Ng Kae Jeng v 1. ) Invenpro (M) Sdn Bhd (WA-24NCC-337-07/2024)

1.

2.

KAMARUL BAHRIN BIN ABDULLAH ... DEFENDANTS And COMPANIES COMMISSION OF MALAYSIA ... INTERVENER JUDGMENT Introduction [1] Before the court is an Originating Summons filed by the Plaintiff, Mr. Ng Kae Jeng, seeking, inter alia, declarations that his removal as a director of the First Defendant company was invalid, that the appointment of the Third Defendant as company secretary was unlawful, and requesting reinstatement as a director. The application is primarily framed under Section 346 of the Companies Act 2016 (“CA 2016”) as an oppression action, with aspects also overlapping with Section 602 pertaining to rectification of the company register. [2] This case presents important questions regarding statutory compliance in the removal of company directors, the appointment of company secretaries, and the intersection between the court's jurisdiction and the statutory powers of the Companies Commission of Malaysia (“CCM”). Background Facts [3] The Plaintiff and the Second Defendant, Mr. Liang Kien Hui, are the shareholders of the First Defendant, Invenpro (M) Sdn. Bhd., a company incorporated in Malaysia on 4.7.2005. Each holds 500,100 shares, representing an equal 50% shareholding. The Plaintiff has been a director of the First Defendant since 1.9.2005, while the Second Defendant has been a director since 4.7.2005. [4] On 10.7.2024, the Plaintiff was removed as a director of the First Defendant. The Plaintiff only discovered this removal on 12.7.2024 during a visit to UOB Bank when he was informed by a bank officer that he was no longer a director of the First Defendant. The Plaintiff subsequently made a police report on 14.7.2024 regarding the incident. [5] Through a CCM search, the Plaintiff discovered that a “Notification of Change of Directors, Managers and Secretaries” under Section 58 of the CA 2016 had been lodged with CCM, indicating that the Plaintiff had resigned as a director effective 10.7.2024. The Plaintiff contends he never resigned and was improperly removed without being given any notice of a general meeting or resolution to that effect. [6] Prior to this, on 28.6.2024, the Plaintiff received a resignation letter from the First Defendant's former company secretaries, Koh Thye Tee and Leng Chen Fatt, effective 30 June 2024. On 9 July 2024, the Third Defendant, Kamarul Bahrin Bin Abdullah, was appointed as the new company secretary of the First Defendant without the Plaintiff's knowledge or the passing of any board resolution. [7] Upon the Third Defendant's appointment, the registered address of the First Defendant was changed from No. 6-2, Jalan 9/23E, Taman Danau Kota, 53300 Setapak, Kuala Lumpur to Unit No: 1030, 10th Floor, Block A3, Leisure Commerce Square, No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor, which is the office address of the Third Defendant. [8] The Plaintiff also alleges that his company email, chris.ng@invenpro.com.my, was wrongfully seized by the Defendants, resulting in him losing access to it. [9] On 30.8.2024, after the filing of this Originating Summons, the Plaintiff signed a Members' Resolution prepared by the Third Defendant, authorising the Second Defendant to sell a property belonging to the First Defendant. The Application [10] The Plaintiff's Originating Summons seeks the following principal reliefs: a) A declaration that the Plaintiff remains a director of the First Defendant; b) A declaration that the Plaintiff's removal as director on 10 July 2024 was null and void; c) Reinstatement of the Plaintiff as a director of the First Defendant; d) A declaration that the Third Defendant's appointment as company secretary was null and void; e) An order for the Defendants to inform CCM to reinstate the Plaintiff's name as a director and to remove the Third Defendant's name as company secretary; f) Recovery of possession of the Plaintiff's company email; and g) An order for CCM to investigate and take appropriate action against the Second and Third Defendants for contraventions of the CA 2016. Parties' Submissions [11] The Plaintiff submits that his removal as a director was unlawful as it contravened Sections 206 and 322 of the CA 2016, which require a special notice of 28 days and the passing of an ordinary resolution at a properly convened general meeting for the removal of a director. He further contends that the Third Defendant's appointment as company secretary was invalid as it was not approved by the board of directors as required under Section 236 of the CA 2016. The Plaintiff argues that these actions constitute oppressive conduct under Section 346 of the CA 2016, warranting judicial intervention. [12] The Defendants counter that the Plaintiff has acknowledged the Second Defendant as the sole director, the Third Defendant as company secretary, and the new registered address by signing the Members' Resolution dated 30 August 2024. They argue that the Plaintiff cannot “approbate and reprobate” by accepting these facts in one context while challenging them in another. The Defendants further contend that the Plaintiff should have exhausted the statutory remedy under Section 602 of the CA 2016 by applying to CCM for rectification of the register before approaching the court. They submit that the court would be usurping CCM's statutory