Krisia Binti Aris Palilah v 1. ) Zaiton Binti Ahmad 2. ) Muhammad Hasrullah Bin Roslan 3. ) Ong Li Hoon 4. ) Pembinaan Yokriskon Sdn Bhd

Case Significance

Illustrates the burden of proving forgery of a share transfer, the recognised validity of a genuine nominee shareholding, and how executing and delivering a share transfer divests a shareholder of her interest and rights.

This High Court decision from the Commercial Division at Kuala Lumpur concerns a shareholder's challenge to the transfer of her shares in a construction company and to the validity of company meetings said to flow from her continued shareholding. After a four-day trial, the court dismissed the plaintiff's suit with costs of RM80,000. The plaintiff's central pleaded case was that her signature on the Share Transfer Form transferring her 750,000 shares to the first defendant had been forged. The court held that the burden of proving forgery lay on the plaintiff, following the Federal Court's decision in Teoh Kiang Hong v Theow Say Kow @ Teoh Kiang Seng, Henry, and found that forgery had not been proved because the plaintiff had failed to call a handwriting expert, while contemporaneous WhatsApp messages and the evidence of witnesses who saw the form being signed pointed the other way. The court also examined whether the plaintiff was a nominee shareholder holding the shares on behalf of another entity and whether any such nominee arrangement was illegal. It restated the settled law that a nominee arrangement, under which a registered shareholder holds shares on a resulting trust for the real owner, is not in itself illegal, and that a beneficial owner is only precluded from asserting ownership where the shares are held in a nominee's name for an illegal purpose or to defraud a public authority. On the corporate governance issue, the court held that once the plaintiff had signed the Share Transfer Form and submitted it for registration, the execution and delivery of the certificate and transfer were sufficient to divest her of her interest, following Re Rose, and she was estopped from exercising any further rights as a shareholder, including any right to call an extraordinary general meeting to remove and replace a director. The court also observed that the recently enacted beneficial-ownership provisions of the Companies Act 2016 introduced by amendment did not operate retrospectively. Having dismissed the suit, the court delivered these grounds after an appeal was filed. The judgment is a useful illustration of the burden of proving forgery, the validity of nominee shareholding, and the effect of executing a share transfer on a shareholder's rights.