with additional notes from Mr.

Lee Jia Chern

It is crucial to determine who the member of the company is.
Only members shall have rights to vote at the meetings or receive
dividends.
In cases of unlimited company, company limited by guarantee or
members having unpaid share in a company limited by share, if
the company is wound up, members shall be liable to contribute

INTRODUCTION
S. 2(1) CA 2016

(a) in the case of a company limited by shares, a person whose

name is entered in the register of members as the holder for
the time being of one or more shares in the company; or

(b) in the case of a company limited by guarantee, a person

whose name is entered in the register of members;

Who is a member?
 Members of a company
Incorporation of a company
Section 14(1), the Companies Act 1965 at least two members
S9(b), the Companies Act 2016 one member is sufficient
Maximum number of members
Private company 50 members
Exempt private company 20 members
Public company unlimited (may limit)
 Who is a member?
Shareholder = member?
Raja Khairulzaman Shah v Zaman Indah Sdn Bhd [1979] 2 MLJ
181: mere allotment of shares does not create the status of
membership.
S2(1), CA 2016:
A company limited by shares a person whose name is entered in the
register of members as the holder of shares in the company
A company limited by guarantee a person whose name is entered in
the register of members.
 Generally, members of company refers to: Those person, including
corporations, if any, who collectively constitute the company
Re Banking, ex p Contract Corp [1867] 3 Ch 105

Who can become member?

S. 14(3)(e) CA 2016 : Natural person & a body corporate
Application for incorporation:
The name, identification, nationality and the
ordinary place of residence of every person who is
to be a member of the company and, where any of
S. 3 CA 2016 these persons is a body corporate, the corporate
name, place of incorporation

Who is a member?
 Who is a member?
Register of members
S50(1), CA 2016 maintenance of a register of members
S50(3) prima facie evidence of the information inserted
S101(1) prima facie evidence of a legal titles to the
shares.
Ming Yueh Holdings Sdn Bhd v Kong Ming Bank Bhd [1990] 1
MLJ 374
Even the fact that a person own shares does not make him a member of
the company it is possible to purchase shares without being
registered as the holder of those shares in the register of
members.
See also S50(4)
 Ming Yueh Holdings S/B v Kong Ming Bank Bhd [1990] 1 MLJ 374

Raja Kamarulzaman Shah v Zaman Indah s/B [1979] 2 MLJ181

Cases
 S 123(1) CA 2016: Only a public listed company may purchase its
own share, but it will be subject to several conditions.

S 22(1) CA 2016: a subsidiary cannot become member of its holding

company.

S 22(4) CA 2016: cases where the subsidiary is a member if its

holding company prior to it become a subsidiary.
S22(4) allows a company which was already holding shares in another company that subsequently became its holding
company to continue to be a member of its holding company.

BUT, the subsidiary has no voting right at the meeting of the holding company or any class of members of the holding
company – s22(5)(a)

The subsidiary has to dispose of its shares in the holding company within 12 months after becoming a subsidiary – s22(5)(b).

Who cannot be a member?

 Who cannot be a member?
S22(4)
S22(1) Before
X
(holding company) A A has shares in B B

Y
X is cannot
control- hold After
A, as the
ling Y any of B subsidiary,
B cannot vote.
shares A still A has to
becomes
the has dispose of
holding shares its shares in
Y
company in B B within 12
(subsidiary company)
months.
A
There are 4 ways of becoming a company member:

a. [s. 18(2)]

b. via allotment of shares [s. 77]

c. purchase & transfer of shares [s. 106(1)]
d. transmission of shares [s. 109]

How to become a member of a

company?
S 18(2) CA 2016:

Every person whose name is stated as a member in the application for

incorporation and on the incorporation of the company shall be entered
as members in the register of members, together with such other
persons who may become members of the company from time to time,
are a body corporate by the name stated in the notice of registration.
Shares in a company are allotted when a person acquires the unconditional
right to be included in the register of members in respect of those shares.

The subsequent issue of those shares is when the name of the person to
whom the shares have been allotted is entered on the register of members
of the company in respect of them.

Allotment creates a right for a person to be registered as a member of a

company, but only once a share has been issued can that person exercise
his rights as a member.

