1. Governed by Section 346 of the Companies Act 2016
Section 346(1) and (2) of the Companies Act 2016 (“CA 2016”) provides the following:
“(1) Any member or debenture holder of a company may apply to the Court for an order under this section on the ground-
(a) that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or debenture holders including himself or in disregard of his or their interests as members, shareholders or debenture holders of the company; or
(b) that some act of the company has been done or is threatened or that some resolution of the members, debenture holders or any class of them has been passed or is proposed which unfairly discriminates against or is otherwise prejudicial to one or more of the members or debenture holders, including himself.
(2) If on such application the Court is of the opinion that either of those grounds is established, the Court may make such order as the Court thinks fit with the view to bringing to an end or remedying the matters complained of, and without prejudice to the generality of subsection (1), the order may-
(a) direct or prohibit any act or cancel or vary any transaction or resolution;
(b) regulate the conduct of the affairs of the company in the future;
(c) provide for the purchase of the shares or debentures of the company by other members or debenture holders of the company or by the company itself;
(d) in the case of a purchase of shares by the company, provide for a reduction accordingly of capital of the company; or
(e) provide that the company be wound up.”
Section 346 of the CA 2016 was formerly Section 181 of the Companies Act 1965 (“CA 1965”).[1]
In Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549, the Federal Court expressly acknowledge that Section 181 of the CA 1965 is identical in form to Section 346 of the CA 2016:
“Section 181 of our then Companies Act 1965 (‘the CA 1965’) that is now s 346 of the Companies Act 2016 (‘the CA 2016’) are both identical in form. This statutory provision comprises one of the broadest and most comprehensive statutory shareholder remedies available in the common law world. Section 181 (now s 346) provides for the broad involvement of the courts in fashioning a wide-ranging series of remedies for the beleaguered shareholder/s who are able to establish oppression, prejudice or discriminatory acts or omissions by those in control, generally the majority.”[2] (Emphasis ours)
2. Action by the minority shareholder of a company against the majority controllers
The Federal Court in Rinota Construction Sdn Bhd v Mascon Rinota Sdn Bhd & Ors [2018] 1 MLJ 141 (“Rinota Construction”) held:
“… a minority oppression petition deals with action by the minority shareholder of a company against the majority controllers …”[3]
Examples of minority oppression would include the denial of shareholder’s fundamental statutory right to vote as provided in Section 223 of the Companies Act 2016.[4]
3. Company cannot be the petitioner and is only a nominal defendant
In Rinota Construction, Zulkefli PCA went on to say that:
“… the company cannot be the petitioner and is only a nominal defendant;”[5]
4. Requires a departure from the standards of fair dealing and a violation of the conditions of fair play
In a seminal decision on Section 181 of the CA 1965 (now Section 346 of the CA 2016), the Privy Council in Re Kong Thai Sawmill (Miri) Sdn Bhd & Ors v. King Beng Sung [1978] 2 MLJ 227 opined:
“… for the case to be brought within section 181(1)(a) at all, the complaint must identify and prove “oppression” or “disregard”. The mere fact that one or more of those managing the company possess a majority of the voting power and, in reliance upon that power, make policy or executive decisions, with which the complainant does not agree, is not enough. Those who take interests in companies limited by shares have to accept majority rule. It is only when majority rule passes over into rule oppressive of the minority, or in disregard of their interests, that the section can be invoked. As was said in a decision upon the United Kingdom section there must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect before a case of oppression can be made (Elder v Elder & Watson Ltd 1952 SC 49): their Lordships would place the emphasis on “visible”. And similarly “disregard” 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 (per Lord Clyde in Thompson v Drysdale 1925 SC 311 315). Neither “oppression” nor “disregard” need be shown by a use of the majority’s voting power to vote down the minority: either may be demonstrated by a course of conduct which in some identifiable respect, or at an identifiable point in time, can be held to have crossed the line.”[6] (Emphasis ours)
5. Courts are tasked with carrying out a balancing exercise
Zabariah Mohd Yusof JCA (now FCJ) in Toralf Mueller v Alcim Holding Sdn Bhd & Ors and other appeals [2019] MLJU 2152 was of the view that:
“… It is to be borne in mind that in cases of minority oppression, courts are tasked with carrying out a balancing exercise. Any act/misconduct on the part of the minority may result in prejudicial conduct by the majority as not being unfair.”[7] (Emphasis ours)
6. Courts are given a wide latitude to fashion various remedies to bring to an end the oppressive conduct
In Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549, the Federal Court expressly held that:
“… The legislature saw fit to word s 181 (now s 346) as it states, and accordingly judicial construction must accord the provision the intention Parliament sought fit to enact, namely a wide and broad remedy encompassing not only the majority, or the company, but also the directors and third parties where necessary, with a view to bringing the oppressive or prejudicial conduct to an end or remedying it.”[8] (Emphasis ours)
A similar view was expressed by the Court of Appeal in Tai May Chean v New Way Capital Sdn Bhd & Anor and another appeal [2020] 12 MLJ 471:
“… [s 346 of the CA 2016] gives a wide latitude to the courts to fashion various remedies to bring to an end the oppressive conduct.”[9] (Emphasis ours)
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[1] https://www.ssm.com.my/acts/fscommand/act125s0181.htm
[2] Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549 (FC), at para 3
[3] Rinota Construction Sdn Bhd v Mascon Rinota Sdn Bhd & Ors [2018] 1 MLJ 141 (FC), at para 34(a)
[4] Concrete Parade Sdn Bhd v Apex Equity Holdings Bhd & Ors [2022] 2 MLJ 857 (CA), at para 59
[5] Rinota Construction Sdn Bhd v Mascon Rinota Sdn Bhd & Ors [2018] 1 MLJ 141 (FC), at para 34(a)
[6] Re Kong Thai Sawmill (Miri) Sdn Bhd & Ors v. King Beng Sung [1978] 2 MLJ 227 (PC), at p. 229
[7] Toralf Mueller v Alcim Holding Sdn Bhd & Ors and other appeals [2019] MLJU 2152 (CA), at para 43
[8] Auspicious Journey Sdn Bhd v Ebony Ritz Sdn Bhd & Ors [2021] 3 MLJ 549 (FC), at para 85
[9] Tai May Chean v New Way Capital Sdn Bhd & Anor and another appeal [2020] 12 MLJ 471 (CA), at para 30