functions by entertaining this application. [13] CCM, as the Intervener, initially appeared to support the Defendants' position in their written submissions that the Plaintiff should have applied under Section 602 of the CA 2016 before approaching the court. However, in their oral submissions, CCM clarified that Section 602 provides an option but is not an exclusive remedy. CCM's primary concern is limited to prayer 15 of the Originating Summons, which seeks to direct CCM to investigate and prosecute, as this falls within the executive prerogative of CCM. Analysis and Findings Procedural Requirements for Removal of a Director [14] The Plaintiff contends that his removal as a director of the First Defendant was unlawful as it failed to comply with the statutory requirements prescribed under Sections 206 and 322 of the CA 2016. Specifically, the Plaintiff argues that no special notice was given, no general meeting was convened, and no resolution was passed for his removal. Instead, a notification was lodged with the CCM indicating that he had resigned, which he denies. [15] The Defendants, on the other hand, maintain that the Plaintiff was not removed (plaintiff tidak disingkirkan), but rather that “SSM has taken action,” as stated in paragraph 6 of their Affidavit in Reply. They further assert that the Plaintiff has acknowledged the Second Defendant as the sole director by signing a Members' Resolution dated 30.08.2024, authorising the sale of a property, and therefore cannot now dispute his removal. [16] A careful examination of the statutory framework governing the removal of directors is essential to resolving this dispute. Section 206(1)(a) of the CA 2016 provides that “subject to the constitution, in the case of a private company, by ordinary resolution” a director may be removed before the expiration of the director's period of office. Section 206(3) further stipulates that “Special notice is required of a resolution to remove a director under this section or to appoint another person instead of the director at the same meeting.” These provisions establish mandatory procedural safeguards that protect directors from arbitrary removal. [17] Section 291(1)(a) of the CA 2016 defines an ordinary resolution as requiring “a simple majority of more than half of such members who are entitled to vote and do vote in person, or where proxies are allowed, by proxy at a meeting of members.” Section 322(1) provides that where special notice of a resolution is required, “the resolution shall not be effective unless notice of the intention to move it has been given to the company at least twenty-eight days before the meeting at which it is moved.” [18] The evidence before this court clearly establishes that these statutory requirements were not met. The Plaintiff stated in paragraph 13 of his Affidavit in Support (Enclosure 2) that he was not given notice by the Defendants to attend any general meeting for his removal as a director. This assertion has not been effectively rebutted by the Defendants. Instead, as evidenced by the notification of change lodged under Section 58(1)(c) of the CA 2016 (Exhibit “NKJ-5” in Enclosure 2), which provides that “A company shall notify the Registrar within fourteen days from the date... after a person ceases to be, or becomes, a director of the company, the particulars required to be specified in the register under section 57,” the Third Defendant, acting as company secretary, simply notified CCM that the Plaintiff had been removed as director effective 10.07.2024. [19] The Defendants' assertion that “SSM has taken action” is particularly troubling in light of CCM's clarification. As stated by CCM's representative during oral submissions CCM operates on an auto-approval process and does not verify the accuracy of information submitted. CCM’s counsel stated: “SSM tidak mempunyai tanggungjawab untuk verify apa-apa maklumat ataupun rekod yang diberikan oleh pihak setiausaha syarikat di mana seperti jelas di dalam borang tersebut pihak yang file dan serah simpan dokumen tersebut telah mengakui dan mengesahkan bahawa maklumat yang diberikan adalah benar. Berdasarkan maklumat yang tersebut diberikan SSM hanya bertindak berdasarkan apa yang diberikan.” This confirms that CCM merely processed the notification submitted by the Third Defendant and did not independently “take action” to remove the Plaintiff as director. [20] Furthermore, the CA 2016 specifies that the only legal methods for a director to cease holding office are through resignation, removal by resolution, or other means specified in the company's constitution or the CA 2016. Mere notification to CCM without adherence to the statutory procedures cannot effect a valid removal. [21] The Court of Appeal in HLB Nominees (Tempatan) Sdn Bhd v SJA Bhd & Anor and another appeal [2004] MLJU 767, per Mokhtar Sidin JCA (with Abdul Aziz Mohamad JCA and Hashim Yusoff JCA concurring), emphasised that strict adherence to the process and procedure for removing directors is essential: “For that, the process and procedure for calling such a meeting should be adhered to strictly... any defect in the process or procedure in calling the meeting and at the meeting is not curable under s. 355 of the Act.” This authority establishes that procedural defects in the removal of directors cannot be