company law

Topics: Shareholder, Corporation, Fiduciary Pages: 15 (5144 words) Published: March 15, 2014


Faculty of Business and Management

BBUS2103
Company Law

January 2013

Companies Act 1965
Section 181: Member’s Remedy

Name: Mohd Afiq bin Sahar
NRIC No: 871226-43-5677
Matric No: 871226435677001

Pages
1. Introduction………………………………………………………………………….3 2. Example of oppressive, disregard of members’ interest and unfairly prejudicial or unfairly discriminatory conduct………………………………………5 Diversion of corporate assets or opportunity………………………………...5 Diversion of profits.………………………………………………………….6 Directors failure to act in the interest of the company……………………….7 Shares issued for improper purposes………………………………………....7 No dividend or inadequate dividend given…………………………………...8 3. The Circumstances Consideration……………………………………………………9 Irregular financial transaction………………………………………………...9 Breach of agreements to repay the loan……………………………………...10 Inaccessibility to the accounts……………………………………………….11 Removal of petitioner as director……………………………………………11 Failure to declare and pay dividends………………………………………...13 4. Recommendation on Section 181 – Member’s Remedy…………………………….14 5. Conclusions………………………………………………………………………….16 6. List of cases………………………………………………………………………….17 7. References…………………………………………………………………………...18 Introduction

The law has developed various remedies where the majority act unfairly or oppressively in order to protect the interests of the company and its member. The common law remedies based on the rule in Foss v Harbottle and its exceptions are complex and place substantial difficulties upon members who complain of unfair treatment particularly when this involves breaches of directors’ duties. Who may apply for a remedy?

Under s 181(1) an application for an order may be made by:
A debenture holder of a company.
A member of the company, even if the oppression action relates to an act or proposed act that is against the member in a capacity other than as a member as long as the oppressive conduct also affects him in his capacity as a member or another member in their capacity as a member. The Minister.

Applicants under s 181 must be members or debenture holders of the particular company and the conduct of which they complain must affect them in their capacity as members or debenture holders. The 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. Generally, a person who applies under s 181 appears on a company’s register of members at the date of the issuance of the summons. However, there may be cases where the applicant of the general rule would be unfair and unjust. In such cases, the courts have allowed an application despite the fact that the applicant may not be a registered member. It is not only a minority shareholder who may seek relief under s 181, but also majority shareholders in circumstances where they are unable for any reason to exert their will at a general meeting of their company. The pertinent issue is to ascertain whether an applicant alleging oppression under s 181 has control over the company’s affairs. Those in control of the company cannot convincingly allege to have been oppressed. In the case of:

Niord Pty Ltd v Adelaide Petroleum NL
A purchaser of shares in company had not been registered as a member at the time when the proceedings were instituted. The Australian court held that an equitable interest as an unregistered transferee is insufficient and accordingly does not confer the necessary standing upon the applicant to make an application under s 181. Owen Sim Liang Khui v Piasau Jaya Sdn Bhd & Anor

The Court of Appeal held that the category of persons within a company who may present a petition under s 181 of the Act would, as a general rule, only include those who come within s 16(6). This would mean that a petitioner who applies under the section must be able to demonstrate that his or her name appears on a company’s register of...


References: Committee on Company Law Amendment, (2010), Report of the Committee on Company Law Amendment (Command 6659). Retrieved from http://www.takeovers.gov.au/content/Resources/other_resources/Cohen_Committee.aspx
KPT, (n.d), Law of Malaysia; Companies Act 1965, Retrived from http://jpt.mohe.gov.my/RUJUKAN/akta/akta%20syarikat.pdf
Pamela Hanrahan, (2012), Commercial Applications of Company Law 2012 (13th Edition), CCH, Malaysia
Wikipedia, (2013), Legal Remedy, Retrieved from http://en.wikipedia.org/wiki/Legal_remedy
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