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CASE ANALYSIS ON DATO’ AZIZAN BIN ABD RAHMAN & ORS V CONCRETE PARADE SDN BHD & ORS: SHAREHOLDER RIGHTS AND CORPORATE GOVERNANCE UNDER THE COMPANIES ACT 2016
focusing on its interpretation of Sections 85, 223, and 346 of the Companies Act 2016 (“The Act”). It highlights the court’s approach to balancing shareholder rights with corporate autonomy and explores the implications for corporate governance and the minority oppression remedy in Malaysia.
INTRODUCTION
The case of Dato’ Azizan bin Abd Rahman & Ors v. Concrete Parade Sdn Bhd & Ors offers critical insights into the Malaysian legal framework regarding shareholder rights, directorial discretion, and the mechanics of corporate governance. Central to the dispute were allegations of oppression and statutory violations in the context of a proposed business merger via private placement, and share buy-back transactions.
CASE BACKGROUND
Apex Equity Holdings Bhd aimed to merge with Mercury Securities Sdn Bhd, a move contested by Concrete Parade Sdn Bhd and other minority shareholders for a potential breach of the Companies Act 2016. The dispute originated from a Heads of Agreement signed on 21 September 2018, leading to a Business Merger Agreement and Subscription Agreement on December 18, 2018. The contention centred on the alleged non-compliance with Section 85 (pre-emptive rights to new shares) and Section 223 (shareholder approval for transactions of acquisition or disposal of substantial value). The High Court’s decision on August 7, 2019, found no contravention of Section 223, and that pre-emptive rights were adequately addressed, a ruling overturned by the Court of Appeal on August 18, 2021. The Federal Court’s decision on March 26, 2024, ultimately provided clarity on these sections, emphasising the balance between shareholder rights and corporate governance.
KEY LEGAL ISSUES
Authors: David Lee Lai Huat(Partner), Lim Jie Tong (Associate) and Aaron Teoh Zheng Yao (Pupil-in-Chambers)
- Pre-Emptive Rights to New Share (Section 85): Whether the directors’ actions in proposing a private placement where new shares will be issued, thereby potentially diluting Concrete Parade’s shareholding without explicit shareholder approval, constituted a breach of statutory pre-emptive rights.
- Disposals or Acquisitions of Substantial Assets (Section 223): Whether the directors’ failure to obtain prior shareholder approval for significant transactions, violated the statutory requirements outlined in Section 223.
- Share Buy-back Transactions: Whether the share buy-back transactions conducted by Apex Equity from 2005 to 2017 were ultra vires, as company’s articles of association (“AOA”) did not provide for such transactions and amounted to acts of oppression against Concrete Parade.
- Remedy in Cases of an Oppression (Section 346): Whether Concrete Parade's grievances could be remedied under Section 346 of the Companies Act 2016, addressing issues of oppression and unfair prejudice against minority shareholders.
- Section 85 - Pre-emptive Rights
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- the company is insolvent;
- the purchase is not conducted through the stock exchange (although there are further exceptions in the section); and
- where such purchases are not made in good faith or in the best interests of the company.
- Oppression Remedy (Section 346)
Authors: David Lee Lai Huat(Partner), Lim Jie Tong (Associate) and Aaron Teoh Zheng Yao (Pupil-in-Chambers)