In Safari Alliance Sdn Bhd v Tiger Synergy Berhad
(and Another Originating Summons)  3 AMR 798,
the Malaysian High Court dismissed an attempt by a company to hold
a general meeting that competes with another general meeting which
has already been convened by the members of the company.
- The plaintiff holds 11.834% of the issued shares of the defendant.
- On 2 January 2020, the plaintiff gave notice ('the Safari special notice') to the defendant of its intention to move resolutions to, inter alia, remove certain directors of the defendant pursuant to section 206(3) of the Companies Act 2016 ('CA 2016').
- The Safari special notice indicated that the general meeting wherein the resolutions for the removal of directors would be moved would be convened on 2 March 2020 and included details of the aforesaid resolutions ('Safari resolutions').
- On the same day, i.e. 2 January 2020, the plaintiff issued a notice of extraordinary general meeting ('Safari EGM notice') to be held on 2 March 2020 ('Safari EGM') at a specified venue ('Safari venue'). The Safari EGM notice included the Safari resolutions as well as the resolutions and consents and profiles of five candidates who sought to be appointed as directors of the defendant at the Safari EGM.
- On 20 January 2020, the defendant issued a letter to the plaintiff ('Tiger letter') stating, inter alia, that the defendant's board of directors had decided to convene an extraordinary general meeting on 20 February 2020 ('Tiger EGM') at a different venue ('Tiger venue').
- The Tiger EGM is a competing extraordinary general meeting as the Safari resolutions would be tabled at the Tiger EGM, along with two additional resolutions to appoint two persons as directors of the defendant with immediate effect ('additional resolutions') (the Safari resolutions and the additional resolutions are collectively referred to as 'Tiger resolutions'.)
- The reason proffered by the defendant for convening the Tiger EGM was that its board of directors had received multiple requests for the appointment and/or removal of directors from various shareholders and that the Tiger EGM would facilitate the orderly manner for tabling of the proposed resolutions by the shareholders in order to save time and costs of convening multiple general meetings.
- It is not disputed that neither of the two shareholders ('relevant shareholders') who had purportedly written to the board of directors of the defendant to consider the appointment of the two directors named in the additional resolutions, had given any special notice of intention to the defendant pursuant to sections 206 and 322(1) of CA 2016. Further, neither of the relevant shareholders holds more than 10% of the total issued shares of the defendant.
- In the Tiger letter, the defendant asked the plaintiff to consider withdrawing the Safari EGM "to avoid confusion amongst the shareholders of (the defendant)". On 21 January 2020, the plaintiff informed the defendant that it was not withdrawing the Safari EGM and instead, demanded that the defendant withdraws the Tiger EGM.
- On 21 January 2020, the defendant issued a notice of general meeting for the Tiger EGM to be convened on 20 February 2020 ('Tiger EGM notice') at the Tiger venue. The Tiger resolutions were attached to the Tiger EGM notice.
- On 7 February 2020, the five individuals nominated for appointment as directors at the Safari EGM informed the defendant in writing that their consent to be nominated for appointment as directors was only for the Safari EGM. It was contended that they did not wish to be appointed earlier as they did not wish to assume obligations or responsibility for the defendant's quarterly announcement which had to be made by the defendant on or before 29 February 2020.
- On 11 February 2020, the plaintiff filed an action ('OS67') seeking, inter alia, (i) a declaration that the Tiger EGM notice is invalid; (ii) a declaration that the Tiger EGM, if convened, is invalid and void; and (iii) an injunction to restrain the defendant from taking any steps in respect of the Tiger EGM.
- The defendant, in turn, filed an action ('OS74') on 14 February 2020 seeking, inter alia, (i) a declaration that the Safari EGM notice to convene the Safari EGM is redundant, invalid and/or null and void; and (ii) an order that the plaintiff be restrained from proceeding with the Safari EGM.
- Both OS67 and OS74 were heard together.
- As the defendant did not at any material time: (a) dispute that the Safari EGM notice was not in compliance with section 322(3) of CA 2016; (b) suggest that there were any procedural defects in the way the Safari EGM was convened; or (c) suggest that any of the Safari resolutions, if carried through at the Safari EGM, would be invalid, the Court proceeded on the basis that the Safari EGM was for all intents and purposes, a valid EGM.
Whether the defendant may convene a competing general meeting once the plaintiff had already properly convened a general meeting under section 310(b) of CA 2016.
Ong Chee Kwan JC reiterated the following comments he made in Seacera Group Berhad v Dato' Tan Wei Lian & 6 Ors  4 AMR 491, 513 on section 310(b) of CA 2016 –
- Every shareholder of a company has a right subject to the prescribed statutory procedures and requirements, to call for an extraordinary general meeting of a company under the CA 2016. A shareholder's right to convene a general meeting under section 310(b) of CA 2016 is one of the key rights provided by law to shareholders to marshal all shareholders of a company together at an appointed date, place and time to provide the opportunity to the shareholders to deliberate and to resolve, if deem fit, on proposals properly tabled before them that may affect the directions of the company. It is an essential right to invoke the internal democratic process of the company.
- The court should be slow in granting injunction preventing shareholders from holding general meetings, especially when such meetings are the only way in which shareholders can put certain resolutions before the members which they think are for the benefit of the company, even if these resolutions involve the removal of the incumbent directors.
The learned Judicial Commissioner added that once a members'
meeting is convened under section 310(b) of CA 2016, the company
should not be taking any action to interfere with the meeting,
especially when steps have already been taken by the members to
convene the meeting, for example, where the notices of the meeting
have already been sent out and/or published.
The Court stated that a company must show compelling and/or good reasons when it seeks to convene a competing meeting, i.e. one which involves tabling before the members identical and/or substantially identical resolutions as the members' meeting, either before or after the members' meeting. It added that the onus is on the company to show that the exercise of its power to convene a competing meeting had not been made mala fide or for an improper purpose. The Court said that it is well established that the court possesses supervisory oversight over the exercise of powers by the directors of the company when convening a general meeting (Cannon v Trask (1875) LR 20 Eq 669; Adams & Ors v Adhesives Proprietary Ltd (1932) 32 SR (NSW) 398; Re Ariadne Australia Ltd; Votraint No. 255 Ltd v Capp & Ors  2 ACSR 791).
Once a general meeting has been properly convened by a shareholder under section 310(b) of CA 2016, there is an overriding duty on the directors of the company not to deliberately call another competing general meeting on a date, especially an anterior date to the meeting that had been called, that would result in confusion and/or inconvenience to the shareholders and/or disrupt the convened general meeting and/or interfere with the member's statutory right to convene a meeting of members at a date, time and venue convenient to the said member. The calling of such a competing meeting unless for compelling reasons, would be considered as improper and by reason thereof invalid.
In the present case, if the defendant had arranged the Tiger EGM to be held immediately after the Safari EGM, there will be little doubt that such a meeting on substantially same resolutions to be held immediately after the Safari EGM would be considered as an improper exercise of powers by the defendant's board of directors unless compelling reasons are proffered. This would, according to the judge, be akin to the circumstances in Howard v Mechtler  30 ACSR 434.
It is an even more compelling case of an abuse of power by the board of directors of the company when it seeks to convene a competing meeting on a date anterior to the members' meeting. The position is further compounded when the company seeks to invalidate the members' meeting by reason of its competing meeting.
In the present case, not only had the defendant deliberately called for a competing meeting on a date anterior to the Safari EGM, it had also filed OS 74 to invalidate the Safari EGM on the ground that the same is rendered redundant or invalid by reason of the Tiger EGM.
The Court found that the decision by the defendant's board of directors to call the competing Tiger EGM had the effect of taking away or rendering impotent the plaintiff's exercise of its statutory right under section 310(b) of CA 2016 to convene a members' meeting. By convening the Tiger EGM prior to the Safari EGM, the defendant had also interfered with and frustrated the plaintiff's statutory right to convene the members' meeting at a date, time and venue of its choosing.
According to Ong JC, the convening of the Tiger EGM is a clear and blatant improper exercise of powers by the defendant's board of directors as it had caused -
- Confusion among the members as to the proper meeting, if any, to attend. The defendant was fully aware that the calling of the competing Tiger EGM would result in confusion among the members. This is clear from the Tiger letter where the defendant asked the plaintiff to consider withdrawing the Safari EGM "to avoid confusion amongst the shareholders of (the defendant)"; a confusion created by the defendant itself;
- The competing Tiger EGM unnecessarily put to waste the costs expended by the plaintiff (which were not recoverable from the defendant) in arranging for the Safari EGM. If a company is permitted to render a members' meeting redundant or invalid by calling a competing meeting prior to the members' meeting, this will deter members from exercising their statutory rights as the costs and expenses that the members will incur can easily be put to waste by the company as a strategy to frustrate attempts to remove its directors;
- The Tiger EGM will result in the defendant incurring costs and expense to organise the meeting which was wholly unnecessary in light of the Safari EGM; this could not be in the interests of the members or the creditors of the defendant;
- By calling the Tiger EGM earlier, the defendant had frustrated or interfered with the Safari EGM as the five individuals nominated to be appointed as directors had indicated that the consent to their appointment as directors was only for the Safari EGM which would be held only after the company's quarterly financial announcement. This means that the five nominated individuals would not be offering themselves for appointment at the Tiger EGM, thus frustrating the defendant's objective of appointing new directors at the Tiger EGM; and
- The Tiger EGM not only called for the members to meet earlier on 20 February 2020 but also at a different venue and time from the Safari EGM.
The Court found the reason proferred by the defendant for the
Tiger EGM, namely, that it wanted to "save time and costs
from convening multiple EGMs ... to accommodate
all multiple resolutions for the appointment and/or removal of
directors from various shareholders" to be disingenuous
and far from compelling.
In relation to the two resolutions to appoint two individuals as directors of the defendant, the Court noted that these resolutions were mooted by the relevant shareholders who were not substantial shareholders and could not requisition or call for a general meeting at all. Each of the relevant shareholders had merely requested the defendant's board of directors to consider the appointment of their respective nominees as a director. According to the learned Judicial Commissioner, the defendant had no legal obligations to table such resolutions before the members at all. Further, there is hardly any urgency or necessity for the defendant to convene a general meeting to meet these requests let alone to disrupt the Safari EGM by calling a competing meeting on an earlier date and to take the further step to invalidate the Safari EGM based on the Tiger EGM.
Based on the foregoing, Ong JC held that the defendant's board of directors had exercised their powers for an improper purpose in calling for the Tiger EGM and that the Tiger EGM notice was made mala fide rendering the convening of the Tiger EGM invalid. The Judicial Commissioner also ordered that the defendant be restrained as there was no special notice of intention to move the Tiger resolutions at the Tiger EGM as required under section 206(3) of CA 2016.
In closing, the learned Judicial Commissioner added that he was not persuaded by the defendant's submission that the defendant could rely on the Safari special notice for the Tiger EGM. This is because the Safari special notice expressly stated that the proposed Safari resolutions would be moved at the Safari EGM. As it was a special notice of intention given only for the Safari EGM convened on 2 March 2020, the Safari special notice cannot in law be relied upon by the board of directors of the defendant to move the Tiger resolutions at the Tiger EGM which was fixed on a different date, venue and time. The Court also observed that the Tiger resolutions were also not identical to the Safari resolutions stated in the Safari special notice.
The Court also dismissed the defendant's application under OS 74.
This appears to be the first reported decision in Malaysia on competing general meetings. It is noteworthy as the learned Judicial Commissioner has laid down helpful guidance on the requirements that have to be considered when a company seeks to convene a general meeting after its members have convened a general meeting, in particular when the meeting convened by the company is to consider matters that overlap with those to be considered at the meeting convened by its members.
Originally published 17 June, 2020.
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