This decision of the Court of Appeal in Abdul Malek Faisal Mohd Hyffny v Shaikh Markhzan Jalani & Ors [2023] 4 CLJ 51 arose from a corporate dispute between certain shareholders of Minsyam Sdn Bhd (‘the company’).
 
The main issue to be determined by the Court of Appeal is aptly summarised by Lee Swee Seng, JCA in the opening paragraph of his judgment on behalf of the Court of Appeal:
 
“We have often been told to be on time and even in time. What then is the status of an Extraordinary General Meeting (‘EGM’) of a company fixed at 10.30am with a waiting period of 15 minutes for the chairman of the Board to be present to chair the EGM as provided for in the articles of association of the company but then the EGM had commenced at 10.35am and ended at 10.41am?”
 
Elaborating on the foregoing, Justice Lee posed the following supplementary questions:
 
‘Is the EGM a valid one and is the resolution passed valid? Is the irregularity curable?’
 
Background Facts
 
The shareholders of the company and their respective shareholdings therein at the material times are as follows:

The shareholders were divided into two factions, with the Appellant and Radzee on one side and the First Respondent and the Second Respondent on the other. The parties had been involved in a series of protracted litigation which resulted in the following key events:  

1.	Arising from a settlement of an oppression action commenced by the Appellant and Radzee against the First Respondent and the Second Respondent, the Appellant agreed to purchase 50,000 out of the 100,000 shares held by the Second Respondent in the company for RM300,000 pursuant to a share sale agreement dated 20 February 2019 (‘SSA’).
2.	The Second Respondent resigned as a director of the company and the Appellant and Radzee were appointed as chairman and managing director respectively of the company. The First Respondent’s position as managing director was revoked but he remained as a director of the company.
3.	The First Respondent applied for a court declaration that the 100,000 shares in the company held by the Second Respondent belonged to the First Respondent; this resulted in the Second Respondent agreeing to transfer all the said 100,000 shares to the First Respondent and the suit being withdrawn. The Second Respondent then granted a power of attorney (‘PA’) to the First Respondent giving the First Respondent all rights over the Second Respondent’s 100,000 shares in the company in total disregard of the provisions of the SSA.
4.	As a result of the events referred to in item (3) above, the Appellant commenced proceedings against the Second Respondent (‘Suit 188’) seeking a declaration that the SSA is valid and an order for specific performance of the SSA whilst the Second Respondent argued that the SSA was terminated for non-payment of the purchase price. The First Respondent intervened in Suit 188, seeking a declaration that the transfer of the 100,000 shares from the Second Respondent to him is valid and enforceable.
5.	Before Suit 188 was disposed of, the Appellant commenced another action in the High Court (‘OS 72’) to restrain the First Respondent from calling a general meeting of the company until Suit 188 has been disposed of. This resulted in a consent order (without any admission of liability) being entered into in OS 72 whereby the First Respondent agreed not to utilise or execute the PA until the disposal of Suit 188.
6.	The Appellant alleged that the respondents conspired to circumvent the consent order in OS 72 when the Second Respondent appointed the First Respondent as his proxy vide a proxy form dated 19 November 2019 (‘first proxy form’) to allow the First Respondent to vote on the 100,000 shares despite the First Respondent having agreed not to utilise the PA in the consent order in OS 72.
7.	The Appellant and Radzee objected to the first proxy form. This resulted in the Second Respondent issuing another proxy form on 19 February 2020 (‘second proxy form’) appointing one Awaludin as his proxy for all 100,000 shares to vote for the resolution at the extraordinary general meeting to be called by the First Respondent.

The Extraordinary General Meeting
 
As the company had failed to convene a general meeting upon the requisition by the First Respondent under section 311 of the Companies Act 2016 (‘CA 2016’), the First Respondent exercised his right under section 313 of the CA 2016 to convene an extraordinary general meeting of the company at 10.30 a.m. on 9 March 2020 (‘EGM’) to consider a resolution for the removal of the Appellant as a director of the company.
 