S 77 CA 2016 : Registration of allotment in the register of members

b. via allotment of shares

 A person may purchase the share from an allottee of
the shares or any person who is holding those shares.
Transfer of shares is a transaction resulting in a change of share
ownership. A shareholder, whether in public or private company,
has a property in his share which he has a right to dispose of,
subject only to any express restriction which may be found in the
constitution.
S 105(1), (3) CA 2016 : Requirement for instrument of transfer
S 106(1) CA 2016 : Registration / refusal of transfer

c. purchase & transfer of shares

Transmission is an automatic process; when a shareholder dies, his
shares immediately pass to the personal representatives or, if a member
is declared bankrupt, their shares will be transmitted to the Director
General of Insolvency.

Transmission completes when the name of the representative (in case of

death) or the name of the DG of Insolvency (in case of bankruptcy) is

S 109 CA 2016 : procedure

d. transmission of shares
 All the above means to become member of a company requires the name of such
person to be entered into the register of members : s 101 CA 2016

S 97 CA 2016 : Issuance of share certificate is no more a prima facie evidence on the

membership of the company as what was the principle under the previous
1965 Act.

The company secretary has the duty to ensure that the register of members is properly
kept and maintained regularly, and all the particulars of issuance and transfer of shares
are entered into the register accordingly. : S 102 CA 2016

CONCLUSION
REGISTERS
There are 2 important registers pertaining
to members:
Register of members
Register of substantial shareholders.
 S 50 CA 2016: requirement of a company to have register of members

S 52 CA 2016: companies having >50 members shall keep an index of its

registration of members.

S 42 CA 2016:

S 2(1) CA 2016:

Register of members
 S 53 CA 2016:
A company may keep branch register of members in a place outside
Malaysia provided that notice is given to the ROC notifying address of
such place. Any change of such address must also be notified.

S 51 CA 2016:
Any changes to the particulars in the register of members shall be
notified to the ROC (not applicable for listed companies).

Register of members
 Who is a substantial shareholder?
S 136(1) CA 2016 : a person who has ...
Interest in >5% of the voting shares of the company; or
Interest in >5% of the voting shares in a class of shares (if the

Register of substantial shareholders

Subdivision 7 of Division 1 Part III of the CA 2016 : ss 134 145 CA 2016
Register of substantial shareholders
Who is a substantial shareholder?
S136(1), CA 2016:
5% of the voting shares in the company; or
5% of the voting shares in a class of shares where the share capital is
divided into two or more classes.
Duty of a substantial shareholder
S137 to serve a written notice on the company after he becomes a
substantial shareholder.
S138 to serve a written notice in the event of a change of interests
S138(1)(a) within 3 days in the case of a public listed company
S138(1)(b) within 5 days in other case
s
S139 to serve a written notice if he ceases to be a substantial shareholder
Duty of the company to maintain a register of substantial
shareholders s144
 Application of the subdivision: S 134 CA 2016

in S 134(2)(a-d) CA 2016

Obligation to comply with the subdivision : S 135(1) CA 2016

shareholders : S 144 CA 2016

Register of substantial shareholders

Substantial shareholders in a company shall give a written notice to the company in
the following situations:-

1. Notice to notify the company of his interest s137

2. Notice to notify the company of any change in his interest s138
3. Notice to notify the company if ceased to be a substantial shareholder s139

Timeframe for public listed companies : 3 days

Others : 5 days
Copy of notice to be extended to ROC : s141 CA2016
RIGHTS OF MEMBERS UNDER COMPANIES ACT
rights.

a) Written resolution procedure for private companies

b) Easier amendment to the constitution
c)
d)
e)
f) The demise of the common law derivative action

RIGHTS OF MEMBERS
 There are 2 main organs in a company :
the members; and
the board of directors (BOD).
Management of the company is vested in the hands of the BOD,
while the members have certain rights such as to attend and vote at
the meeting.
There are certain decisions of the company that require approval of
members.
Directors may or may not be a member of the company. However,
the company may state in its constitution the requirement of minimum
number of shares that a director should hold in the company.

Introduction
 Members have the right to be called, speak and vote at the meeting.

However, calling for the meeting is left at the BOD.

If the BOD is holding the majority number of shares, they will

therefore be in control of the resolution passed during the meeting.

The issue is what happens to the members of the company who are
not part of the BOD, but hold minority numbers of shares?

