1. ) DATO DR. LI WEI 2. ) ZHANG, DANDAN v 1. ) DFCITY GROUP BERHAD 2. ) LOW KIM KIAT

Case Significance

Reaffirms judicial non-intervention in a company's internal management, holding that shareholders' dissatisfaction with validly passed directors' resolutions is not a basis for curial interference, and that a company constitution is construed by its plain words as a statutory contract under section 33(1) of the Companies Act 2016.

This High Court decision in the Commercial Division at Kuala Lumpur concerns an originating summons by two shareholders seeking to impugn a series of directors' resolutions in writing passed by the first defendant, DFCITY Group Berhad. The impugned resolutions dealt with the internal governance of the company, including the appointment of additional independent directors, the re-designation of the managing director and changes to the company's corporate representatives on its subsidiaries. On a certificate of urgency, the plaintiffs had obtained ad interim injunctions preserving the status quo and restraining the company from acting on the resolutions, and the defendants applied to set those orders aside. The central legal question concerned section 203 of the Companies Act 2016, which restricts the appointment of two or more directors by a single resolution, and whether that restriction applies only to a general meeting of a public company or extends also to resolutions of the board of directors. The Court also considered section 33(1) of the Companies Act 2016, under which the company's constitution takes effect as a statutory contract, and reaffirmed the principle that the courts are slow to interfere in the internal management of a company acting within its powers. Construing the constitution harmoniously and giving effect to its plain and unambiguous language, the Court held that the impugned resolutions were within the powers of the board, were passed in accordance with the company's constitution and the Companies Act 2016, and were not tainted by bad faith or ulterior motive. The plaintiffs' complaints amounted to no more than dissatisfaction with lawfully taken board decisions, which is not a recognised basis for curial intervention. The Court dismissed the originating summons with costs. Because the substantive claim had failed, the foundation for the interim and interlocutory injunctions no longer existed, and that relief could not survive the dismissal of the very claim it had been designed to support; the injunctions consequently fell, and the defendants' application to set them aside was allowed.