In light of the agreement between the First Respondent and the Appellant that 50,000 of the shares held by the Second Respondent would not be utilised for voting purposes until the disposal of Suit 188, each of the rival factions held 225,000 shares for voting purposes at the EGM – the Appellant and Radzee being entitled to vote on 175,000 and 50,000 shares respectively, whilst the First Respondent and the Second Respondent being entitled to vote on 175,000 and 50,000 shares respectively. Hence the chairmanship of the meeting become of critical importance as article 53 of the company’s articles of association provides that in the event of a tie, the chairman of the meeting shall have a casting vote.
 
On the morning of the EGM, the Appellant informed the company secretary and the First Respondent by email that he would be attending the EGM before 11.00 a.m. The Appellant stated that he and Radzee arrived at the place for the meeting at 10.45 a.m. only to find that the EGM had already ended.
 
It was recorded in the minutes of the EGM, inter alia, that: 

1.	prior to the commencement of the EGM, the company secretary informed those present that an interim injunction had been received in respect of 50,000 of the Second Respondent’s shares;
2.	the EGM started at 10.35 a.m.;
3.	the First Respondent appointed himself as the chairman of the meeting;
4.	the company secretary confirmed that there was sufficient quorum in accordance with regulation 48 of the company’s constitution (i.e. article 48 of the company’s articles of association);
5.	the First Respondent as the chairman of the meeting briefed those present at the meeting on the proposed resolution to remove the Appellant as a director of the company with immediate effect;
6.	the proposed resolution was put to a vote on a show of hands, and the First Respondent and Awaludin as proxy for the Second Respondent voted in favour of the resolution; and
7.	the chairman declared the meeting closed at 10.41 a.m.

The minutes of the EGM were confirmed as correct on 11 March 2020 by the First Respondent as chairman of the meeting.
 
Decision of the High Court
 
The Appellant applied to the High Court seeking, inter alia, a declaration that the resolution passed at the EGM to remove him as a director and the chairman of the company was invalid and null and void.
 
The Appellant argued that as the chairman of the company, he had the right to chair the EGM if he was present by or before 10.45 a.m. as stated in the company’s articles of association. The Appellant further contended that he had been denied his statutory right to attend and chair the meeting as well as to participate in the discussion about his removal as director and chairman of the company and to vote on the resolution.
 
The Appellant’s application was dismissed by the High Court primarily on the ground that he had not proved that he was there by 10.45 a.m. and that in any event, the non-compliance with the waiting period of 15 minutes from the time of the scheduled commencement of the meeting was a procedural irregularity that is curable as the outcome of the voting would have been the same since the First Respondent has 175,000 shares in the company and the Second Respondent has 100,000 shares in his name until Suit 188 is disposed of.
 
The Appellant appealed to the Court of Appeal against the decision of the High Court.
 
Decision of the Court of Appeal
 
Whether the EGM was wrongly convened in violation of the articles of association and statutory requirement
 
Justice Lee first referred to sections 309 and 329 of the CA 2016 which provide as follows:
 

“309.

Unless otherwise provided in the constitution, a resolution shall be validly passed at a meeting of members if:

“329.

Chairperson of meetings of members

The Court of Appeal then cited article 49 of the company’s articles of association which reads as follows:
 
“49.  The chairman, if any, of the board of directors shall preside as chairman at every general meeting of the company, or if there is no such chairman, or if he is not present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their number to be chairman of the meeting.” (emphasis added)
 
The Court of Appeal noted that article 49 is consistent with the CA 2016.
 
According to the Justice Lee, the articles of association is a contract between the shareholders of the company inter-se and also between the shareholders and the company. The articles of association set out the rules and procedures with respect to the proper governance of a company and in the context of this dispute, the manner of convening a general meeting. As the articles of association are binding on the contracting parties, shareholders whose rights have been infringed by the non-compliance by a shareholder or the company may bring an action to claim the necessary reliefs against the defaulting shareholder(s) and the company.
 