Introduction
 Rights of members
S101(2)(a), CA 2016 right to vote
Ss101(2)(b) & 321(1) right to receive notice of meetings of
members
S316(6) accidental omission to give notice shall not invalidate the
proceedings.
S195 rights for management review
A resolution may be passed under this section to make recommendation to
the Board of Directors on matters affecting the management of the company.
The recommendation shall not be binding UNLESS
It is in the best interest of the company; AND
The rights to make recommendations is provided for in the constitution, OR the
resolution is passed as a special resolution.
 Rights of members
S101(2)(c) right to receive dividends cf. s131
S334 right to appoint a proxy
S223(2) rights with regard to substantial value transaction
 Liabilities of members
S192, CA 2016
S192(1) not simply because one is a member of the company
S192(2) liability of a member is limited to
S192(2)(a) any amount of unpaid shares of a member (company limited by
shares)
S192(2)(b) amount of undertaking of contribution (company limited by
guarantee)
S192(2)(c) express provision of the constitution
S192(2)(d) express provision by the CA 2016

S435 liability as contributories of present and past members

S435(2)(b) no contribution shall be required from any member exceeding
the amount of unpaid shares
 Are their rights & interest protected?

What if the act and conduct of the BOD are not in the best interest of
the minority members?

In the event of conflict between the BOD and/or the majority

shareholders and the other members (who are the minority
shareholders), what are the steps available according to the law that
could be accorded to curb the issue?

Issue : minority shareholders

 Two main components of a company

Members INTERESTS Board of Directors

S211 the business and affairs

of a company shall be managed
by, or under the direction of the
Board.

What happen when there are conflicts between the board of directors and members? At the same
time, the directors are also the majority shareholders.
 Foss v Harbottle [1843] 67 ER 189

a. Internal management rule

b. Proper plaintiff rule

COMMON LAW POSITION

 Internal management rule
Burland v Earle [1902] AC 83
It is an elementary principle of the law relating to joint stock companies that the
Court will not interfere with the internal management of companies acting within
their powers, and in fact has no jurisdiction to do so.

Edward & Anor v Halliwell & Ors [1950]2 All ER 1064

Where the alleged wrong is a transaction which might be made binding on the
company and on all its members by a simple majority of the members, no
individual member of the company is allowed to maintain an action in respect of
that matter for the simple reason that, if a mere majority of the members of the
company is in favour of what has been done, then cadit quaestio.

Owen Sim Liang Khui v Piasau Jaya Sdn Bhd [1996] 1 MLJ 113
The rule in Foss v Harbottle also embraces a related principle that an individual
shareholder cannot bring an action in courts to complain of an irregularity in the
conduct of the internal affairs provided that the irregularity is one
which can be cured by a vote of the company in general meeting.
 Proper plaintiff rule
Edward & Anor v Halliwell & Ors [1950]2 All ER 1064
The proper plaintiff in an action in respect of a wring alleged to be done to a
company is prima facie the company itself.

Burland v Earle [1902] AC 83

[I]t is clear law that in order to redress a wrong done to the company, the action
should prima facie be brought by the company itself. These cardinal principles are
laid down in the well-known cases of Foss v Harbottle

Owen Sim Liang Khui v Piasau Jaya Sdn Bhd [1996] 1 MLJ 113
A cannot, as a general rule, bring an action against B to recover damages or
secure other relief on behalf of C for an injury done by B to C. C is the proper
plaintiff because C is the party injured, and therefore the person in whom the
cause of action is vested. This is sometimes referred to as the rule in Foss v
Harbottle.
 Proper plaintiff rule
Prudential Assurance Co Ltd v Newman Industries Ltd (No.2)
[1982] Ch 204
It was, nor could it successfully be argued that it was a matter of course for any
individual members of a corporation thus to assume to themselves the right of
suing in the name of the corporation.
In law the corporation and the aggregate members of the corporation are not the
same thing for purposes like this; and the only question can be whether the facts
alleged in this case justify a departure from the rule which, prima facie, would
require that the corporation should sue in its own name and in its corporate
character, or in the name of someone whom the law has appointed to be its
representative.
The Majority Rule has two parts:-

1. If a wrong is alleged against the company, then the proper Plaintiff to

sue in respect of that alleged wrong is the company itself and not any
individual shareholder.

2. If company officers have committed an irregularity and this irregularity

can be ratified in general meeting, then no individual member may
sue in respect of the irregularity.

