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Research- S. 181 Companies Act 1965

JET-TECH MATERIALS SDN BHD & ANOR V YUSHIRO CHEMICAL INDUSTRY CO LTD & ORS AND

ANOTHER APPEAL [2013] MLJU 10 FEDERAL COURT

Facts

Appellant was the majority shareholder (alter ego of Chen) of Jet Chemicals Sdn Bhd. Respondents was

the minority shareholder of Jet Chemicals Sdn Bhd. Subsequently, Yushiro(one of the respondent)

bought further 500,000 new shares for RM2500,000.00 ( fair value is RM 8 millions ascertain by

qualified actuarist)which render him a major shareholder of the Jet Chemicals Sdn Bhd. Appellants

(include Chen) file petition under s. 181 as Yushiro take over majority share of Jet Chemicals Sdn Bhd,

use majority share to remove Chen as Director, refusing to allow Jet-Tech and Chen removed nominees (

Gan and Firdaos) and pray that Yushiro buys shares of Jet-Tech at fair value, compensating appellants as

appellants has loss of control over Jet Chemical.

Issues

Whether just and equitable is applicable in s. 181 Companies Act 1965 Malaysia?

Whether the petition is within the scope of s. 181?

Held (Appeal Dismissed)

Under s. 181, the word just and equitable does not appear thus, concept of just and equitable isinapplicable in s. 181.

The basic theme of s. 181 is unfairness. Unfairness does not mean court can do whatever the individual

judge happens to think is fair. The court must decide base upon rational principles. Learned High Court

judge has devoted almost whole of his ground to issues of valuation of the shares but not ground on

issues of oppression.

The issues of 500,000 new shares to Yushiro was given consent by shareholders. The act of issuing and

allotting addition 500,000 shares is not an oppressive act under s. 181.

The removal of Chen as Director for Jet Chemical Sdn Bhd was not within the scope of oppression as theremoval is of status as Managing Director and not of shareholder.

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PAN-PACIFIC CONSTRUCTION HOLDINGS SDN BHD V NGIU-KEE CORPORATION (M) BHD & ANOR

[2010] 6 CLJ 721 FEDERAL COURT

Fact

Petitioner entered JVA with 2nd Respondent forming Pacific-Ngiu Kee S/B (1st respondent) for purpose

of operating a supermarket store. Petitioner own 30% of the shareholding and 2nd

Respondent held

70%. Dispute subsequently arose and petitioner take a petition under s. 181 for an order either 2nd

res

disposed 70% to petitioner or the company to be wound up. Petitioner contended that there is breach

of fiduciary duties by res to petitioner which come under s. 181 as firstly 2nd

and 3rd

res had paid salaries

of employees of 2nd

res out of 1st

res company fund, staff of 1st

res had been assigned to look after stores

own by 2nd res, and 2nd res had charged 1st res unjustifiable rate of interest for an unverified loan RM

3.78 million.

Issue

Whether a breach by one JV partner in conducting JV company automatically constitutes conduct or

action that is proscribed under s. 181?

Held

Breach by one partner in JV company does not automatically equate to conduct under s. 181. Mere

breakdown of relationship in term of trust and confidence was not per se sufficient to justify relief under

s. 181 (2). It must be shown that breach by 2nd

and 3rd

res amount to unfair disregard, oppressive

conduct of petitioner minority interest. This is because s. 181 is in relation to company and not

partnership.

In order to succeed in petition, petitioner has to establish and must eminently be determined according

to facts that affairs of company conducted or power of directors exercised in oppressive manner, unfair

discriminatory, resolutions has been passed or proposed to be passed.

Pertaining to the loan, mere suspicion or deficiency in keeping the accounts of the business was not

enough. Court normally very reluctant to accept managerial decision can amount to unfairly prejudicialconduct.

Pertaining to the salaries of 2nd

res paid out of 1st

res fund, the arrangement know to board of directors

of company. In reality, no loss was suffered by petitioner or the company.

Pertaining to staff of 1st

res which was asked to look after 2nd

res store, it did not amount to oppression

as it has stopped. The store had reimbursed salaries paid to staff.

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SOH JIUN JEN V ADVANCE COLOUR LABORATORY SDN BHD & ORS [2010] 4 CLJ 897

COURT OF APPEAL

Facts

Appellant, 2nd and 3rd respondents, were directors and shareholders of 1st respondent company.

Appellant was not keen to agree with any plan for 1st

respondent to expand its business and had not

accorded time and effort in managing day to day business and operation of 1st

respondent. Respondent

later on knows about appellant involvement in a company known as Meta Graphic Sdn Bhd whose main

business similar to 1st

respondent. On March 2001, 1st

respondent cancelled appellants Shell card and

issued notice dated 13 March 2001 demanding return of company car. Appellant issued notice demand

directors fees and 1st respondent failed to pay and notice under s. 218 was served. 2nd and 3rd

respondents requisitioned EGM and appellant was removed as directors, increased authorized capital as

expansion plan, and set off directors fees in exchange of allotment and issue of share. Appellant

unhappy and instituted proceeding under s. 181.

Issue

Whether the proposal(EGM) was unfairly prejudicial or oppressive to Appellant?

Held

-Appellant 1st complaint was of removal of him as a director or sales representative of 1st

respondent but not as member or shareholder of company. Therefore court have no jurisdiction to

entertain such proceeding.

-The set-off of directors fees couldnt be said as prejudicial to appellant as such exercise will affect all

shareholders collectively.

-Appellant failed to prove his claims under s.181 as matter of complained were not matters affected his

right and interest as a shareholder of 1st

respondent of the company. Court should not interfere in the

internal management of the companys affair.

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OWEN LIM LIANG KHUI V PIASAU JAYA SDN BHD & ANOR [1996] 4 CLJ 716

FEDERAL COURT

Fact

Appellant held 1500 shares out of 10,000 shares of 1st respondent. 1st res wrote to appellant alleging

appellant owed it sum RM111,734.60. Appellant denied and claimed that 1st

respondent indebted to

him sum of RM12,500. Res give notice of said resolution if the alleged debt was not paid within seven

days, resolution would be carried out. Subsequently, 1st

res went ahead and sold appellant shares and

transferred to 2nd

res for sum of RM 16,026. Appellant appealed.

Issues

Whether mismanagement is essential elements of concept of oppression?

Whether oppressions act or omission sufficient if effects persist at the date of presentation of petition?

Held (Petitioner restored to file hearing on the merits)

Mismanagement is not essential element of concept of oppression. Allegation of mismanagement does

not have to be pleaded in every case. This also applied to unfairness.

It is inaccurate to say act or omission which constitutes oppression must persist till the date of

presentation of petition. S. 181 directed to nature of the conduct complained and not the specific acts

or omissions. S. 181 looks at the effects and consequence of the wrong done in determining whether

there is oppressive conduct.

The terms members and shareholders refer to same category of persons in a company. In general

as under s. 16(6), petitioner applies under s. 181 under Act must able to demonstrate his name appears

on a company registers however this rule is general rule which may be unjust or unfair to specific

situation such as appellant which was deprived status as a member.