Having established that both article 49 and section 329 are applicable in determining the validity of the EGM, the Court of Appeal proceeded to consider whether the procedure set forth therein had been complied with.
 
According to the learned judge, the First Respondent, and the Second Respondent through his proxy, are bound to comply with the requirement of waiting for 15 minutes after the time set for the holding of the EGM as required both under article 49 and section 329, and this had clearly not been complied with. The consequence is that the Appellant had been deprived of his right to be present at the EGM wherein he was allowed until 10.45 a.m. to be present and to have the right to chair the meeting as he was at the material time the chairman of the Board.
 
The Court of Appeal added that in any event, the EGM is defective for by the very admission from the minutes of the EGM, the meeting had concluded by 10.41 a.m. The company secretary’s minutes itself showed the non-compliance with the procedural requirement of waiting for 15 minutes before the First Respondent could appoint himself as the chairman and a vote be taken on the resolution to remove the Appellant as director and with that his removal as chairman of the Board.
 
According to the Court of Appeal Judge, it was clear that the meeting was rushed through as the First Respondent was aware that the Appellant may be late as notified in his email to the First Respondent that morning itself. The Court added that regardless of the First Respondent’s motive, he must of necessity wait for 15 minutes to be over from the time set for the holding of the meeting at 10.30 a.m. Instead, the First Respondent and the Second Respondent’s proxy only waited until 10.35 a.m. and then convened the meeting at 10.35 a.m. and concluded it at 10.41 a.m. The inference for the rush is that should the Appellant arrive by 10.45 a.m., the resolution may not be carried as the Appellant would have the casting vote as the chairman of the meeting.
 
Whilst acknowledging that the respondents were not obliged to wait past 10.45 a.m., the Court of Appeal could not condone the convening of the EGM at 10.35 a.m. and concluding it at 10.41 a.m. to be a members’ meeting that had complied with article 49 and section 329.
 
The Court of Appeal held that the High Court Judge had erred when he concluded that the EGM could proceed at 10.30 a.m. by reason that a quorum was present at that time. According to the Court of Appeal, the requirement for a quorum is only one of the requirements for convening a meeting and the other requirement is the requirement under article 49 and the statutory requirement under section 329 of the CA 2016. The mandatory language “shall” in both article 49 and section 329 with respect to the chairman chairing the meeting unless he could not be present after the lapse of 15 minutes from the scheduled time of the meeting cannot be ignored simply because the respondents did not have the patience to wait. According to His Lordship, “Section 329 is not there for decorative purpose but for a designed purpose to ensure proper chairmanship of meeting.”
 
The Court of Appeal added that the fact that the company secretary gave the go-ahead for the meeting to convene does not make the meeting valid where the contractual and statutory requirements have not been complied with.
 
The Court of Appeal also rejected the respondents’ contention that the Appellant had no right to complain as the Appellant had acted in bad faith in not convening the EGM requisitioned by the First Respondent. Whilst acknowledging that the Board should have convened the requisitioned EGM as required under section 311 of the CA 2016, the First Respondent could and indeed did exercise the power conferred on an aggrieved requisitionist under section 313 of the CA 2016 to convene the EGM when the Board did not do so.
 
As the procedure had not been followed in this case where the rights of the director and chairman to be removed are affected, the Court of Appeal had no hesitation in holding that the EGM is invalid and thus, the resolution passed is invalid, null and void.
 
Whether the violation of the articles of association and statutory requirement is curable?
 
The First Respondent and the Second Respondent argued that the non-compliance is technical in nature and that no substantial injustice had been caused as the result would have been the same.
 
According to Justice Lee, the Court of Appeal could not second-guess what the result could have been if the Appellant had the right to speak and defend his position as a director and the chairman of the company before a vote was taken as shareholders are free to align and realign themselves after hearing one another out. The right to be heard cannot be taken away from the Appellant who is also a director as well as the chairman of the company and more so when he is sought to be removed.
 
