1. ) A GANASAN A/L K ARUMUGAM 2. ) ABDUL HAFIZ BIN ABDUL RASHID @ ABD KHALID v SYED YUSOF BIN SYED MOHD

Case Significance

An oppression case under section 346 of the Companies Act 2016 in which the Court found a strong prima facie case that a majority shareholder's use of extraordinary general meetings to remove the minority from the board was an abuse of majority power justifying interlocutory restraint.

This High Court decision at Shah Alam concerns a dispute between the shareholders of a company, VSD Automation Sdn Bhd, and an application for interlocutory relief in oppression proceedings brought under section 346 of the Companies Act 2016. The plaintiffs, minority shareholders, sought an injunction to restrain the defendant, the majority shareholder and managing director, from convening an extraordinary general meeting and a declaration that certain notices of such a meeting were invalid, alleging that the defendant had conducted the company's affairs oppressively and in a manner unfairly prejudicial to them. The defendant denied oppression, contending that the shareholding structure and his role had been established by legitimate means and that convening meetings and proposing resolutions to remove directors fell within his statutory rights as majority shareholder. Three applications were before the Court: the plaintiffs' originating summons under section 346, the defendant's application to set aside or vary an injunction that had earlier been granted, and the defendant's application for the recusal of the plaintiffs' solicitors. In assessing the interlocutory relief the Court applied the familiar framework — whether there was a bona fide serious question to be tried, the adequacy of damages and the balance of convenience — against a background in which the company's financial operations were said to be in deadlock. The Court found a strong prima facie case that the defendant had engaged in conduct that was oppressive and unfairly prejudicial, viewing his attempt to convene extraordinary general meetings whose primary purpose was to remove the plaintiffs and their allies from the board and install his own nominees as an abuse of his majority position that would eliminate any checks on his power. On that footing the Court was satisfied that interlocutory restraint was justified pending the determination of the oppression claim, treating the interlocutory relief as necessary to hold the position between the parties until the section 346 claim could be tried on its merits.