COMPANY LAW

TUTORIAL 2

4. (a) I am asked to advise Tang whether he is entitled to request a meeting. Tang decides to
request the directors of Lang Lang Bhd call a member’s meeting to put the resolution to a vote.
Section 310 of Companies Act 2016 stated that a meeting of members maybe convened by the
board or any member holding at least ten per centum of the issued share capital of a company or
a lower percentage as specified in the constitution or if the company has no share capital, by at
least five per centum in the number of the members. The extraordinary general meeting (EGM)
can be held by the Lang Lang Bhd. An EGM also can called a special general meeting or
emergency general meeting that regularly occurs among a company’s shareholders, executives
and any other members. So, Tang is entitled to request a meeting in the company.

(b) An EGM is usually called on short notice and deals with an urgent matter, often concerning
company management. Section 311(1) of Companies Act 2016 stated that the members of a
company may require the directors to convene a meeting of members of the company. Section
311(2) provided that a requisition under subsection (1) shall be in hard copy or electronic form,
shall state the general nature of the business to be dealt with at the meeting, may include the text
of a resolution that may properly be moved and is intended to be moved at the meeting and shall
be signed or authenticated by the person making the requisition. Then, section 311(3) stated that
the directors shall call for a meeting of members once the company has received requisition to do
so from members representing at least ten per centum of the paid up capital of the company
carrying the right of voting at meetings of members of the company, excluding any paid up
capital held as treasury shares or in the case of a company not having a share capital, members
who represent at least five per centum of the total voting rights of all members having a right of
voting at meetings of members. In relation to section 311, the directors shall call for the meeting
within fourteen days from the date of the requisition and hold the meeting on a date not more
than twenty-eight days after the date of the notice to convene the meeting.
(c) The board of Lang Lang Bhd saying that the meeting would be a waste of money therefore
refuses to call the meeting. Here, Tang as a member of the company may call for a meeting of
members. Section 313 of the Companies Act 2016, stated that if the directors are required under
section 311 to call a meeting of members and do not do so in accordance with section 312, the
members who requisitioned the meeting, or any of the members representing more than one half
of the total voting rights of all of the members who requisitioned the meeting, may call for a
meeting of members. Subsection 3 of the above section also stated that the meeting shall be
convened on a date not more than three months after the date on which the directors received a
requisition under subsection 311(1) to call for a meeting of members.

Other than that, section 314 of the Companies Act 2016, also stated that to call for a
meeting of members of a company in any manner in which meetings of that company may be
called or to conduct the meeting in the manner prescribed by the constitution or this Act.
Subsection 2 provided that the Court may either of its own motion or on the application of the
director of the company, a member of the company who would be entitled to vote at the meeting
or of the personal representative of any such member, order a meeting to be call, held and
conducted in any manner the Court thinks fit.

6. Protection under Common Law

If the actions taken by the majority discriminate against the minority, common law has created
protection against minorities.

1) To take action, a minority should prove that the action taken by the majority has
been suppressed and unfair to minorities.

The “just and equitable” winding-up measure is commonly utilised in cases where the majority
shareholders conspire to act in a way that is detrimental to the minority, such as seen
in Ebrahimi v Westbourne Galleries  Ltd [1973]. In this case, the majority shareholders passed a
resolution to have the minority shareholder removed as a director against his reasonable
expectations. Since this motion did not allow for the minority director to effectively dispose of
his interest in the company, the court ruled that the company should be wound-up.
Oppression. To succeed in oppression, the plaintiff must prove that he was oppressed in his
capacity as a shareholder or debenture holders. In the case of Re Jermyn Street Turkish Baths Ltd
[1971], ‘oppression’ occurs when shareholders, having a dominant power in a company, either
exercise that power to procure that something is done or not done in the conduct of the
company’s affairs; or procure by an express or implicit threat of an exercise of that power that
something is not done in the conduct of the company’s affairs; and when such conducts is unfair
to the other members of the company or some of them, and lacks that degree of probity which
they are entitled to expect in the conduct of the company’s affairs. In the case of Jaya Medical
Consultants Sdn Bhd V Island & Penisular Bhd [1994], oppression does not necessarily mean
‘illegal’ or ‘fraudulent’. For there to be oppression, there must be a visible departure from the
standard of fair dealing or fair play.

2) Fraud on minorities.

Fraud on the minority is not precisely defined but it can be interpreted simply as
misrepresentation or an act to deceive. In the case of Cook v Deeks [1916], the directors who
were also the majority shareholders of the company, expropriated a project which the company
was negotiating. As they formed the majority, they passed a shareholders’ resolution to declare
that the company has no interest in the contract. The minority shareholder, Cook, objected and
took action against the majority shareholders. The court held that the shareholders’ resolution
was invalid as it was a fraud on Cook, a minority shareholder in the company. In the case of
Daniels v Daniels [1978], The BOD sold one of the company’s assets at a grossly undervalued
price to one of the directors. The director subsequently sold it for a large profit. The court held
that such undervalued transaction which benefited one of the directors or majority shareholders
was a fraud on the minority and could not be ratified.

3) Take the property of a minority shareholder.

In the case of Brown v British Abrasive Wheel Co [1919], the company approached the minority
shareholders who owned 2% of the company’s capital to contribute to the company’s capital.
They refused. The company then approached the majority shareholders who own 98% of the
company’s capital. The majority shareholders were willing to do so only if they could buy the
minority’s shares. As the Article of Association was silent on this issue, the majority
shareholders decided to alter the AOA to give them the power to buy the minority’s share. The
minority shareholders claimed that it was not bona fide. The court held that there was a fraud on
the minority.

4) When the rights of the shareholder / personal rights are violated.

In the case of Pender v Lushington [1877], chairman of a meeting of shareholders wrongfully

5) When the justice of case requires the minority to be protected.

Protection under Companies Act 2016

The Companies Act 2016 also provides protection against minorities if the action of majority
suppress the minority. Minorities are allowed to take action to challenge the decision made if the
decision is suppressing them. Section 346(1) give rights to member or debenture holder of a
company may apply to the court for an order under this section. Under section 346(2), the court
may issue an order if section 346(1) (a) & (b) are proved. Section 346 does not list against whom
the actions can be taken. Therefore, section 346 can be taken against anyone who manages the
administration of company.

1) Disregard of members’ interests.

Involves something more than a failure to take account of the minority’s interest, there 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 procedure.
 2) Discrimination

Where one group of members is given a benefit which other members do not have, or where one
group of members is subject to some detriment or liability to which the others are not subject.
‘Unfairly discriminatory’ is some discrimination can be fair; whether the discrimination can be
justified in terms of benefit to the company as a whole. ‘Prejudice’ to mean ‘causing prejudice,
detrimental to rights or interest’. Re A Company [1983]

In the case of Re Kong Tahi Swamill (Miri) Sdn Bhd [1978], there must be a visible departure
from the standard of fair dealings and a violation of the conditions of fair play which a
shareholder is entitled to expect before a case of oppression can be made. ‘Disregard’ involves
s/thing more than a failure to take into account of the minority’s interest: there must be
awareness of that interest and an evident decision to override it or brush it aside or set at naught
the proper company procedure.

In the case of Peter Gibson In Re A Company, the test of unfair prejudice is objective. It is not
necessary for the petitioner to show bad faith. It is not necessary for the petitioner to show a
conscious intention to prejudice the petitioner. The test is, if the objective bystander observes
that the conduct of the respondent was for an improper purpose or with an improper motive that
may well be a relevant consideration in determining whether the conduct is unfairly prejudicial.