Company Law II - Chapter 2Membership and Members Rights

2.1 Introduction2.1.1 Significance of being a member- why it is important to be a member? Gain benefit and incur liability

Entitle to vote at general meetings

- Table A, art 54

Entitle to receive dividends- Table A, art 105

If company in the process of winding up, members may be liable to contribute towards the payments of its debts

- s 214

- Re Clifton Springs Hotel Ltd [1939] VR 27

Pask made application for shares and made payment to the company. His name was entered in the register of members but no notice of allotment or acceptance was sent to him. No other communication with the company except a notice for extraordinary meeting.

Later the company went bankrupt and include Pask as the contributory. Pask applied to court to have the register rectified by removal of his name and an order for the return of the allotment money paid by him.Held: Court refused to make the requested order andclarified Pask was a member of the company because his name was entered in the register.

Entitle to share in the company’s surplus assets on a winding up

- s 247(2)

may enforce s 33(1) contract- s 33

Can petition for a remedy under s 181.

- Owen Sim Liang Kim v Pisau Jaya Sdn. Bhd. & Anor [1996] 1 MLJ 113

Appellant applied to court for a remedy under s.181(2) (Remedy in cases of an oppression, but was argued by the respondent saying that his name was no longer in the register at the time he commence the the action.

Held: (Gopal Sri Ram) A petitoner who applies s.181 must be able to demonstrate that his name appears on the companies’s register of members at the date of petition. If fail, he has no standing to invoke the jurisdiction.

2.1.2 Who qualifies to be a member of a company limited by share?

1) members of company limited by shares are usually the shareholders of the company

2) to qualify as member, the name of the shareholder must be inserted in the register of members - s 16 (6)

The subscribers to the memorandum shall be deemed to have agreed to become members (point no. 6) of the company and on the incorporation of the company shall be entered as members in its register of members, and every other person who agrees to become a member of a company and whose name is entered in its register of members shall be a member of the company.

Ayer Molek Rubber Co Bhd v Insas Bhd

P: the process of becoming a member is incomplete until entry on the registerperson who becomes a shareholder of a company after the registration of the company

3) person has entered into a contract to purchase the shares issued by the company

4) Person have acquired shares from an existing member.

5) Existing shareholder has transferred the shares to him/her

6) Subscribers to the company’s memorandum - s 16(6) Re London, Hamburgh &

Continental Exchange Bank, Ward and Henry’s - a subscriber becomes a member as soon as the company is incorporated even if the company does not allot the shares to him or her or does not enter the name i the register of members.

7) Natural person or body corporate

8) Director with share qualification: - when directors have shares, they are qualifies as members: s 123, 124; Table A art 71

9) Allottee - person who issue shares Raja Khairulzaman Shah Bin

Raja Aziddin v Zaman Indah Sdn Bhd [1979] 2 MLJ 181

10) Transferee - the process of transfer. Formally transfer

11) Personal representative of a deceased member who receives shares via transmission –must apply to have the shares registered in his name. Give to executor

2.1.3 Qualification of shares s 123 CA- Restriction on appointment of director. Director must have qualified number of shares

s 124 (1) CA- Director required to hold a specified share qualification

Table A, art 71- Director must comply with the number of shares which is fixed by the company in general meeting

2.1.4 Register of members

- if a person is a SH, it does not mean that he or she is a member. - the SH’s name must be inserted in the register of member to qualify as a member- the register may be inspected by any of the member without charge

s 158(1) CA (1) Every company shall keep a register of its members which contain certain information.

(a) the names, addresses, ic number, nationality and etc. - shares held by each member...

(b) the date at which the name of each person was entered in the register as a member(c) the date at which any person who ceased to be a member during the previous seven years so ceased to be a member; and

(d) in the case of a company having a share capital, the date of every allotment of shares to members and the number of shares comprised in each allotment.

s 159(1)(a)(b) CA- (1) The register of members and index, if any, shall be kept at the registered office of the company, but—

(a) if the work of making them up is done at another office of the company within Malaysia they may be kept at that other office; or(b) if the company arranges with some other person to make up the register and index, if any, on its behalf they may be kept at the office of that other person at which the work is done if that office is within Malaysia

s 158(4) CA- (4) The register of members shall be prima facie evidence of any matters inserted therein as required or authorized by this Act.

