LEE LENG CHAN v 1. ) ADDEKOH SDN BHD 2. ) KOH SIONG CHOON 3. ) WONG SOH LING

Case Significance

Illustrates the loss-of-substratum principle in a just and equitable winding up under section 465 of the Companies Act 2016: where a company established for a particular purpose, in the nature of a quasi-partnership, has ceased carrying on that business, the court may order it wound up on the petition of a minority shareholder.

This High Court decision at Kuala Lumpur (Commercial Division), delivered by Judge Ahmad Murad bin Abdul Aziz, concerns a petition to wind up a company on the just and equitable ground under section 465 of the Companies Act 2016. The petitioner, a minority shareholder holding 38% of the shares, sought the winding up of the first respondent company; the remaining respondents were the majority shareholder, who held 62%, and another individual. The company had been set up as, in substance, a joint venture between the petitioner and the majority shareholder, the shareholding having originally been held equally between them before it became 38:62. The central question was whether the cessation of the company's business amounted to a loss of substratum sufficient to justify a winding-up order on the just and equitable ground.

The court granted the petition. It accepted that where a company set up for a particular purpose has ceased carrying on that business, the substratum of the company may be lost, so that it is just and equitable that it be wound up, since the very object for which the shareholders associated no longer exists. Treating the company as one founded on a relationship in the nature of a quasi-partnership between the petitioner and the majority shareholder, the court was satisfied on the facts that continuing the company served no legitimate purpose and that the just and equitable ground was made out. It accordingly ordered that the company be wound up and that the Official Receiver be appointed as liquidator, with costs of RM20,000 to be paid to the petitioner out of the assets of the company. The judgment is a useful illustration of the loss-of-substratum principle and of the just and equitable winding-up jurisdiction as a remedy for a minority shareholder in a company that has ceased to pursue its founding purpose.