The Majority Rule

 The rule in Foss v Harbottle as I understand it, comes no more than this.
First, the proper plaintiff in an action in respect of a wrong alleged to be
done to the company or associations of persons is prima facie the company
or association of persons itself. Secondly, where the alleged wrong is a
transaction which might be made binding on the company or association and
on all its members by a simple majority of the members, no individual
member of the company is allowed to maintain an action in respect of that
matter for the simple reason that, if a mere majority of members of the
company or association is in favour of what has been done, then cadit
quaestio.

Edwards v Halliwell [1950] 2 All ER 1064

 Exceptions to the rules in
Foss v Harbottle
Edwards & Anor v Halliwell & Ors
Jenkins LJ summarised the exceptions under the following
heads
1. Fraud on the minority
2. Special majority
3. Ultra vires act
4. Personal rights; and
5. Where justice of the case requires.
Fraud on the minority:

'where what has been done amounts to what is generally

called in these cases as a fraud on the minority and the
wrongdoers are themselves in control of the company,
the rule is relaxed in favour of the aggrieved minority who
are allowed to bring what is known as a minority
shareholders' action on behalf of themselves and all
others'.
 Exception 1 fraud on the minority
S213(1), CA 2016 a director shall at all times exercise his
powers for a proper purpose and in good faith in the best
interest of the company.
Where what has been done amounts to what is generally
called a on the and the wrongdoers are
themselves in control of the company, the rule in Foss v
Harbottle is relaxed in favour of the aggrieved minority.
Two elements to be proved:
1. There is a fraud; and
2. The wrongdoers are in control of the company.
 Exception 1 fraud on the minority
Fraud
Burland v Earle
Fraud embraces all cases where the majority are endeavouring, directly or
indirectly, to appropriate to themselves money, property or advantages which
belong to the company or in which the other shareholders are entitled to
participate.

Abdul Rahim bin Aki v Krubong Industrial Park (Melaka) Sdn Bhd & Ors
[1995] 3 MLJ 417
The expression on the is a term of art and has absolutely
nothing whatsoever to do with actual fraud or deception at common law.
The lack of probity comes within the ambit of the expression, but it is not
necessary to prove dishonesty before a minority shareholder may claim relief
under the doctrine.
It is sufficient for a plaintiff in an action grounded upon the doctrine to show
that those wielding majority control abused the powers vested in them
in the sense that they used or omitted to use their powers for an oblique
or collateral motive or purpose and not for the true purpose for which the
power was entrusted to them either by the memorandum and articles of
association, by statute or the general law.
 Exception 1 fraud on the minority
Examples of Fraud
Cooks v Deeks [1916] AC 554
Daniels v Daniels [1978] 2 All ER 89
If minority shareholders can sue if there fraud, I see no reason why
they cannot sue where the action of the majority and the directors,
though without fraud, confers some benefit on those directors and
majority shareholder themselves.
Allen v Gold Reefs of West Africa [1900] 1 Ch 656
American Delicacy Co Ltd v Heath (1939) 61 CLR
457
 Exception 1 fraud on the minority
Wrongdoers are in control of the company

Control relates to the body which has the power to institute legal action.
Board of directors; or
meeting
To look at the shareholdings of the wrongdoers in the company.

in happens
The majority has approved a fraud on the minority; or
If the wrongdoers have a majority of the votes
 Exception 1 fraud on the minority
Wrongdoers are in control of the company

How can majority approve a fraud?

Menier v Telegraph Works (1874) 9 Ch App 350
The majority divides the assets of the company, more or less, between
themselves, to the exclusion of the minority. A resolution can be passed that
everything must be given to them, and that the minority should have nothing
to do with it.

To look at the shareholding

Tan Guan Eng & Anor v Ng Kweng Hee & Ors [1992] 1 MLJ 487
The court may go behind the apparent ownership of the shares in order to
determine whether the wrongdoers do in fact control the company.

De facto control
Ting Chong Maa v Chor Sek Choon [1989] 1 MLJ 477
3. Special majorities: 'an individual member [is not] prevented from suing
if the matter ... [is] one which could validly be done or sanctioned, not
by simple majority of the members ... but only by some special

c/- Edwards v Halliwell [1950] 2 All ER 1064

4. Personal rights: where 'the personal and individual rights of members

of [the plaintiff] have been invaded', the rule 'has no application at all'.
Hickman v Kent or Romney Marsh Sheep- Association
[1915] 1 Ch 881
Pender v Lushington (1877) 6 Ch D 70
Wood v Odessa Waterworks Co (1889) 42 Ch D 636
 Exception 2 Special majority
Where the Companies Act or the constitution of a company requires an act or
transaction only to be done with the sanction of some majority. The rules in Foss
v Harbottle cannot be used to override this requirement.
To strictly apply the rules in Foss v Harbottle would allow the directors to break
the own regulation by doing something without a special resolution
which could only be done validly by a special resolution.

