the Privy Council in the case Mahesan v Malaysia
Government Officers Co-operative Housing Society where the company could recover the
amount of the actual loss suffered by it as a consequence of entering into the contract,
Sogood Sdn Bhd may also recover the amount of RM20,000 from Nana as the sum of money
is to be regarded profit and Nana had not disclosed the fact that she received the money from
Sofast Sdn Bhd.

In conclusion, the contract made between Sogood Sdn Bhd and Sofast Sdn may be
rescinded on the ground that the directors, Nini and Nana had breached their fiduciary duty
whereby Nini did not disclosed the fact that she is the majority of shareholder of Sofast Sdn
Bhd and Nana did not inform the company that she had received RM20,000 from Sofast Sdn
Bhd as a token of appreciation.

The fifth issue is whether Jack who is the minority shareholder is capable of taking
action on behalf of Sogood Sdn. Bhd. to redress the default caused by the majority
shareholders

Directors may breach their duties as a director when they are the majority
shareholders. However, when the directors are also the majority shareholder of the company
they may at any time passed a resolution which would ratify their conducts and ceased any
action to be taken against them. For example, the directors may enter into a contract which
will implicitly benefit themselves but caused lost the company and ratify such conduct so that
no legal action will be initiated against them. This situation surely would give difficulties to
the minority shareholders as they need approval of the general meetings in order to take an
action against the directors as the right to initiate an action is always given to the board of
directors and they will definite decide not to take action against themselves.

Generally, the minority shareholders cannot take action on behalf of the company.
This had been first declared in the case Foss v Harbottle where in this case, the minority
shareholders of a company would like to initiate an action against the 3 directors for misusing
the company’s fund. They alleged that such acts had caused losses to the company. However,
the court in this case had rejected their claim by asserting that the right person to commence
an action was the company itself which consists of the directors. The company must pass a
resolution to sue the directors. This case had come out with two principles which are the
proper plaintiff rule as well as the majority rule.

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 The proper plaintiff rule concerns about the rule regarding who would have the locus
standi to act on behalf of the company. Thus, the proper plaintiff for a wrong done to the
company is the company itself as it has the capability to sue and being sued on its personal
capacity. The another principle that had been established in this case is the majority rule
where this rule ruled that if the majority decides that the company should not take any action
for wrong done to it, there can be no use in having litigation about it. Despite of the strict
approach of this rule, these principles accompanied with several exceptions which allows the
interest of the minorities will be protected. Among of the exceptions to this rule are when
there is infringements of member’s personal rights, when the acts of the company are ultra
vires, when acts requiring special majority as well as when there is fraud on minority.

However, the common law exceptions are no longer applicable to the Malaysian legal
system with the coming into force of the Companies Act 2016. Currently, the provisions that
is applicable to address the injustice in a company is Section 346 of Companies Act 2016.
This section provides for the remedies that is available to address the oppressive conduct of a
company. Overall, this section provides for 4 grounds of protection which are oppression,
disregard of interest, discrimination and unfairly prejudicial.

Specifically, Section 346(1)(a) allows the court to remedy to a member where the
court satisfied that (i) The affairs of the company are being conducted or (ii) The power of
the company are being exercised either (iii) In oppressive manner to one of the members
including the petitioner or (iv) In disregard of the interest of members or debenture holders.
On the other hand, Section 346(1)(b) empowered the court to provide remedy to the member
where the courts finds that (i) Some Act of the company has been done or threatened or (ii)
Some resolution or proposed resolution of members, debenture holders or class of members
has been passed or is proposed which (iii) Unfairly discriminates or (iv) Prejudicial to one or
more of the members or the debenture holders. Upon successfully proving any of the four
grounds, a member or debenture holder would be able to bring any personal action under this
section against those who are responsible for the act which could include including directors,
majority shareholders, or the company itself.

This can be seen from several cases where courts had allowed the minority
shareholders to initiate an action on behalf of the company as against the majority
shareholders in the event the activity carried out by the majority shareholders in the name of
the company had unfairly discriminate & prejudicial to the shareholders or the creditors of

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the company. The first case is in Re Gee Hoe Chan where in this case court held that the act
of the directors in paying themselves directors’ fees and salaries but not declaring dividend
had constituted as unfairly prejudicial. The another case which could illustrates the
application of section 346(1)(b) was in Sanford v Sanford Courier Service Pty Ltd where in
this case, the majority had diverted away the business of the company to themselves. They
made payment for high salaries, and provisions for retirement benefits, and refused to pay
dividends. The minority was then allowed to take action under the equivalent to section 181
of the previous section.