Offence for non-compliance with s 158 CA: s 158(7) CA – company and officers

- (7) If default is made in complying with this section the company and every officer of the company who is in default shall be guilty of an offence against this Act.

Penalty: Two thousand ringgit. Default penalty.

s 160(2) & (3) CA

(2) The register and index shall be open to the inspection of any member without charge and of any other person on payment for each inspection of one ringgit or such less sum as the company requires.

(3) Any member or other person may request the company to furnish him with a copy of the register, or of any part thereof, but only so far as it relates to names, addresses, number of shares held and amounts paid on shares, on payment in advance of one ringgit or such less sum as the company requires for every hundred words or fractional part thereof required to be copied and the company shall cause any copy so requested by any person to be sent to that person within a period of twenty-one days

or within such further period as the Registrar considers reasonable in the circumstances commencing on the day next after the day on which the request is received by the company.

Majujaya Holdings Sdn. Bhd. v Pens-Transteel Sdn. Bhd. [1998] 2 MLJ 399

- A member petitioned to court to wound up the company. Company defended that the applicant had no standing as he was no longer a member of the company as his name has been struck out.H: Directors may not unilaterally/simply struck out the name of it’s members as it must first make an application to the court for an order to strike out the name.

S 160 (2)- the register may be inspected by any other person upon payment for each inspection of RM1 or lesser amount as the company requires

S 160 (3)- a company must comply with a request to furnish a copy of extracts of the register to any person

2.1.5 Record of Depositors

- the status of ‘member’ is given to

those -> name which appears in the record of depositors (maintained by Malaysian Central Depository pursuant to:

s 35 of Securities Industry (Central Depositories) Act 1991

s 107B(1) CA - person who names appear in the record of depositors shall be deemed to be members of the company

S 107B(2) - for person who names appear in the record of depositors, company will not obliged to enter their names into the register of members

2.1.6 Relationship between members and the Board of directors

Distinction between membership and directorship.

- if directors are members they will work harder

2.2 Cessation of membership - when a person stops being a member Circumstances:o Shares are transferred and the transfer is duly registered

o Death of a member - the shares are transmitted to his/her personal representatives

o Forfeiture of partly paid shares by the company:Table A, art 28 - - even forfeiture will reduce the capital, it is still allowed for a reason of non-payment of a call- Table A, Art 31 ; allows company to sell forfeited shares

o Repayment of capital – preference shareholder- valid surrender of shares

o Dissolution of company (not winding up)

2.3 Disclosure of interests in shares2.3.1 Disclosure of trust in shares

- member of a company may hold shares in the capacity of trustee for a particular beneficiary. Why? - to reduce taxation or

conceal identity

TableA, art 7- No notice of any trust shall be entered in a register and the corporation concerned shall not be affected with notice of any such trust (subject to exception)

s 163(3) - but, shares in a corporation registered in a register kept in Malaysia and held by trustee, with consent may be marked in the register to identify them as being held as trust

S 163 (1)- Trustee, executor or administrator (with consent) may be registered as the holder of that shares as trustee, executor or administrator.

S 163 (2)- Trustee, executor or administrator (with consent) may be registered as shareholders as trustee, executor or administrator.

2.3.2 Substantial shareholder Contain in: Div 3A of Pt IV Person who is a substantial

shareholder in a company (Types of companies)-> s 69B(2) CA

S 69E(1)- must give notice to the company disclosing shareholding details of the nature of the interest in the shares and the circumstances in which that interest was aquired

Meaning of “substantial shareholdings”: s 69D(1) CA –

- a person who has an interst in one or more voting shares in the company and the nominal amount of that share or the aggregate of the nominal amounts of those shares is not less than 5% and above

2.3.3 Purpose of disclosing substantial shareholding in the company See reasons stated in Jenkins

Committee reports- enable the directors and shareholders of companies to ascertain the identity of holders of large numbers of shares and the extent of their shareholdings

2.3.4 Voting shares- only interest in voting shares are required to be disclosed

Definition: s 4(1) CA- an issued share of the body corporate, but exclude a share to which there is no voting rights attached or a share entitling the holder to vote only in certain circumstances