Edward & Anor v Halliwell & Ors

The rules in Foss v Harbottle did not prevent an individual member from
suing if the matter in respect of which he was suing was one which could
validly be done or sanctioned, not by a simple majority of the members of the
company, but only by some special majority.

Quin & Axtens Ltd v Salmon [1909] AC 442

 Exception 3 personal rights
Where the personal and individual rights of members have been invaded, the
individual members may bring an action themselves.

Edward & Anor v Halliwell & Ors

The individual members who are suing sue, not in the right of the union, but
in their own right to protect from invasion their own individual rights as
members.

Wood v Odessa Waterworks Co (1889) 42 Ch D 636

Ling Beng Hui & Ors v Ling Beng Sung [1990] 2 MLJ 186
Lim Hean Pin v Thean Seng Co Sdn Bhd [1992] 2 MLJ 20
 Edgar Joseph Jr J was laid out in Edwards v Halliwell as follows:

Ultra vires acts:

'in cases where the acts complained of are wholly ultra vires the
company or association the rule has no application because
there is no question of the transaction being confirmed by any

c/- Simpson v Westminister Palace Hotel Co (1860) 8 HL Cas

712

Exceptions to the rule in Foss v Harbottle

 Exception 4 ultra vires acts
Where the act of a company is one which is ultra vires, the rule in Foss v Harbottle
has no application because such an act cannot be ratified by the majority members.
Lee Eng Hock & Ors v Malay-Siamese Prospecting Co Ltd [1933-1934] FMSLR
350
A member of a company is not debarred from claiming an injunction to restrain
the company from acting on an ultra vires resolution, by the fact that he has
himself been a party to the passing and has assented to illegal acts under it.

Express provisions of the Act:

S223(4), CA 2016 any member of the company may apply to the court to restrain
the directors from entering into or carrying into effect an arrangement or
transaction which is in contravention of s223(1).
S20, CA 1965 specifically provided for ultra vires transactions.
S20(3) A High Court may set aside and restrain performance of the act by
the company if the Court deems it and equitable to .
 Exception 5 ultra vires acts
Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd & Ors (1969) 92 WN
(NSW) 199
It is perhaps, a useful door to be left open lest in some extremely unusual
circumstances injustice would result from applying the rule. No exhaustive or even
descriptive statement of such circumstances has been propounded

Biala Pty Ltd & Anor v Mallina Holdings Ltd & Ors (No.2) (1993) 11 ACLC 1082
Equity is concerned with substance and not with form and it seems to me to be
contrary to principle to required wronged minority shareholders to bring themselves
within the boundaries of the well-recognised exceptions and to deny jurisdiction to a
court of equity even when an unjust or unconscionable result might otherwise ensue.
To the extent that policy may be relevant in determining whether a fifth and general
exception to the rule should be recognised, I consider it to be desirable to allow a
minority shareholder to bring a derivative claim where the justice of the case clearly
demands that such a claim be brought, irrespective of whether the claim falls within
the confines of the established exceptions.
Abdul Rahman bin Aki v Krubong Industrial Park (Melaka) Sdn Bhd & Ors
(5) When the justice of the case requires.

Cases:
Prudential Assurance Co Ltd v Newman Industries Ltd & Ors (No.2)
Tan Guan Eng v Ng Kweng Hee & Ors [1992] 1 MLJ 487
Abdul Rahman bin Aki v Krubong Industrial Park (Melaka)
Sdn. Bhd. [1995] 3 MLJ 417
Allen v Gold Reefs of West Africa [1900] 1 Ch 656

Pavlides v Jensen [1956] Ch 565

Abdul Rahman bin Aki v Krubong Industrial Park (Melaka)
Sdn. Bhd. [1995] 3 MLJ 417
North-West Transportation v Beatty (1887) 12 App Cas 589