His Lordship also noted that as the Second Respondent could only exercise his voting right in respect of 50,000 shares, the First Respondent, and the Second Respondent through his proxy, would be able to vote in respect of 225,000 shares. Similarly, the Appellant and Radzee would have 225,000 shares and in the event of a tie, the chairman’s casting vote becomes the defining vote under article 53.
 
The Court of Appeal stated that the powers of the court under section 582 of the CA 2016 to cure an irregularity should only be exercised if the court is satisfied that no substantial injustice has been or may be caused which cannot be remedied by an order of the court. The Court added that the discretionary power under the said provision is not unfettered but must be exercised judiciously and the justice of the case should be seriously considered.
 
In exercising its discretion, the court is duty-bound to consider the seriousness and repercussions of the subject resolution in the light of the factual matrix and context of the shareholders’ disputes. Here it was for the removal of a director who is a substantial shareholder of the company as well as the chairman of the Board in the aftermath of a High Court’s finding of oppression by the majority represented by the respondents.
 
The requisition by the First Respondent is for the removal of the Appellant as a director and the chairman of the Board which would ostensibly have the effect of nullifying the oppression decision of a previous High Court. In addition, there is a pending dispute over the sale and ownership of the 50,000 shares registered in the Second Respondent’s name for which the Second Respondent had initially given a proxy to the First Respondent to vote on his behalf at the EGM only to later realise that this might be in breach of the First Respondent’s agreement with the Appellant that the PA over the shares is not be exercised until the dispute between the Appellant and the Second Respondent as to the ownership of 50,000 of the Second Respondent’s shares had been decided in Suit 188.
 
The events elucidated above would heighten the Court of Appeal’s scrutiny of the actions of the respondents in requisitioning for an EGM to remove the Appellant as a director and the chairman of the company and to subject the respondents to strict compliance to the procedural requirements in article 49 and the statutory requirements of section 329 and the chairman’s right to exercise his casting vote under article 53 of the company’s articles of association in event of a tie in the votes of the shareholders.
 
The Court of Appeal referred to HLB Nominees (Tempatan) Sdn Bhd v SJA Bhd & Anor And Another Appeal [2005] 1 CLJ 23 where Mokhtar Sidin, JCA in delivering the decision of the majority judges of the Court of Appeal expressed the view that in a case where a meeting is convened to remove some of the existing directors and to replace them with directors of the defendant’s choice, opined that “any
defect in the process or procedure in calling the meeting and at the meeting is not curable under s. 355 of the [Companies Act 1965] (replaced by section 582 of the CA 2016).”
 
His Lordship reiterated that it is not the business of the court to second-guess the outcome of the EGM but to hold the parties to the bargain that they had struck in the articles of association as well as the need to comply with the statutory requirement under section 329 of the CA 2016.
 
The Court of Appeal concluded that to exercise its discretion under section 582 of the CA 2016 in the present case would be to pay lip-service to the right to be heard which right the Appellant had been deprived of in a resolution passed that affected grievously his position as a director and the chairman of the company.
 
Accordingly, the Court of Appeal allowed the Appellant’s appeal and ordered the High Court’s decision to be set aside. The Court also granted a declaration that the resolution passed at the EGM on 9 March 2020 for the removal of the Appellant as a director of the company is invalid and null and void and that the Appellant is still a director of the company.
 
Comment
 
Although the Court of Appeal’s decision appears to be a straightforward interpretation of the provisions of section 329 of the CA 2016, it nevertheless illustrates the importance of ensuring that the provisions in a company’s constitution and the CA 2016 governing the conduct of company meetings are strictly complied with and there are instances, such as in the present case, where non-compliance will not be regarded as a procedural irregularity that can be cured under section 528 of the CA 2016.
 
Case note by Kok Chee Kheong (Partner) and Tan Wei Liang (Senior Associate) of the Corporate Practice of Skrine.