The decision of the High Court in Tan Kei Vin & 2 Ors v Feed Me Love Sdn Bhd & 2 Ors [2019] 7 AMR 623 concerns the resignation of directors and matters that arise from such resignations.
Facts
The three plaintiffs and the second defendant were directors of the first defendant. By way of written notices dated 15 March 219 addressed to the first defendant’s board of directors, the plaintiffs tendered their resignations as directors of the first defendant with immediate effect. The letters of resignation were delivered to the first defendant’s secretary at the first defendant’s registered office.
On 18 March 2019, the second defendant tendered her resignation as a director with immediate effect.
The first defendant’s secretary subsequently informed the plaintiffs that the “Return Giving Particulars in the Register of Directors, Managers & Secretaries and Changes of Particulars” (‘the Return’) could not be filed without a resolution by the board of directors of the first defendant due to the second defendant’s resignation as director.
The plaintiffs contended that the second defendant’s purported act of resigning violated section 209(1) of the Companies Act 2016 (‘the Act’) as she was the sole remaining director of the first defendant. The plaintiffs commenced legal proceedings against the first and second defendants seeking various declarations and orders from the High Court. They also named the Companies Commission of Malaysia as the third defendant.
The second defendant’s contentions
The second defendant contended that the plaintiffs’ resignations were improper and invalid on various grounds, including:
- there was no acknowledgment of receipt of plaintiffs’ resignation letters;
- the second defendant did not receive the written notices of the plaintiffs’ resignations and was not informed verbally of the resignations;
- the plaintiffs cannot resign as they are in possession of the first defendant’s statutory documents;
- the plaintiffs have breached an agreement to purchase 100% of the shares in the first defendant; and
- there was no basis for the plaintiffs to resign as the first defendant has lodged its annual return for the year 2018.
The High Court’s Decision
The learned Judicial Commissioner made it clear that the issues at hand are the validity of the plaintiffs’ resignations on 15 March 2019 and whether the declarations and orders sought by the plaintiffs should be granted. The Court said that it did not address the other issues, such as the reasons for the plaintiffs’ resignations, breach of agreement and the possession of the first defendant’s documents.
The learned Judicial Commissioner held that:
- section 208(1)(a) of the Act makes it clear that the office of a director shall be vacated if the person holding that office resigned; this is effected by giving written notice of such intention to the company at its registered office;
- section 208(3) of the Act provides that the written notice shall be effective when such notice is delivered at the company’s registered office;
- the resignation of a director is subject to section 196(3) of the Act which prohibits a director from resigning or vacating office if by his resignation or vacation from office, the number of directors of the company is reduced below the minimum number prescribed in section 196(1), which in the case of a private company, is one director; and
- any purported resignation or vacation of office of a director in contravention of section 196 of the Act is deemed ineffective unless a person is appointed in his place.
Applying the foregoing principles, the Court was satisfied that with the delivery of the plaintiffs’ written notices of resignation to the first defendant at its registered office, each of the plaintiffs had on 15 March 2019 validly vacated his office as a director of the first defendant.
The learned justice rejected the second defendant’s contentions, holding that there is no requirement for:
- any acknowledgment of receipt of the written notices;
- the notices of resignation be served on the remaining directors; or
- the resignations to be accepted by the board of directors.
In view of the Court’s finding that the resignations of the plaintiffs were valid, it followed that the resignation of the second defendant as the sole remaining director is in contravention of and deemed ineffective under subsection (3) read with subsection (1) of section 196 of the Act. The Court then held that the second defendant had not resigned from the office of director and is the remaining director of the first defendant.
The Court then granted, among others, the following declarations/orders sought by the plaintiffs:
- that the plaintiffs have validly resigned as directors of the first defendant and ceased to be directors thereof on 15 March 2019;
- that on 15 March 2019 the second defendant became the sole remaining director of the first defendant;
- that the first defendant and/or the second defendant lodge the Return with the Registrar within 14 days from the date of the court order to reflect the plaintiffs’ resignations as directors of the first defendant with effect from 15 March 2019;
- that the first defendant and/or the second defendant rectify the register of directors, managers and secretaries within 14 days to reflect the plaintiffs’ resignations as directors of the first defendant with effect from 15 March 2019; and
- that in the event of non-compliance of the orders referred to in sub-paragraphs (3) and (4) above, the plaintiffs be entitled to sign and lodge with the Registrar the Return or such other prescribed form as may be advised by the third defendant, i.e. the Companies Commission of Malaysia, to reflect the plaintiffs’ resignations as directors of the first defendant with effect from 15 March 2019.
Comments
The High Court’s decision in Tan Kei Vin does not break new legal ground and merely affirms trite law embodied in the Act. Nevertheless, it is useful to take note of the ancillary order sought and obtained by the plaintiffs which will enable them to submit the Return to notify the Registrar of their resignations in the event that the first defendant and the second defendant fail to do so. It would seem that the power of the Court to make this order lies in section 582(3) of the Act.