(English) Shareholders' Agreement & Constitution Transfer of Shares (Case Analysis: Dato' Sng Chong Keong v PC Manufacturing Solutions S/B) by Mah Li Chen (MAICSA Chartered Secretary)

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Upcoming Webinar: 09 & 16 August 2022 (Tuesday)

Title: Shareholders' Agreement & Constitution Transfer of Shares

Speaker: Mah Li Chen (MAICSA Chartered Secretary)

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Webinar Outline
# 01 The Law
Section 105, Section 106 and Section 107 of the Companies Act 2016

#02 Parties
Plaintiff (Dato’ Sng Chong Keong) v Defendant (PC Manufacturing Solutions Sdn Bhd)
2 incumbent directors
4 new directors
3 shareholders

#03 Chronology of Events
Share Sale Agreement
Shareholders’ Agreement
Directors of the defendant-company and shareholders
Application to transfer shares
First rejection of application to transfer shares
Second rejection of application to transfer shares

#04 Overview of the Case
Plaintiff’s Main Suit
Defendant’s Counterclaim

#05 Issues
1st issue: Whether the terms of the Shareholders Agreement which have not been incorporated into the Memorandum and Articles of Association of the Defendant-company are binding between the shareholders inter se; and between the shareholders and the Defendant-company?

• Beh Chun Chuan v. Paloh Medical Centre Sdn Bhd [1999] 3 MLJ 262
• Tung Ah Leek & Anor v. Perunding DJA Sdn Bhd & Ors [2005] 3 MLJ 687
• ISM Sdn Bhd v. Queensway Nominees (Asing) Sdn Bhd & Ors and Other Suits [2021] 7 MLJ 506
• Golden Harvest Films Distribution (Pte) Ltd v. Golden Village Multiplex Pte Ltd [2007] 1 SLR 940
• The Wellness Group Pte Ltd v. Paris Investment Pte Ltd and others [2018] SGCA 47
• Far East Holdings Bhd & Anor v. Majlis Ugama Islam dan Adat Resam Melayu Pahang [2018] 1 MLJ 1

Court’s decision

2nd issue: Whether the Court has a discretion to order or refuse to order the registration of share transfer under section 107 of the Companies Act 2016?
Section 107(2) Companies Act 2016
Court’s decision

3rd issue: Whether the discretion of the Court is lost or becomes inapplicable defunct in the event of the Defendant company’s failure or neglect to reject the Plaintiff’s request for share transfer within the time or according to the procedure stipulated in section 106 of the Companies Act 2016?

• Section 106 Companies Act 2016
• Section 107(2) Companies Act 2016
• Section 91 Companies Act 2016
• Section 111(7) Companies Act 2016
• Section 582 Companies Act 2016

Court’s decision

4th issue: What are the factors and criteria to be considered by the Court in exercising its power under subsection 107(2) of the Companies Act 2016?

• Section 107 Companies Act 2016
• Emas Kiara Sdn Bhd v. Michael Joseph Monteiro (Receiver and Manager of Lembah Beringin Sdn Bhd) & ors(Farcoll Estate Sdn Bhd & Ors, Interveners) [2018] 5 MLJ 54
• Sarah Sayeed Majangah (t/a sole proprietor under the name and styles of Sayfol International School) & Anor v. Lembaga Getah Malaysia & Anor [2016] 3 MLJ 812
• Kumpulan Perubatan (Johor) Sdn Bhd v. Dr Mohd Adnan bin Sulaiman [2015] 1 CLJ 471

Court’s decision

5th issue: Whether the Court should order the Defendant-company to register the share transfer in the circumstances of the present case?
Shareholders’ Agreement and Deed of Adherence
Transfer of shares by PCMS
Transfer of shares by Shareholders
Court’s decision

During the Paid Session, Li Chen will be sharing on below

Comment #01 Changes ?: When a company enters into a shareholder's agreement, what are the things that will change?

Comment #02 U-Turns ?: Is there a clause in shareholders’ agreement that will allow a U-TURN? Just in case for some reason the shareholder’s agreement fell through? The two parties decided not to proceed with the shareholder’s agreement.

Comment #03 Shareholder to appoint Director ?:
For shareholder’s agreement, minority shareholders may have a right to appoint the directors onto the board, they may request company / directors to appoint their nominated director onto the board.

Singapore case (2018): Singapore Court of Appeal in The Wellness Group Pte Ltd v Paris Investment Pte Ltd and others [2018] SGCA 47 we are able to explore the case under Malaysian perspective and see whether it is a statutory right of a shareholder to appoint director. Now it is incorporated into S202 of the Companies Act.