rectified retrospectively. [22] Similarly, in Kanesin a/l SVS Sappaniapply v Vythilingam a/l Sappani & Ors [2022] MLJU 2569 (HC), Alice Loke Yee Ching JC (as she then was) held that the removal of a director was null and void because proper notice was not given as required under Section 206(3) of the CA 2016: “In the absence of proof as to due receipt of Notice of EGM, I am not satisfied that the provisions of the CA, 2016 on removal of directors had been complied with.” [23] In the recent High Court case of WHL Creations Sdn Bhd & Anor v Asia Metro Marketing Sdn Bhd & Anor [2024] MLJU 530, the court ordered the reinstatement of a director because no evidence was presented to show that an extraordinary general meeting was held or that any members' resolution was passed for the removal. The court stated: “I therefore find the removal of D2 from the board of directors of the Company to be invalid. Consequently, I order that he be reinstated as a director of the Company.” [24] The Defendants' reliance on the Members' Resolution dated 30.08.2024 cannot overcome these statutory deficiencies. The Plaintiff has explained in paragraph 7 of his Affidavit in Reply No. 2 (Enclosure 14) that he signed this resolution only to facilitate the sale of a specific property rather than empowering D2 to sell the other assets of the First Defendant. Moreover, this resolution was signed after the commencement of these proceedings, which were filed on 23.07.2024, and cannot retrospectively validate a procedurally defective removal. [25] Additionally, the Plaintiff points out that the Memorandum and Articles of Association of the First Defendant, specifically Clause 4, requires a minimum of two directors for the company. This requirement, as highlighted in paragraph 19 of the Plaintiff's Affidavit in Reply (Enclosure 8), would be breached if the Plaintiff's removal were to be considered valid, as it would leave the Second Defendant as the sole director. [26] In Tan Poh Lee v Tan Kim Choo Holdings Sdn Bhd & Anor [2018] MLJU 1750, the High Court emphasised that the statutory provisions for the removal of directors serve to protect the rights of company members, particularly when the director to be removed is also a member of the company. The court held that “in exercising their right as shareholder they are obliged to comply with the procedural provisions... The fact that both of them are the majority shareholders does not give them the right to ignore the statutory provisions, especially when it is about removal of a director which requires special notice to be given.” [27] Having carefully considered the evidence and the applicable legal principles, I find that the removal of the Plaintiff as a director of the First Defendant was procedurally defective due to the failure to comply with the mandatory requirements of Sections 206 and 322 of the CA 2016. No special notice was given, no general meeting was convened, and no resolution was passed for the Plaintiff's removal. Instead, a mere notification was lodged with CCM, which is insufficient to effect a valid removal. Accordingly, the purported removal of the Plaintiff as a director is null and void. Validity of the Third Defendant's Appointment as Company Secretary [28] Section 236(1) of the CA 2016 clearly states that “the Board shall appoint a secretary and determine the terms and conditions of such appointment.” The Plaintiff contends that no board meeting was convened, no notice was given, and no board resolution was passed for the appointment of the Third Defendant as company secretary. [29] This contention has not been effectively rebutted by the Defendants. There is no evidence before the court that a board resolution was passed for the appointment of the Third Defendant. The fact that the Third Defendant was appointed on 9.9.2024, just one day before the Plaintiff's purported removal, suggests a coordinated attempt to exclude the Plaintiff from the management of the First Defendant. [30] Given the absence of evidence of proper board approval, I find that the appointment of the Third Defendant as company secretary was not in compliance with Section 236 of the CA 2016 and is therefore invalid. The “Approbate and Reprobate” Argument [31] The Defendants heavily rely on the Members' Resolution dated 30 August 2024, signed by the Plaintiff, to argue that the Plaintiff has acknowledged the Second Defendant as the sole director, the Third Defendant as company secretary, and the new registered address. [32] The principle that a party cannot “approbate and reprobate” or “blow hot and cold” is well-established. However, this principle must be applied in context. The Plaintiff has explained that he signed the Members' Resolution to facilitate the sale of a specific property, acting in the capacity of a shareholder. This explanation is plausible and shows the Plaintiff's willingness to act in the best interests of the First Defendant despite the dispute. [33] Furthermore, the Plaintiff signed the Members' Resolution after the filing of this Originating Summons (filed on 23.7.2024, while the Resolution was signed on 30.8.2024). It would be inequitable to construe this subsequent act as a waiver of rights already asserted in pending legal proceedings. [34] Most importantly, compliance with statutory requirements for the removal of directors