Interest in voting share: s 6A(2)-(10) CA

Deemed interest in voting shares: s 6A(6) CA

Person deemed to have an interest in a share if that share is held jointly with another person: s 6A(7) CA

2.3.5 Substantial shareholder’s statutory duty to disclose to the company Relevant provisions: ss 69E, 69F,

69G, 69J CA Change of interest, must notify

company: s 69F CA Cease to be substantial

shareholder: s 69G CA

2.3.6 Effects of contravening ss 69E, 69F, 69G and 69J CA

Fine: RM1 million with default penalty RM5,000: s 69M CA

See also s 69N CA

2.3.7 Duty of company to maintain a register of substantial shareholders Duty on company: s 69L(2) CA Default – offence (company &

officer): s 69L(4) CA

2.3.8 Furnishing of information and particulars of shareholding to CCM CCM may require any person or company to make a statutory declaration verifyinginformation and particulars of his or her shareholding in a company: s 69A

2.3.9 Furnishing of information and particulars of shareholdings to the public listed company

A public listed company may either on its own account or when directed by the SC or Bursa Malaysia to issue a written notice on its members requiring that member to disclose to it whether he or she holds any voting share in the company as a beneficial owner or as trustee for someone else: s 69O.

2.4 Infringement of members’ rights – majority control and minority protection

2.4.1 Introduction

Members’ rights – conferred by CA, AA and general law

Members’ personal rights

(a) To have the MA and AA observed.

(b) To restrain ultra vires and illegal acts

(c) To have access to the company’s records and to have certain information provided to them.

(d) Where general meetings are held, to attend and vote at general meetings.

(e) To be treated fairly.

Remedies where the majority act unfairly or oppressively in order to protect the interests of the company and its members.

Rule in Foss v Harbottle and its exceptions

Statutory remedies: s 181, 218(1)(f) & (i), s 199 CA

THE RULE IN FOSS V HARBOTTLE

Concept of majority rule:

- Those who takes interest in company limited by shares have to accept the majority rule.

- person who joins deemed to have accepted the risk that wider interest of company which may be prejudicial to his own

- if he joins a company, he will be bound by certain policy of the majority which does not coincide with his own

- If there is conflict of opinion; the majority’s opinion must prevail--> minority have by contract agreed to submit to the will of the majority

2.4.2 The Rule in Foss v Harbottle

(a) Internal management rule

(b) Proper plaintiff rule

(c) Effect of rule

This is the rule of “majority rule”. This rule has two parts:-

1. If a wrong is alleged against the company, then the proper Plaintiff to sue inrespect of that alleged wrong is the company itself and not any individualshareholder.2. If company officers have committed an irregularity and this irregularity can beratified in general meeting, then no individual member may sue in respect ofthe irregularity.2.4.3 Common Law Exceptions to the rule in Foss v Harbottle(a) Where the act of the company is ultra vires Common law: ultra vires acts cannot be ratified by majority of members. Simpson v Westminister Palace Hotel Co (1860) 8 HL Cas 712 Malaysia: s 20(1), 20(2) Bee See & Tay v Ong Hun Seang

[1997] 2 SLR 193(b) Where the act of the company requires a special majority s 152(1) CA(c) Where a member’s personal rights are infringed Personal rights conferred either by the Act, s 33(1), AA or a separate contract. Examples: s 65, s 148 CA Hickman v Kent or Romney Marsh Sheep-breeders’ Association [1915] 1 Ch 881 Pender v Lushington (1877) 6 Ch D 70 Wood v Odessa Waterworks Co (1889) 42 Ch D 636(d) Where majority members commit a fraud on the minority General rule: majority must use their voting power to act ‘bona fide for the benefit ofthe company as a whole’: Allen v Gold Reefs of West Africa [1900] 1 Ch 656, failingwhich is amounting to fraud on minority. Onus of showing an abuse of power is on the minority shareholder: Peters’ AmericanDelicacy Co Ltd v Heath (1939) 61 CLR 457 A resolution of the general meeting which is a fraud on minority may be challengedby members who lack voting rights, such as preference shareholders:

Pavlides v Jensen [1956] Ch 565. Two elements must be established:i) fraudii) wrongdoer in control Definition “fraud on minority” Abdul Rahman bin Aki v Krubong Industrial Park (Melaka) Sdn. Bhd. [1995] 3 MLJ417 Appear to come within s 181 Expropriation of the company’s propertyo Menier v Hooper’s Telegraph Works (1874) 9 Ch App 350 Expropriation of members’ shares

o Brown v British Abrasive Wheel Co [1919] 1 Ch 290Cf: Wong Kim Fatt v. Leong & Co Sdn. Bhd. [1976] 1 MLJ 140 Ratification of directors’ breach of dutyo Bamford v Bamford [1969] 1 All ER 969o Ngurli Ltd v McCann (1953) 90 CLR 425o Daniels v Daniels [1978] 2 WLR 73(e) Bona fide for the benefit of the company as a whole North-West Transportation v Beatty (1887) 12 App Cas 589 Greenhalgh v Ardeme Cinemas Ltd [1951] Ch 286(f) Where the justice of the case requires UK’s approach

Prudential Assurance Co Ltd v Newman Industries Ltd & Ors (No.2)[1980] 2 All ER 841; [1980] 3WLR 543 Australia:Hawkesbury Development Co Ltd v Landmark Finance Pty Ltd [1969] 2 NSWLR782Biala Pty Ltd & Anor v Mallina Holdings Ltd & Ors (No.2) (1993) 11 ACLC 1082 Malaysia:Abdul Rahman bin Aki v Krubong Industrial Park (Melaka) Sdn. Bhd.[1995] 3 MLJ 417

2.4.4 Statutory remedies

There are various statutory rights which allows members to seek remedies where the controllers of the companies unfairly misuse their positions of power or breach of their duties.

(a) Oppressive, disregard of members’ interests or unfair conduct

Law has developed various remedies where the majority act unfairly or oppressively in order to protect the interests of the company and its members

2 limbs – s 181 CA

It gives the court power to remedy conduct where it is of the opinion that:

i. The company’s affairs are being conducted in a manner that is oppressive to members

ii. Act of the company

(done/proposed), unfairly discriminates against members

4 grounds: ‘oppression’, ‘disregard of interests’, ‘unfair discrimination’ or ‘unfair prejudice’

- upon any grounds being est : member may pursue a personal action under s 181 either against company or those responsible for the acts

S 181 - covers broad range of conduct

- fraud on minority

- aspect under s 218(1)(i) CA – just and equitable ground for winding up

- s 218(1)(f) CA – directors act in their own interests or in a manner that appears to be unfair or unjust to other members

Who may apply for a remedy?

o s 181 CA – member / debenture holder / Minister

o Niord Pty Ltd v Adelaide Petroleum NL (1990) 8 ACLC 684- F: a purchaser of shares in a company had not been registered as member at the time when the proceedings were instituted.- H: equitable interest as an unregistered transferee is insufficient and have no standing to make an application under s 181

o Re Lundie Bros Ltd [1965] 1 WLR 1051- P: Applicants under s 181 must be members or debenture-holders of the said company and the conduct of the complain must affect them in their capacity

o Re A Company [1983] 2 All ER 36- P: Right to apply s 181 extends to legal personal representatives of the member and person to whom a share in the company has been transmitted by will or operation in law

GR: Applicants must be able to demonstrate that his/her name appears in the company’s register of members at the date issuance of summons - s 16(6)

Exception: If the rule would be unfair and unjust

o Owen Sim Liang Khui v Piasau Jaya Sdn. Bhd. & Anor [1996] 1 MLJ 113- P: It is unjust and inequitable to permit Rs (Company) to assert that the Pt (victim) has no standing to move the court as Pt will be estopped- H: As the co had deprived the Pt of his membership, the co was not entitle to assert that the Pt lacked standing to present the petition*Pt = Petitioner

o Re Sin Lee Sang Sawmill Sdn. Bhd. [1990] 1 MLJ 250- I: Whether applicant alleging oppression under s 181has control over the co’s affairs.- H: Those in control cannot allege to have been oppressed