In applying to the situation, since Jack wishes to initiate an action on behalf of

Sogood Sdn. Bhd, there are several circumstances that need to be examine first. Whether Jack
has the locus standi to initiate an action on behalf of the company. Following to the principle
of proper plaintiff rule, Jack has no locus standi to act on behalf of the company because
company acquires its own legal entity. However, assuming this situation occurs after the
Companies Act 2016, Jack may take action on behalf of the company to redress the default if
he could prove any of the ground laid down under section 346(1)(a) or section 346(1)(b) of
Companies Act 2016. From the question, the possible ground that can be utilised by Jack in
initiating is section 346(1)(b) which provides for any act carried out that would jeopardise
and prejudicial to the interest of the members and the creditors. From the situation, it can be
seen that the directors had acted as if the company is theirs. Some of the act such as the
buying of the land and the giving of tenders had been done to benefit the directors themselves
without prioritising the company. There is also no disclosure has been made by the directors
to the company as to their interests in all the dealings. These conducts definitely would affect
the interest of the members and creditors of the company.

Assuming that Jack had fulfilled all the requirements under section 346(1)(b) of the
Companies Act 2016, Jack is able to seek remedies to address all the wrong doings
committed by the majority shareholders. Firstly, Jack can be remedied under Section 346(2)
Section 346(2) states that the court may make an order it thinks fit and without prejudice may
(i) Direct or prohibit any act or cancel any transaction or resolution (ii) Regulate the conduct
of the affairs of the company in the future (iii) Provide for the purchase of shares or
debentures of the company by other member as of the company itself (iv) In the case of a
purchase of shares by the company provide for a reduction of share capital (v) Provide for the
company be wound up. Jack also can use the derivative proceedings under section 347 of this
Act. Section 347(1) allows the complaint to initiate an action, intervene or defend a

13
proceedings on behalf of the company. In addition, this section also had abrogated any
principle under common law which would deprive the right to continue action on behalf of
the company.

The another provision that can be utilised by Jack to address the default of the
directors is Section 465(1)(h) of Companies Act 2016 which also provides for the remedy
in seeking to wind up the company under just and equitable ground. It is another statutory
remedy available to minority shareholders. Nonetheless, just and equitable is not defined
under the Companies Act 2016 but it can be inferred from the circumstances of each cases.
Therefore, the meaning of just and equitable ground can be seen under several circumstances
where court will grant the petition to wind up the company. One of the case is in Re German
Date Coffee in which court allows the winding up of the company when the main object of
the company had failed. The another case where court allows winding up proceedings to be
commenced on the ground of just and equitable ground was in Re Thomas Edwards
Brinsmead & Songs Ltd where the business is carried on in fraudulent manner.

Similarly, the just and equitable grounds also include the situation when there is
deadlock in the management as in Re Yenidje Tobacco Co Ltd. Next, court also would grant
the winding up when members have justifiable loss of confidence in the management as in
Loch & Anor v John Blackwood Ltd. Other than that, in Re London Country & Coal Co
where there is no bona fide intention on the part of the controllers to manage the company in
the proper manner also had been catagorised as under just and equitable grounds to wind up
the company. Just and equitable grounds also had been highlighted in Ebrahimi v
Westbourne Galleries in this case court had allowed the winding up proceedings to be carried
out when court satisfied that the mutual trust and confidence which is the basis of company is
gone. And last but least, the another case that could show the meaning of just and equitable
grounds to wind up the company is in Tay Book Choon v Tahansan Sdn Bhd which is when
there is an exclusion of management.

Later, another remedy that could be obtain by Jack is under Section 351(2) stated
regarding the seeking an injunction from court to restrain the company from contravening
certain provisions in Companies Act 2016. Further, Section 351(7) also had empowered the
court may grant an interim injunction pending, determination of an application under
subsection (1) if in the opinion of the court it is desirable to do so. Section 590(1) of this Act
also gives the power to appoint inspectors to investigate the affairs of the company.

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 In conclusion, Jack who is the minority shareholder is capable of taking action on
behalf of Sogood Sdn. Bhd. to redress the default caused by the majority shareholders and
could resort to all the remedies mentioned above.

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