and appointment of company secretaries is a matter of public policy that cannot be overridden by estoppel or waiver. As the court held in HLB Nominees, procedural defects in the removal of directors are not curable. Similarly, the Memorandum and Articles of Association of the First Defendant require a minimum of two directors, which is a requirement that cannot be circumvented by estoppel. [35] For these reasons, I find that the “approbate and reprobate” argument does not assist the Defendants in this case. Section 602 Remedy vs. Section 346 Oppression Action [36] The Defendants argue that the Plaintiff should have exhausted the remedy under Section 602 of the CA 2016 by applying to CCM for rectification of the register before approaching the court. They rely on the principle that declaratory relief should not be granted where an adequate alternative remedy is available, citing Manggai v Government of Sarawak & Anor [1970] MLJ (FC). [37] This argument requires careful consideration of the relationship between Sections 602 and 346 of the CA 2016, and whether Section 602 provides an exclusive remedy that must be exhausted before seeking relief under Section 346. [38] Section 602 provides for the rectification of registers kept by CCM. Section 602(1) states that “A person may apply to the Registrar for the rectification of a register if an entry in the register- (a) contains any matter contrary to law; (b) contains any matter that, in a material particular, is false or misleading in the form or context in which the matter is included; (c) by reason of an omission or misdescription has not been duly completed; or (d) is incorrect or erroneous.” [39] Section 602(2) provides that “Upon receipt of the application under subsection (1), in order for the Registrar to decide whether to approve or refuse the application, the Registrar may- (a) require the applicant to produce any document or to furnish any information as the Registrar thinks necessary in order for the Registrar to rectify the entry; or (b) require the applicant to give notice of that application to such other person as the Registrar may specify, being a person who appears to the Registrar to be concerned or to have an interest in the business.” [40] Section 602(4) further provides that “Any person aggrieved with the decision of the Registrar under this section may appeal to the Court.” These provisions establish a statutory scheme whereby aggrieved parties may seek rectification of company registers through an administrative process before CCM, with a right of appeal to the court if dissatisfied with the Registrar's decision. [41] Section 346, on the other hand, provides a broad remedy for oppression. Section 346(1) provides that “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.” Section 346(2) empowers the court to “make such order as the Court thinks fit with the view to bringing to an end or remedying the matters complained of.” [42] While there is some overlap in the sense that both provisions may address improper entries in the company register, they serve different purposes. Section 602 is primarily concerned with the accuracy of the register, while Section 346 addresses oppressive conduct in the broader management of company affairs. [43] The High Court in Dato' Abdul Razak bin Abdul & Ors v Companies Commission of Malaysia & Ors [2024] MLJU 1429, per Adlin Abdul Majid J, recognised that non-response by CCM to an application under Section 602 effectively constitutes a refusal, giving rise to the right to appeal. At paragraph 33 of the judgment, the court stated: “Thus, I find that the plaintiffs had applied to rectify the register pursuant to section 602(1) of the CA 2016 by way of the Plaintiffs' Letters. The non-response by the 1st defendant is effectively a refusal to approve the application, which gives rise to the right to appeal pursuant to section 602(4) of the CA 2016.” In the present case, the Plaintiff filed a complaint with CCM on 24.7.2024, one day after filing this Originating Summons, but has not received any response or decision after approximately seven months. Following the reasoning in Dato' Abdul Razak, this non-response may be treated as an effective refusal, the court to make judicially intervene in respect of the Plaintiff’s removal as a director without waiting for CCM’s action. [44] Furthermore, CCM itself has clarified in its oral submissions that Section 602 is an option but not an exclusive remedy, and does not prevent directors or company members from taking court action regarding their disputes. This clarification is significant, as it represents the view of the statutory body responsible for administering the CA 2016. [45] In light of these considerations, I find that the Plaintiff was not required to exhaust the remedy under Section 602 before seeking relief under Section 346. Section 346 provides an independent basis for relief against oppressive conduct, which includes the improper removal of directors and appointment of company secretaries in contravention of statutory requirements. Oppressive Conduct under Section 346 [46] Having established that the Plaintiff's removal as a director and the Third Defendant's appointment as company secretary were procedurally defective, the question arises whether these actions constitute oppressive conduct within the