Lau King Yew v 1. ) Tan Yuh Pei 2. ) KOH KEAN MUM 3. ) ONETECH SOLUTIONS HOLDINGS BERHAD

Case Significance

Illustrates that reflective losses — harm suffered by a company rather than distinctly by a shareholder — are not recoverable through a minority oppression action under section 346 of the Companies Act 2016, the proper avenue being a derivative action.

This High Court decision in the Commercial Division at Kuala Lumpur concerns a minority oppression action under section 346 of the Companies Act 2016. The plaintiff was a substantial minority shareholder of Onetech Solutions Holdings Berhad, a company listed on the LEAP (Leading Entrepreneur Accelerator Platform) Market — a specialised equity market open only to sophisticated investors. He and the first defendant had built up an IT consulting business, later restructured under the listed company as a holding vehicle, with the plaintiff holding 45%, the first defendant 35% and the second defendant 10%.

The plaintiff complained that his removal as a director of the company and its subsidiaries, followed by the defendants' conduct after that removal, was oppressive or unfairly prejudicial to his interests as a member. The alleged post-removal conduct included a deterioration in the group's financial performance, the defendants' self-appointment as chief executive and chief operating officer on higher salaries, and the acquisition of company vehicles for their use. The court examined whether an oppression action was the proper vehicle for these complaints. It held that the alleged financial deterioration and the diversion of company resources, if made out, were losses suffered by the company rather than losses suffered distinctly by the plaintiff as a shareholder; such reflective loss is not recoverable by an individual shareholder under section 346. The proper avenue, the court explained, was a derivative action on the company's behalf for negligence or breach of fiduciary duty, not a personal oppression claim.

The court was also unpersuaded that the plaintiff was locked in as a minority: despite the LEAP Market's restriction to sophisticated investors, there was credible evidence of daily buy queues for the company's shares, demonstrating liquidity. Finding that no case of minority oppression had been made out, the court dismissed the action with costs of RM30,000.00. The judgment is a useful illustration of the boundary between an oppression remedy and a derivative action where the true complaint is of loss to the company.