Reverse Oppression

o Kumagai Gumi Co Ltd v Zenecon-Kumagai SB-P: Not only minority SH can rely on s 181 but also majority when they are unable for any reason to exert their will at a general meeting

o Re R H Harmer Ltd [1959] 1 WLR 62

(b) Conduct where a remedy may be sought

i. Affairs of the company- provides a remedy against any person involved in the affairs of the co- Eg: directors, majority SH, substantial SH and company itself

o s 181(1)(a) CA - applicant must allege that ‘affairs of the company’ are being conducted in an oppressive, unfairly prejudicial or unfairly discriminatory manner

o No definition in the Companies Act 1965.- may refer to Australian provisions(page 479)

o Re H R Harmer Ltd [1958] 3 All ER 689- P: wide enough to cover oppression by any person in a management capacity

o Re Jermyn St Turkish Baths Ltd [1971] 3 All ER 184- P: the conduct complaint must be operative and subsisting at the time of the petition

Example of conduct:o Re Cast Iron Products - H: failure to pay dividends over a prolonged period in total disregard of the interests of the SH when the co is profitable may be evidence of oppression

o Wayde v New South Wales Rugby League Ltd (1984) 9 ACLR 349- P: Applicant may apply for remedy regardless whether the conduct was continuing in nature or an isolated act

However, a refusal by director to allow the SH to inspect the financial records of a co was not ‘conduct’ in the affairs of the company//

o Re Dernacourt Investments Pty Ltd -H: inactivity or negative action can only be regarded as ‘conduct’ where there is a duty at law or in equity to act in a positive way.

ii. Acts or proposed acts

o s 181(1)(b) CA- applicant may allege that an act by or on behalf of company is contrary to the interests of the members as a whole, oppressive, unfairly prejudicial or unfairly discriminatory

o Wayde v New South Wales Rugby League Ltd- H: a single resolution of the board of directors could be an oppressive or unfair act on behalf of the co

An applicant may also obtain a remedy where the act is merely proposed and has not yet occurred

- if the conduct complain is still a proposed resolution

o North-West Transportation Co v Beatty -

S 181 may not specifically apply to omission or proposed omission

Exception:

o Sanford v Sanford Courier Service Pty Ltd- P: a co with sufficient profits persistently refuses to pay

dividends

Meaning of oppressive conduct

o Scottish Co-operative Wholesale Soc Ltd v Meyer [1959] AC 324- conduct that is ‘burdensome, hash and wrongful’

o Re Jermyn Street Turkish Baths Ltd [1971] 1 WLR 1042- additional requirement: involve ‘some overbearing act or attitude on the part of the oppressor’

Effect of such narrow interpretation:Remedy was not available except in the most extreme circumstances where controllers deliberately abuse their power

o Ng Chee Keong v Ng Teong Kiat Highlands Plantations Ltd - Even the allege oppressive conduct may be relatively trivial in isolation, but if the cumulative effect is that it amounts to oppression, it will be so held

o Re A Company [1983] Ch 178- To succeed against oppression, applicant must have suffered harm in his capacity as members or debenture holders

o Verghese Mathai v Telok

Plantations Sdn. Bhd. (1988) 1 MSCLC 90, 122o Re Senson Auto Supplies Sdn. Bhd. [1988] 1 MLJ 326-Relief willl be denied where the applicant has acquiesced to the conduct complain

o Re Kong Thai Sawmill (Miri) Sdn. Bhd. [1978] 2 MLJ 227- “there must be visible departure from standard of fair dealings...’disregard’ involves something more than a failure to take account of the minority’ s interest. There must be awareness of that interst and an evident decision to override it or brush it aside or to set at naught the proper co procedure”

o Jaya Medical Consultants Sdn. Bhd. v Island & Peninsular Bhd- Ct held: it is impossible to lay down categories of conduct considered to be oppressive, each case must be determine base on facts..oppression does not necessirily mean iilegal or fraudulant. To be oppression there must be a visible departure from standard of fair dealings..’disregard means something more than a failure’

Meaning of ‘disregard of interests of the members of debenture-holders’

- the phrase appear to allow a single member or debenture holder to take the requisite action under s181

- better interpretation: court will first examine the interests of the members and debenture holder as a whole

o Re Kong Thai Sawmill (Miri) Sdn. Bhd. [1978] 2 MLJ 227- “there must be visible departure from standard of fair dealings..”