meaning of Section 346 of the CA 2016. [47] Section 346(1)(a) provides that a member may apply to the court for relief if the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to members or in disregard of their interests. Section 346(1)(b) extends this remedy to cases where an act of the company or a resolution of members unfairly discriminates against or is otherwise prejudicial to members. [48] The improper removal of a director who is also a 50% shareholder of the company, without following the statutory procedures, clearly falls within the ambit of oppressive conduct under Section 346. It disregards the Plaintiff's interest as a member by depriving him of his right to participate in the management of the First Defendant, a right that is particularly significant in a company with only two equal shareholders. [49] The coordinated actions of the Second and Third Defendants – including the appointment of the Third Defendant as company secretary without board approval, the immediate change of the registered address to the Third Defendant's office, the purported removal of the Plaintiff as director, and the denial of access to the Plaintiff's company email – demonstrate a pattern of conduct aimed at excluding the Plaintiff from the management of the First Defendant. [50] I am satisfied that these actions constitute oppressive conduct within the meaning of Section 346 of the CA 2016, warranting judicial intervention. Remedy [51] Section 346(2) of the CA 2016 empowers the court to make such order as it thinks fit to bring an end to or remedy the matters complained of, including directing or prohibiting any act, cancelling or varying any transaction or resolution, and regulating the conduct of the company's affairs in the future. [52] Given the findings above, I consider it appropriate to allow the Plaintiff’s application in the Originating Summons and order as follows: a) A declaration that the Plaintiff remains as a director of the First Defendant; b) A declaration that the removal of the Plaintiff as director of the First Defendant on 10.7.2024 is null and void; c) A declaration that any resolution passed (if any) for the removal of the Plaintiff as director of the First Defendant is null and void and is hereby set aside and cancelled; d) A declaration that all resolutions passed during the period of the Plaintiff's removal as director of the First Defendant from 10 July 2024 until the date of reinstatement of the Plaintiff's position are null and void and are hereby set aside and cancelled; e) A declaration that the appointment of the Third Defendant as secretary of the First Defendant is null and void; f) A declaration that any resolution passed (if any) for the appointment of the Third Defendant as secretary of the First Defendant is null and void and is hereby set aside and cancelled; g) A declaration that the change of registered address of the First Defendant to Unit No: 1030, 10th Floor, Block A3, Leisure Commerce Square, No. 9, Jalan PJS 8/9, 46150 Petaling Jaya, Selangor is null and void and is hereby set aside and cancelled; h) An order that the Defendants shall reinstate the Plaintiff as Director of the First Defendant within 7 days from the date of this order given by this court; i) An order that the Defendants shall inform the CCM to reinstate and restore the Plaintiff's name as Director of the First Defendant in the CCM register within 7 days from the date of this order given by this court; j) An order that the Defendants shall inform CCM to cancel the name of the Third Defendant as secretary of the First Defendant within 7 days from the date of this order given by this court; k) An order that the Second Defendant is disqualified as director of the First Defendant for a period of 5 years from the date of this order given by this court or for such period as determined by this court; l) An order that the Plaintiff is given full power to appoint directors and secretary for conducting the affairs of the First Defendant; m) An order that the registered address of the First Defendant is changed to No. 41 & 43, Jalan Taming 5, Taman Taming Jaya, 43300 Seri Kembangan, Selangor until an order is given by this court for the appointment of a new secretary for the First Defendant and the address of the new secretary's company is obtained by the Plaintiff; n) An order that the Plaintiff is given the right to recover possession of the company email "chris.ng@invenpro.com.my" from the Defendants; o) Costs of the application in the sum of RM15,000.00 subject to allocatur fees shall be paid by the Defendants to the Plaintiff; and p) Costs of the application in the sum of RM3,000.00 subject to allocatur fees shall be paid by the Plaintiff to the Intervener. [53] Regarding the Plaintiff's prayer for CCM to investigate and take appropriate action against the Second and Third Defendants, I agree with CCM's submission that this falls within the executive prerogative of CCM and is not an appropriate subject for a court order. The court will therefore decline to make any order in this regard. 12 June 2025 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Plaintiff: Lee Hoe Leong and Kong Kai Yan (Messrs HL Lee & Co) For the Defendants: Kok Pok Chin with Ng Pau Chz (Messrs PC Kok & Co) For the Intervener Muhammad Amir Basaruddin (Companies Comission of Malaysia)