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Case Update: Removal of directors under Companies Act 2016

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COMPANY LAW
Removal of directors – The validity of certain board meetings and extraordinary general meetings of the defendant companies, and the validity of the resolutions passed thereat – Companies Act 2016

Low Thiam Hoe & Anor v Sri Serdang Sdn Bhd & Ors
(Originating Summons No WA-24NCC-459-08/2019), High Court
- see the grounds of judgment here

Facts The 1st, 2nd, 3rd and 4th Defendants (the “Subsidiaries”) are wholly owned subsidiaries of the 5th Defendant company, Golden Plus Holdings Berhad (GPLUS), which is a holding and investment company. The Board of Directors of GPLUS passed a directors’ resolution to remove certain directors (the “Plaintiffs”) and to appoint other directors. The directors’ resolution also authorised GPLUS’ corporate representative, Tan, to take all such steps to give effect to the removal and appointment of those directors which includes the signing of four requisitions, one for each of the subsidiaries, to request the directors of the subsidiaries to convene an extraordinary general meeting (EGM) to consider the resolutions to remove the specified directors. These requisition notices appeared to have been made pursuant to section 311[1] of the Companies Act 2016. On the other hand, the Company Secretary (8th Defendant) of the subsidiaries emailed all of its directors informing them that a director in each of those companies had convened a Board meeting with the agenda to call an EGM, but some replied that they were unable to attend to the said meeting. Nonetheless, the EGMs were held and the specified directors were removed. The Plaintiffs then challenged the validity of the said board meetings, the EGMs and the resolutions passed thereat as they claimed that they had been unlawfully removed as directors of GPLUS.

Issues The main issue is whether the board meetings and the various resolutions passed at the EGMs removing the Plaintiffs as directors are valid?

Held The High Court held that the manner of the Plaintiffs’ removal as directors were not unlawful or wrong on the ground that the expedited process and the alacrity in which the Plaintiffs were removed as directors do not equal to lack of bona fides that could nullify their removal. The speed in which the Plaintiffs were removed as directors were carried out in accordance with the Articles of Association of the Subsidiaries and it is also due to the fact that the Subsidiaries were wholly owned companies of GPLUS.

ZUL RAFIQUE & partners
{31 January 2020}
[1] Power to require directors to convene meetings of members