MEMBERSHIP OF COMP

Question 1

POSITION MINORITY S’HOLDERS

Answer 1

• power & control is depend on the amount of shares that held by a member in the comp
• so mino s’holders are unable to have any say in the control & mgmt of comp

Question 2

MAJORITY RULE & ITS PROBLEMS

Answer 2

Majority Rule:
The majority shareholders control the company. So Directors, often backed by majority shareholders who run the company.

Problems:
Directors may misuse their power (e.g., paying excessive fees to themselves, taking company opportunities for personal benefit, bribe majo. by issue shares that will vote for them in the cases when needs arises).
Sometimes directors may breach their duty but the majo. may support him by ratify his wrong so there will be no action taken against the directors.

EFFECT:
Minority shareholders struggle to take action against wrongdoing due to the need for majority approval
- bcause comp is a separate legal entity from its members, so any wrong done to comp is suffered by comp so only comp can take action NOT MEMBERS OF COMP (the rule in Foss v Harbottle) so as directors manage the comp & have the right to take action on behalf of the co so they will definitely not take action
against themselves.

Question 3

Foss v Harbottle Rule

Answer 3

Proper Plaintiff Rule:
Only the company can sue for wrongs done to it, not individual members. (separate legal entity)

Majority Rule:
since majo of members in GM, they will ratify an act by ordinry resolution. The court typically does not interfere with internal company matters if the majority does not want to sue.

Advantages:
1. Prevents multiple lawsuits,
2. saves court time
3. avoids frivolous lawsuits by minority shareholders

Disadvantages:
Unfair to minority shareholders, as directors may block legal action against themselves.

EFFECT RULE:
unfair to mino. s’holders

Question 4

Right to initiate legal action lies in the hands of:

Answer 4

1. BOD
2. if BOD refuses = GM
3. if GM refuses = Liquidator if the comp is in liquidation
4. A s’holder, through Derivative Action,
   if dissatisfied with the board’s lack of action against a director

Question 5

DERIVATIVE ACTION S 347

Answer 5

Definition:
Shareholders can sue on behalf of the company with court permission.

“distinction is important” - dia claim bwh nama comp dan mybbkan loss of comp bukan bwh nama dia, so amount received/recovered later will go to comp tp board punye decision to pass the benefit through dividend to the s’holders

CA 2016- only allows s’holder 1 remedy which STATUTORY DA

Question 6

WHO CAN BRING THE DA ?

Answer 6

Statutory Basis: S 347
“COMPLAINANT” refers to
members, former members, directors/ the Registrar under specific conditions.

Question 7

CONDITIONS FOR DA S348 (4)

Answer 7

1. The court must be satisfied that the complainant is acting in good faith
2. is in the best interest of comp

Question 8

CASES:

Answer 8

1. Lembaga Tabung Angkatan Tentera v Prime Utilities Berhad
   Directors failed to recover money from a foreign asset management company by not taking necessary legal actions and filing proof of debt.
2. Abdul Rahman Suleiman & Anor v Faridah Md Lazim & Ors
   Directors didn’t obtain accurate audited accounts for 10 years, misappropriated company funds, and didn’t take legal action to recover the money.
3. Perak Integrated Network Services Sdn Bhd v Urban Domain Sdn Bhd & Anor
   Directors failed to pay the company fees for services and didn’t hand over proceeds collected for the company.

Question 9

STATUTORY REMEDIES FOR MINORITY S’HOLDERS

Answer 9

Section 346: Remedies for oppressive conduct.
Section 465(1)(h): Winding up the company on just and equitable grounds.
Section 351(2): Seeking injunctions to prevent contraventions of the Companies Act.
Section 91: Preventing variation of class rights.
Section 590(1): Appointing inspectors to investigate company affairs.
Section 348: Bringing statutory DA