I was interviewed by Focus Malaysia on the rights of minority shareholders in a public listed company context. My view was that there were limited options for the minority to express their displeasure at the directors or management of the company.
The interview was partly through email answers and also through a phone call. I set out below my emailed answers setting out my views.
Focus Malaysia 16 July 2016 issue
I have been invited to speak at the upcoming MAICSA (Chartered Secretaries of Malaysia) Annual Conference 2016. The conference is on 8 and 9 August 2016 at the Sime Darby Convention Centre.
I am honoured to join a long list of distinguished speakers drawn from the Companies Commission of Malaysia, Bursa Malaysia, and public listed companies. I will be speaking on 8 August at the Plenary 2 session. It will be a panel discussion on the new Companies Act regime.
A recent High Court decision of Usahasama SPNB-LTAT Sdn Bhd emphasised the importance of complying with all the pre-conditions / conditions precedent of a dispute resolution clause before initiating arbitration.
Multi-tiered dispute resolution clauses are very common. They usually incorporate language referring to the need to hold “good faith negotiations”, to hold a meeting between certain higher management personnel first, or to attempt mediation or negotiation before parties can initiate arbitration.
The Federal Court in Lai Yak Kee v Pembinaan Alam Cemerlang Sdn Bhd [2012] 1 LNS 1464 has clarified important points regarding the statutory demand issued under section 218 of the Companies Act. Any letter of demand, without any reference to possible winding up proceedings, can be an effective statutory demand. Beware of this possible landmine.
The Federal Court held that the statutory demand need not stipulate that it was issued pursuant to section 218, and there is no need to mention any 3-week payment period. Further, there is no requirement to give any warning that there will be winding up proceedings.
The demand merely needs to be for a sum of more than RM500, issued under the hand of the creditor or his agent, and served on the registered address of the debtor company. This is due to the plain application of the wording of section 218.
This is significant as companies are used to receiving mere letters of demand as precursors to possible civil suits. Companies may even ignore such letters of demand.
On the other hand, when companies receive a clearly-marked statutory demand issued pursuant to section 218, there is an obvious threat of possible winding up proceedings. Companies would know that they must immediately react to oppose this statutory demand.
Companies will now have to be very cautious in assessing every letter of demand that they receive, whether there is a reference to section 218 or not.
If the claim is not paid within the 3-week period, there can be the presumption of insolvency and where the creditor can file a winding up petition against the company.
So, every simple letter of demand could now be a hidden landmine where winding up proceedings may be initiated if the demand is not paid after the expiry of the 3-week period.
The High Court has recently upheld the existence of the multiple derivative action in Malaysia. This is seen in the decision of Ranjeet Singh Sidhu & Anor v Zavarco plc & Ors [2016] 2 CLJ 975 (and with the original Grounds of Judgment here).
A multiple derivative action is where a shareholder of a holding company files an action on behalf of the subsidiary of that holding company. This common law action would allow shareholders to seek relief against wrongdoings where there are wrongs carried out against subsidiaries further down the corporate structure.
In the face of wrongdoings carried out against a company or its subsidiary, the law would clothe a suitably interested representative with the necessary standing to bring an action on behalf of the wronged company and to be the company’s champion.
[my article originally published on The Malaysian Lawyer]
The Dewan Rakyat, the lower house of Parliament, passed the Companies Bill 2015 on 4 April 2016. It was first tabled for Second Reading on Thursday 31 March 2016 and Parliament continued and concluded its debate on 4 April 2016.
Upcoming Changes
I had previously written on some of the upcoming changes, especially on the challenges that directors may face and I was also featured on The Edge TV.
The new Companies Act will undoubtedly transform Malaysia’s corporate landscape. Underpinning the changes are the aims of spurring entrepreneurship, making the corporate vehicle more attractive for businesses, deregulating certain aspects of the corporate process, and to introduce the concept of corporate rescue for ailing companies.
It is anticipated that the new Companies Act itself will not be brought into force until a year’s time or so. This is because the new regulations, rules and guidelines will still need to be drawn up.
I set out below 7 of the more significant areas we will see in the new Companies Act.
The Privy Council in the Anzen Limited case emphasised the importance of careful drafting of the arbitration clause (Grounds of Judgment dated 18 January 2016). Here, the Privy Council had to decide on the phrase “may submit the dispute to binding arbitration”. The Privy Council interpreted this phrase to mean that either party to the contract could insist on arbitration. Even where one party had initiated litigation, it was open to the other party to make an unequivocal request that the dispute should be submitted to arbitration and/or to then apply for a stay of the litigation.
In an interesting recent Court of Appeal decision (Grounds of Judgment dated 3 February 2016), the Court of Appeal allowed a defamation action against CTOS.
I can imagine this decision having quite serious repercussions for credit reporting agencies in Malaysia in general. It imposes an obligation on a credit reporting agency to ensure any information that it inserts into its database or report to be factually correct. Further, that information must continue to be factually correct at all times. A credit reporting agency cannot rely on any disclaimer in their report that the information may not be up to date and that the person relying on the report should conduct their own checks.
So for example, if an individual had originally been adjudged a bankrupt but he had since been discharged from his bankruptcy, a credit reporting agency must ensure that information is updated quickly. So quite a victory for individuals and companies worried about their creditworthiness. Continue reading
In an earlier article on ‘Getting Away with Fraud: Defraud the Subsidiary?‘, I had written about the development of the multiple derivative action in other jurisdictions. This is where a shareholder of a holding company brings an action on behalf of a subsidiary of that holding company. In a way, it allows you to skip past one or more levels of the corporate structure in order to bring an action for a wrong done to that subsidiary.
In the recent unreported Grounds of Judgment dated 16 November in the Zavarco case, the High Court upheld the existence of a multiple derivative action in Malaysia. It is therefore possible for a shareholder to bring such an action.
This recent High Court decision in CLLS Power System [2015] 11 MLJ 485 emphasised that the mere filing of an appearance would amount to a step in the proceedings. This would be fatal to applying for a stay under section 10 of the Arbitration Act. This is the importance of preserving the right to apply to stay the court proceedings pending arbitration. An application to stay court proceedings could only be made before that applicant had taken a step in the proceedings. Once the applicant took such a step, the Court would treat it as having waived its right to arbitrate and had instead opted for court litigation.
Justice Mary Lim referred to her earlier decision in Winsin Enterprise [2010] 3 CLJ 634 as well as to the Federal Court decision in Sanwell Corp [2002] 2 MLJ 625.
Of Counsel 