TEH CHEE HOE v SOUTH MALAYSIA INDUSTRIES BERHAD

Case Significance

Illustrates the statutory preconditions under section 323 of the Companies Act 2016 to a shareholder compelling a company to circulate resolutions before a general meeting, the court striking out as an abuse of process a premature claim by a below-threshold shareholder connected to a take-over offeror.

This High Court decision concerns a shareholder's attempt to compel a listed company to circulate his notice of intention to move resolutions appointing new directors at the company's annual general meeting, and the company's application to strike out that claim. The plaintiff, who held a small fraction of the company's issued shares, well below the statutory threshold, had served a notice of intention to move resolutions to appoint several persons, including himself, as directors at the forthcoming annual general meeting; shortly afterwards, and before the company's board had finalised its position after convening to seek legal advice, the plaintiff commenced proceedings seeking to compel circulation of the notice and passage of the resolutions. The court held that the plaintiff did not, at the time he instituted the proceedings, possess the statutory right under the Companies Act 2016 to compel the company to circulate his notice: he lacked the requisite shareholding threshold and had not complied with the statutory timing requirements in section 323. It further held that the proceedings were premature, because the company had not yet reached a final position and had taken steps to consider the notice and obtain legal advice. The court also took into account the regulatory context — that the plaintiff was connected to a party that had made a mandatory take-over offer for the company, engaging Rule 15 of the take-over rules on nominees of an offeror and persons acting in concert — and considered that acceding to the appointments risked undermining the statutory protections the take-over rules are intended to secure. Concluding that the rush to court, coupled with the failure to satisfy the statutory thresholds, amounted to an opportunistic abuse of process, the court allowed the striking-out application and struck out the claim with costs of RM10,000. The judgment illustrates the statutory preconditions to a shareholder compelling company action ahead of a general meeting.