I highlight the recent Grounds of Judgment dated 27 August 2015 by Justice Dr Prasad Abraham in the Petra Perdana Court of Appeal decision.
The case involved the former directors of Petra Perdana Bhd being sued for breach of their duties in selling down the company’s stake in Petra Energy Bhd. The High Court had dismissed the suit finding that they had not acted in breach of their duties. They had exercised their business judgment in selling off those shares due to liquidity and cash flow problems (see Petra Perdana Bhd v Tengku Dato’ Ibrahim Petra bin Tengku Indra Petra & Ors  11 MLJ 1).
At the Court of Appeal, the Court focused on the interplay between the directors’ powers of management (including the power to deal and dispose assets of the company) and the shareholders right to make resolutions to intrude on those powers of management.
In the recent unreported High Court decision of Abdul Rahim bin Suleiman and another v Faridah binti Md Lazim & 7 Others dated 3 April 2015, Justice Wong Kian Kheong considered an application for leave under section 181A of the Companies Act 1965 to bring a statutory derivative action. I have written a commentary on the statutory derivative action provisions over here before.
The decision is useful in setting out some of the procedural guidelines that must be met in bringing such an action. Some of the significant points are:
- A complainant only apply under 181A to bring a new action, to act for the company when the company intervenes in an action, and to defend a pending action against the company.
- A complainant cannot seek to apply to act for the company where the suit is already concluded or where the suit is pending (as that suit would be under the control of the present management of the company).
- Notice under section 181B must be given to each of the directors. It is not sufficient just to address it to the Board of Directors.
- This decision gave some guidance on what should be in the contents of the section 181B notice and the decision referred to several Canadian cases.
- The application for leave is filed by way of Originating Summons (OS). In the OS, the applicant need only cite the Company itself as the sole Defendant. There is no need to cite the other alleged wrongdoers as parties to the OS. Nonetheless, citing the other alleged wrongdoers was not fatal in this case.
I will be moderating a session at the Malaysian Institute of Accountants Conference 2014 this Wednesday 5 November 2014. It will be on the new Companies Bill and its impact on Malaysian businesses and economy. It should be a very interesting session and I have been liaising with the speakers on the panel. Will keep the format as a group discussion and try to draw out all the different issues.
I was invited by the Malaysian Institute of Accountants to deliver a talk on 4 March 2014 focusing on the insolvency-related provisions of the Companies Bill. It was an interesting session, with a lot of questions and a lively discussion among the participants. The areas I touched on were the changes to the receivership, winding up and schemes of arrangement provisions, and the introduction of judicial management and the corporate voluntary arrangement.
A copy of my slides can be downloaded here.
My article on Corporate Insolvency and Corporate Rehabilitation has been featured in the Accountants Today issue for November-December 2013. The article itself can be downloaded here.
A colleague and I gave a talk today hosted by the Malaysian Institute of Accountants on the Companies Bill. The session was well attended with over 90 people present. It was an enlightening experience preparing the content for the talk and interesting to hear the questions from the floor. The questions are now making me go back and study the provisions in the Bill in more detail in the other areas.
The slides are available for download here: