As a result of the merger of three foreign companies (“original entities”) under the relevant foreign law, one of the original entities (“successor company”) became the surviving entity that assumed the rights and obligations of the original entities that were involved in the merger.
One of the original entities (“relevant entity”) whose rights and obligations were assumed by the successor company was the registered owner of shares (“subject shares”) in a Malaysian company (“Malaysian company”).
We filed an application under the Companies Act 2016 (“CA2016”) on behalf of the successor company, seeking various declarations/orders in relation to the subject shares.
On 5 August 2019, the High Court, among other orders, issued the following declarations/orders -
- that the merger had carried into effect a transmission of the subject shares from the relevant entity to the successor company by operation of law;
- that the Malaysian company rectifies its register of members by deleting the name of the relevant entity and inserting the name of the successor company as the registered owner of the subject shares; and
- that the Malaysian company cancels the share certificate issued in the name of the relevant entity in respect of the subject shares and issues a new share certificate in the name of the successor company in respect of the subject shares.
This decision is significant as there are no reported cases in Malaysia where the concept of universal succession has been recognised by the Malaysian courts in relation to shares held by an entity that ceases to exist and a new entity is created by operation of law as the successor entity.
In coming to its decision, the High Court agreed that the words “transmitted … by operation of law” in section 109(1) of CA2016 was wide enough to allow for the recognition of a corporate successor entity.
The Court has indicated that it would issue written grounds in due course.
The successor company was represented in the above-referred proceedings by our Partner, Mr Lee Shih, and Associate, Joyce Lim.