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Membership and Members Rights

STATUTORY REMEDIES
1. Members statutory remedies: (a) oppression remedy, (b) court ordered winding up,
(c)statutory injunction, (d) statutory rights to inspect company books
2. Members personal action
3. Members derivative action

1. (a) OPPRESSION REMEDY
- S.181 had 2 limbs. It gives the court to power remedy conduct where it is of the opinion
that:
Conduct of the companys affairs or directors powers are being exercised in an
oppressive manner or in disregard of members interest including himself
An actual or proposed act or omission by or on behalf of the company or a
resolution, or a proposed resolution of members or a class of members is either
unfairly prejudicial to or unfairly discriminatory against members.
- It would appear to cover cases of fraud on minority and aspects of just and equitable
ground for winding up S.218(1)(i). Refer to S.218(1)(f). S.181 is use to force controllers
of the companies to consider the interest of the minority shareholders.

- The remedy can apply to any type of company but in practice, oppression actions must
brought by members of private companies, that have only few participants and which
the members involved in management.

- S.181(1)- a members or debenture-holders of a company or the Minister may apply for
remedy.
Niord Pty Ltd v Adelaide Petroleum NL
An equitable interest as an unregistered transferee is insufficient and does not
confer the necessary standing upon the applicant to make an application under
S.181.

Re A Company: Right to apply for remedy extends to a legal personal representative of
a member and to a person to whom a share in the company has been transmitted by
will or operation of law.

Owen Sim Liang Khui v Piasau Jaya Sdn Bhd: A petitioner must be able to demonstrate
that his/her name appears on a companys register of members at date of presentation
of petition. However, a R who is guilty of unconscionable or inequitable conduct is not
permitted to rely upon the general requirement of membership in order to defeat a
petitioner standing.
Membership and Members Rights

Kumagai Gumi Co Ltd v Zenecon-Kumagai Sdn Bhd: Minority shareholders may seek
relief and majority shareholders in circumstances where they are unable for any reason
to exert their will at general meeting of their company.

- Objective standard test is required. Unfairness determined objectively. It means the
conduct may be considered oppressive or unfair even it is established that the person
alleged to have been acting oppressively or unfairly did not intend to harm the
complaining shareholder.
Oppressive/unfair if no reasonable director would have acted in that way.
Not necessary for directors/majority shareholders acted dishonestly.

- Disregard of interests of the members of debenture-holders: Re Kong Thai Sawmill
(Miri) Sdn. Bhd- something more than a failure to take account of minority interest.
There must be awareness of that interest and an evident decision to override it/brush
it aside/ to set at naught the proper company procedure.

Unfairly prejudicial/ unfairly discriminatory: Morgan v 45 Flers Avenue Pty Ltd- regard
as a composite whole and the individual elements should be considered merely as
different aspects of the essential criterion, that is commercial unfairness.

- Examples of oppressive, disregard of members interests and unfairly prejudicial or
unfairly discriminatory conduct:
Diversion of corporate assets or opportunity
Scottish Co-operative Wholesale Society Ltd v Meyer,
- co-operative society diverted the profits of the company to a new
department of theirs, after failing to purchase the shares of the petitioners
in the company.
- It was held that the conduct of majority constituted oppression under
English equivalent of S.181 and ordered majority to buy the shares of the
minority.
Kumagai Gumi Co Ltd: Diverting the companys business opportunities to
related companies amounted to oppression.

Diversion of profits
Re Gee Hoe Chan Trading Co Pte Ltd: Directors by paying themselves directors
fees and salaries but not declaring dividends had acted inequitable and was
held to constitute a basis for an allegation of unfair prejudice.
o A majority may act oppressively/unfairly where the minority shareholders are
excluded from being directors and a significant proportion of profits paid in
form of high directors fees and low dividends to shareholders.
Membership and Members Rights


Directors failure to act in the interest of the company -minority may apply this
Re Spargos Mining NL
- Court found that the affairs of the company were conducted in a manner
that was oppressive and unfair. The directors exhibited an endemic
incapacity to deal with the companys affairs by giving sloe attention to its
interests. There were conflict of interests that were detrimental to the
company, its shareholders and the minority SH not interested in other
companies for whose benefit the transactions were undertaken.
Transactions were almost entirely devoid of any commercial benefit to the
company.

Shares issued for improper purposes
If Ds who breached their duty which also a majority SH, they will act
oppressively/unfairly if (as shareholders) they vote to ratify their improper
purpose.
Hannes v MJH Pty Ltd: A majority shareholder could not ratify his own breaches
as it would be oppressive/unfair. The disinterested shareholders could only
ratify the particular decisions made by the directors.

No dividend/inadequate dividend given
Art 98-it gives the directors actual power to declare a dividend and to
determine maximum amount.
Low Peng Boon v Low Janie : the non-payment of dividend coupled with the
misappropriation of company funds could amount to oppression.