Meaning of unfairly prejudicial or unfairly discriminatory

S 181 covers oppressive acts and conduct that is unfairly discriminatory, unfairly prejudicial or is contrary to the interests of the member as a whole.

o Morgan v 45 Flers Avenue Pty Ltd (1987) 5 ACLC 222 SC NSW- P: In was in appropriate to focus on each of these individual

elemenys. Ct held the correct approach is to regard them as ‘omposite whole’ and the individual elemets should be considered merely as different aspects of the ssential criterion, namely commercial unfairness.

o Eric Lau Man Hing v Eramara Jaya Sdn. Bhd. & Ors [1998] 7 MLJ 528- H: the grievances of the minority SH should be looked at in totality to decide if they amounted to oppressive, prejudiacial and discriminatory conduct by majority SH

The objective standard

Unfairness is determined objectively

- the conduct may be considered appressive or unfair even if it is establish that the person alleged to have been acting oppressively or unfairly did not intend to harm the complaining SH

o Wayde v New South Wales Rugby League Ltd (1985) 3 ACLC 799-P: Reasonable man test> a director’s condust may be regarded as oppressive or unfair if no reasonable director would have acted in that way

To determine whether a conduct oppressive, court must balance the conflicting interest of majority and minority SH

- How?> Examining the background of a co and the reasonable expecttion of its SH> not necedirilly oppressive or unfair jut because the controllers of the co are pursuing management or dividend policies with which a minority SH disagrees

o Re G Jeffrey (Mens Store) Pty Ltd (1984) 2 ACLC 421-P: It is not necisirily unfair if majority SH refure to buy minority’s shares

o Low Peng Boon v Low Janie [1999] 1 SLR 761-

o Jaya Medical Consultants Sdn. Bhd. v Island & Peninsular Bhd. & Ors [1994] 1MLJ 520- H: the question of unfairness is one of the fact and degree which requires the ct to apply an objective test

o Re Postgate & Denby (Agencies) Ltd (1987) BCLC 8- ct is not only to take the rights of members under the co’s constitutioninto account, but also their legitimate expectations arising from the agreements ot the understandings of the members inter se.

o Dato’ Low Mong Hua v Banting Hock Hin Estate Co. SB- GP applicable to s 181:

1) G2) G3) G4) G5) G6) G7) G

o Dato’ Oon Ah Baa @ Boon Pak Leong v Eagle & Pagoda Brand Teck Aun Medical Factory SB- accept Dato Low’s decision

Legitimate expectations

S 181 empowers ct to determine whether the conduct complained is commercially fair or unfair to take into account informal or implied understanding, over the above co’s costitution

o Ebrahimi v Westbourne Gallaries - where the majority’s assertion of power and dominance in accordance with the co’s constitution conflicts with the legitimate expectations of the minority members, the conduct of the majority could be challanged as oppressive and unfair

o Jaya Medical Consultants Sdn. Bhd. v Island & Peninsular Bhd- the concept of unfair discrimination or prejudice that enables the court to take into considereation not only the rights of the members under the co’s constituion but also their legitimate expectation arising from agreemnets and understanding of the memebers among themselves

o Tuan Haji Ishak bin Ismail v Leong Hup Holdings Bhd.- it was for the petitioner to satisfy the ct that his expectatios of minority members are is a question of law to be determined objectively, considering the nature of the co’s involved

Examples of oppressive, and unfairly prejudicial and unfairly discriminatory conduct:

Diversion of corporate assets or opportunity

Cook v Deeks [1916] AC 554- P:Directors breach their fiduciary duties if they divert a corporate opportunity to themselves or their associates

S 181 provides remedy for minority SH

Scottish Co-operative Wholesale Soc Ltd v Meyer

-

Eric Lau Man Hing v Eramara Jaya Sdn. Bhd. & Ors [1998] 7 MLJ 528

Low Peng Boon v Low Janie [1991] 1 SLR 761 & Re Elgindata Ltd (1991) BCLC 959

- P: if controllers usesco’s fund to pay their personal expenses > oppression

Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn. Bhd. & Ors [1994] 2 MLJ 789- diverting the co’s business opportunities to related cos amounted to oppression

//Re Kong Thai Sawmill (Miri) Sdn.

