IRIS CORPORATION BHD v 1. ) TAN SRI RAZALI BIN ISMAIL 2. ) DATUK TAN SAY JIM 3. ) Yam Tunku Dato Seri Shahbuddin Bin Tunku Besar Burhanuddin 4. ) DATO HAMDAN BIN MOHD HASSAN 5. ) DATO EOW KWAN HOONG 6. ) CHAN FEOI CHUN 7. ) SYED ABDULLAH BIN SYED ABD KADIR 8. ) DATUK NOOR EHSANUDDIN BIN HJ MOHD HARUN NARRASHID 9. ) DATUK NIK AZMAN BIN MOHD ZAIN

Case Significance

Illustrates the application of the business-judgment rule under section 214 of the Companies Act 2016 to protect directors who make honest, careful and good-faith commercial decisions that later prove unsuccessful, and the principle that such decisions are not to be judged with hindsight.

This Court of Appeal decision concerns claims by a public-listed company against nine of its former directors for alleged breaches of directors' duties, and the application of the business-judgment rule. The company, a technology company, had invested approximately RM11.7 million, equivalent to about GBP 2.05 million, in and paid to a United Kingdom company and its sole shareholder, and later sued the nine directors, alleging that they had breached their duties in relation to that investment and seeking damages of the amount invested. The Judicial Commissioner dismissed the claims, and the company appealed. The questions of principle were whether the business-judgment rule in section 214 of the Companies Act 2016 applied to protect the directors, what constitutes acting in the best interests of the company, and whether the directors were entitled to be relieved from liability, including under section 581 of the Companies Act 2016. The Court found the Judicial Commissioner's analysis to be legally sound and well supported by the evidence. It emphasised that directors who act honestly, with reasonable care and in good faith are entitled to protection from liability even where their business decisions ultimately prove unsuccessful, and that a court must resist the temptation to apply hindsight and must instead assess the reasonableness of the decision-making process on the circumstances existing at the time. Concluding that the directors had acted within the protection afforded by the business-judgment rule and that no breach of duty had been established, the Court dismissed the appeal with costs and affirmed the dismissal of the claims against all nine directors. The judgment is a useful illustration of how the business-judgment rule under section 214 of the Companies Act 2016 shields directors who make honest and careful commercial decisions that later turn out badly, and of the courts' refusal to judge such decisions with hindsight.