Eric Lau Man Hing v Eramara Jaya Sdn. Bhd. & Ors : Non-payments of dividends
together with a failure to keep proper records amounted to oppressive conduct
in disregard of the interests of the minority shareholders by the majority.

Re Gee Hoe Chan Trading Co Pte Ltd: a minimum amount of dividend couples
with a generous remuneration for the directors may be considered as a conduct
that is oppressive/unfair.

Dominant members run the company as if it were their own, disregarding the
rights and interests of the other company
Re HR Harmer Ltd
- H R Harmer founded a stamp business. In 1947, HRH formed a company to buy the
business; at this time, HRH was 77. The initial directors of the company were HRH and
his sons Cyril H and Bernard H. The shareholders were HRH, CH, BH and HRHs wife.
Together HRH and his wife had over 75% of the votes, and his wife always voted with
Membership and Members Rights

HRH. HRH ran the business in an autocratic way: hiring and firing yes men, ignoring
views of the other directors, opening a branch in Australia which folded and sold a
successful branch in the US. The sons sued for unfair prejudicial conduct.

-The court ordered that HRH was to be employed as a senior stamp consultant with a
salary of 2500 per annum; HRH was not to interfere in any way with the running of
the company; HRH was appointed as president for life but with no powers; and the
company was forced to buy his shares from HRH.


Re Coliseum Car Stand Service Ltd: Although there is no obligation on the Ds of
the company to recommend declaration of dividends, if the company has been
making profit for several years or in situations where the directors have
obtained excessive compensation or benefit, the members can apply for the
oppression remedy.

- Orders that the court can make: S.181[2]
Winding up
Regulating the companys affairs
Purchase or oppressed members shares
Appointment of receiver
Restraining someone from doing something, or requiring someone to do something.

1. (b) COURT-ORDERED WINDING UP
- A member of a company (creditor in some case) can apply to court to have the
company wound up where:
It is just and equitable to do so. S.218(1)(i), or
Directors acting in their own interest. S.218(1)(f), or
Oppresive, unfairly prejudicial; or unfairly discriminatory conduct. S.181(1)
- Company, creditor, contributory and liquidator of company who apply for winding up
cannot apply under S.218(1)(f) and (i) as they could pursue another remedy.

- Just and equitable ground: situations-s.218(1)(i)
i) Breakdown of mutual trust and confidence.
-in case of small companies that evolved partnerships or that operate in a
similar manner to partnerships, it was held just and equitable to wind up the
company when the relationship between partners breaks down.
Lawrence v Lawrick: Mutual trust and confidence between directors broke
down when one D committed adultery with the wife of the other. Court
ordered to wound up the comp.
-if there is convincing evidence on breakdown of mutual confidence and good
faith, it would justify the winding up on just and equitable ground.
Membership and Members Rights

ii) Deadlock
-where shareholders in a company are deadlocked to the extent that the
company is unable to function properly. There must be evidence of deadlock
that clear and fully presented otherwise application will be dismissed.
iii) Fraud, misconduct or oppression
-this ground has been largely incorporated into S.181 that allows a wide range
of remedies.
iv) Failure of substratum
-means ceases to carry on the business for which it was formed.
Re Eastern Telegraph Co Ltd: A shareholder who invested money in his shares
for what the company is going to carry out particular object, he cannot be
forced against his will to continue pay his money for different project or
speculation.

1. (C) STATUTORY INJUNCTION
-Court order to stop someone from breaching CA
-Provisions: S.132C, S.132E, S.28
-Any member can apply

1. (D) INSPECT COMPANY BOOKS
-S.157-member can apply to court for authorization to inspect company books
-court can authorize either the member /representative
-member must act in good faith

2. MEMBERS PERSONAL ACTION
-Personal action-legal action to enforce a personal right.
-members have personal right from :
* statutory contract(express)-
* S.33- AA/MM - between members and members vs company
*Companies Act- eg: right of a member holding at least 10% of the paid up capital
to call a general meeting- S.145

3. MEMBERS DERIVATIVE ACTION
-Derivative- an action to enforce a right of the company . Eg, to enforce a breach of
directors duties.
-even though a member brings a derivative action, the action is not for the benefit
of the member but for the companys benefit.
-Any remedies goes to the company
-wrongdoers cited as defendants, company joins as nominal defendant.
-statutory derivative action(SDA): S.181A-181E

Membership and Members Rights

Mohd Shuaib Ishak v Celcom (Malaysia) Bhd.
-improve position of minority SH

Ng Hoy Keong v Chua Choon Yang

-5 issues relevant to application for SDA:
Leave-S.181B

Good faith- S.181B

Reasonable notice-S.181A

Costs-indemnity order-S.181E

Interests of company-S.181B