Bhd. [1978] 2 MLJ 227- The SH-director had not acted oppressively by causing the co to purchase and outfit a motor yatch for their personal use.

- PC: did not consider it as extravagance on the part of SH-director as amounting to oppression of the minority SH

Diversion of profitsSanford v Sanford Courier Service Pty Ltd (1986) 5 ACLC 394-Re Gee Hoe Chan Trading Co Pte Ltd [1991] 3 MLJ 137-the directors by paying themselves director’s fees and salaries but not declaring dividens had acted inequitably and this was held to constitute a basis for an allegation of unfair prejudice

Directors’ failure to act in the interest of the company

Re Spargos Mining NL (1990) 8 ACLC 1218

Shares issued for improper purposes; and

Hannes v MJH Pty Ltd (1992) 10 ACLC 400

No dividend or inadequate dividend given

Table A, art 98

Burland v Earle [1902] AC 83- SH cannot compel a co to declare a dividen and to determine the max amount

Low Peng Boon v Low Janie [1999] 1 SLR 761- the non paymnet of dividen couple with misappropriation of co funds coud amoun to oppressionEric Lau Man Hing v Eramara Jaya Sdn. Bhd. & Ors [1998] 7 MLJ 528-non paymnets of dividen together with a failure to keep proper records amounted to oppressive conduct in disregard of the interst of the minority SH by majority

Re Gee Hoe Chan Trading Co Pte Ltd [1991] 3 MLJ 137Min amount of dividen coupled with a generous renumeration for the directors > oppressive or unfair

Re Sam Weller & Sons Ltd [1990] 1 Ch 682

Dominant members run the company as if it were their own, disregarding the rights and interests of the other members

Re HR Harmer Ltd [1958] 3 All ER 689 (CA, England)Re Coliseum Car Stand Service Ltd [1972] 1 MLJ 109 (HC, Malaysia)

Remedies: s 181(2)

(d) Winding up solvent companiesGrounds for compulsory winding up: s 218(1)(f)&(1)(i)

Persons who can wind up: company, creditor, contributory, liquidator

Directors act in their own interests: s 218(1)(f)Kokotovich Constructions Pty Ltd Wallington (1995) 13 ACLC 1113

Just and equitable ground: s 218(1)(i)

o Breakdown of trust and confidenceLoch v John Blackwood Ltd [1924] AC 783 (PC on appeal from West Indies)Re Wondoflex Textiles Pty Ltd [1951] VLR 458 (SC of Victoria)Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 (HL)Varusay Mohamed Shaik Rahman v SVK Patchee Bros (M) Sdn. Bhd. [2002] MLJ674

o DeadlockRe Yenidge Tobacco Co Ltd [1916] 2 Ch 426 (CA, England)Re Davis Investment (East Ham) Ltd

[1963] 3 All ER 926

o Fraud, misconduct or oppressionThese grounds have been largely incorporated in s 181.

Re Thomas Edward Brinsmead & Sons Ltd [1897] 1 Ch 45 (HC, England; affirmed by CA [1897] 1 Ch 406)

o Failure of substratumRe Eastern Telegraph Co Ltd [1947] 2 All ER 104Re German Date Coffee Co (1882) 20 Ch D 169 (CA, England)Re Tivoli Freeholds Ltd [1972] VR 445 (SC of Victoria)

2.4.5 Procedure in Minority Member’s Actions

(a) Personal and representative actions When personal rights have been infringed.

(b) Derivative actions When a wrong is done to the company (Proper plaintiff rule) and the minority is bringing such an action.

Australian Agricultural Co v Oatmont Pty Ltd (1992) 10 ACLC 1220

2.4.6 Proceedings on behalf of a company

Statutory derivative action (SDA) ss 181A-181E Salient feature of the new statutory derivative action

Mohd Shuaib Ishak v Celcom (Malaysia) Bhd. [2008] 5 MLJ 857Reversed by Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636 (CA)

Ng Hoy Keong v Chua Choon Yang [2010] 9 MLJ 145

5 issues:o Leaveo Good faitho Reasonable noticeo Costs-indemnity ordero Interests of company