Cases
 3 types of legal action available to a minority member to
take action against a majority member (wrongdoer) of a
company at common law:

a. Personal action
b. representative action
c. derivative action

Procedure at Common Law

 Common Law
1. Personal action
Taken by a member in his personal capacity to enforce his personal
rights against the company
Brown v British Abrasive Wheel Co Ltd [1919] 1 Ch 290

2. Representative action
Taken by a member on behalf of himself as well as other members
whose rights are affected by the conduct of the company through its
directors and/or majority shareholders.
Usually used to challenge an action of the company which should have
been done with special majority but was done without that authority.
Edward v Halliwell
 Common Law
3. Derivative action
Brought by a member or director of a company in the name and on behalf of that company in
respect of a wrong done to the company, rather than to its members.
Prudential Assurance Co Ltd v Newman Industried Ltd (No.2)
A derivative action is exception to the elementary principle that A cannot, as a general
rule, bring an action against B to recover damages or secure other relief on behalf of C for
injury done by B to C. C is the proper plaintiff because C is the party injured, and therefore
the person in whom the cause of action is vested .

B A

Abdul Rahim bin Aki v Krubong Industrial Park (Melaka) Sdn Bhd
A derivative action is based upon the premise that the company which has been wronged
is unable to sue because the wrongdoers are themselves in control of its decision-making
organs and will not, for that reason, permit an action to be brought in its name.
 Statute the Companies Act 2016

1. Action against oppression

2. Statutory derivative action

3. Winding up

4. Statutory injunction
 Action against oppression s346
Who may be the plaintiff?

S346(1) member or debenture holder of a

Who is a member? s2(1)
Exception Owen Sim Liang Khui v Piasau Jaya Sdn Bhd
Who is a debenture holder? s2(1)

Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn Bhd [1994] 2 MLJ

789
Relief under s181 (of the CA 1965, now s346 of the CA 2016) is
available to majority shareholders who are not in control of the
management of the company and who, for any given reason, are
unable to control the board
 Action against oppression s346
Who may be the defendant?
S346(1)(a)
The person who conducted the affairs of the company in a manner
oppressive to the members or debenture holders;
The person who exercised the powers of the directors in a manner
oppressive to the members or debenture holders;
The person who conducted the affairs of the company in disregard of the
interests of the members or debenture holders;
The person who exercised the powers of the directors in disregard of the
interests of the members or debenture holders;
The act of the company that unfairly discriminated against the members or
debenture holders; or
The act of the company that is prejudicial to the members or debenture holders.
 Action against oppression s346
Who may be the defendant?

Kondapuram Raghuram v Soo Peng & Ors [2006] 7 MLJ 510

The court cannot agree with the respondent's proposition that a
petition under s 181 of theCompanies Act 1965 can only be directed
on either the directors or shareholders of the company. Such a
construction of the powers conferred by s 181 would unduly curtail
and limit the powers granted by statute to provide relief against
oppression. Relief under s 181 should be granted where the
petitioner can show that the respondents are in control of the
company and are exercising that control in the affairs of the
company in a manner which is oppressive to the petitioner.
 Action against oppression s346
Principles
Re Kong Thai Sawmill (Miri) Sdn Bhd [1978] 2 MLJ 227
There must be a visible departure from the standards of fair dealing and a violation of
the conditions of fair play which a shareholder is entitled to expect before a case of
can be made.
involved something more than a failure to take into account the
interest where must be awareness of that interest and an evident decision to
override it or brush it aside or to set at naught the proper company .

Pan Pacific Construction Holding Sdn Bhd v Ngiu Kee Corp (M) Bhd & Anor [2010]
MLJU 269
From the wording of s181 (now s346), its basic theme is . However,
unfairness does not mean that the court can do whatever the individual judge
happens to think fair. The concept of fairness must be applied judicially and the
content which it is given must be based upon rational principle.
 Action against oppression s346
Examples
Ebrahimi v Westbourne Galleries Ltd & Ors [1973] AC 360
Jet-Tech Materials Sdn Bhd v Yushiro Chemical Industry Co Ltd &
Ors [2013] 2 MLJ 297
Re H.R Harmer Ltd [1959] 1 WLR 62
Re Gee Hoe Chan Trading Co Pte Ltd [1991] 1 MLJ 137
Concrete Parade Sdn Bhd v Apex Equities Holdings Bhd & Ors [2020]
11 MLJ 120
Choy Yuk Kong v Landyork Farming SdnBhd [2020] 10 MLJ 806
 Statutory derivative action s347
Four requirements:
1. Locus standi

2. Notice and leave requirements

3. Good faith

4. Best interest of the company

 Statutory derivative action s347
Locus standi who may use s347?
S347(1) a complainant may, with the leave of the Court initiate,
intervene in or defend a proceeding on behalf of the company.
Who is
s345 a member of a company; a person who is entitled to be
registered as a member of a company; a former member of the
company; any director of a company; the Registrar.

Effect of ratification s349

S349(a) if members of a company, ratify or approve the conduct of
the subject matter of the action, the ratification or approval does not
prevent any person from bringing, intervening in or defending
proceedings with the leave of the Court.
 Statutory derivative action s347
Notice and leave requirements
1. A written 30- notice by the complainant to the director
about the intention to apply for leave of the court under
s347. [s348(2)]
2. At the expiry of the 30 notice, the complainant may apply
for the leave of the court. [s348(1)]
3. considerations whether to grant leave:
i. Whether the complainant is acting in good faith; [s348(4)(a)]
and
ii. Whether it appears prima facie to be in the best interest of
the company that the application for leave be granted.
[s348(4)(b)]
4. The derivative action must be initiated within 30 days after the
leave has been granted. [s348(3)]
 Statutory derivative action s347
Notice and leave requirements
1. A written 30- notice by the complainant to the director
about the intention to apply for leave of the court under
s347. [s348(2)]
Abdul Rahim bin Suleiman (suing as the director and minority
shareholder of Semangat Motor Sdn Bhd and in the interest of
Semangat Motor Sdn Bhd) & Anor v Faridah bt Mohd Lazim & Ors
[2016] 6 MLJ 449
Ng Hoy Keong v Chua Choon Yang & Ors [2010] 9 MLJ 145
It is clear that the intention of s181B(2) [now s348(2)] is not to take the
directors by surprise and, therefore, the party wanting to obtain leave of court
under s181A [now s347(1)] must notify the directors of his intention to do so.
The underlying principle must be that as long as no injustice has been
caused to the party as a result of non-compliance of the other party, then
such non-compliance must be treated as a mere-irregularity.
 Statutory derivative action s347
Notice and leave requirements
2. At the expiry of the 30 notice, the complainant may apply
for the leave of the court. [s348(1)]
S347(1) a complainant may, with the leave of the Court
initiate, intervene in or defend a proceeding on behalf of the
company.
Lim Aik Chin v Hong Leong Bank Bhd & Anor [2015] MLJU
564

4. The derivative action must be initiated within 30 days after the

leave has been granted. [s348(3)]
 Statutory derivative action s347
3. considerations whether to grant leave:
i. Whether the complainant is acting in good faith; [s348(4)(a)]
Celcom (M) Sdn Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636

ii. Whether it appears prima facie to be in the best interest of

the company that the application for leave be granted.
[s348(4)(b)]
Ong Keng Huat v Fortune Frontier [2015] 11 MLJ 604
Koh Jui Hiong v Ki Tak Sang [2014] 3 MLJ 10
 Statutory derivative action s347
S350, CA 2016 powers of the Court in granting leave
To authorise the complainant or any person to control the conduct of
the proceedings;
To give directions for the conduct of the proceedings;
To order any person to provide assistance and information to the
complainant;
To require the company to reimburse the complainant

S348(5) discontinuation with the leave of the Court

A derivative action brought under s348 shall not be discontinued,
compromised or settled without the leave of the Court.
 Winding up
S465(1), CA 2016 circumstances under which a company may
be wound up the order
S465(1)(f) the directors have acted unfairly or unjustly to
members
Re Cumberland Holdings Ltd [1976] 1 ACLR 361
S465(1)(h) it is just and equitable to wind up the company
Re Cumberland Holdings Ltd
 Statutory Injunction
S351, CA 2016 allows for an injunction to be granted against a person
under circumstances described in s351(1).
Who may apply for an injunction under s351?
The Registrar;
A person whose interests have been, are or would be affected
by the conduct of the .
Who may be the target of the injunction? s351(1)(a) (f)
What can the injunction do?
Restrain that from engaging in the conduct;
Require that to do any act or thing
Damages may also be awarded together with or in substitution of
the injunction s351(9).
 syaidatul.adzmi@mmu.edu.my

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