Yew Huoi, How & Associates | Leading Malaysia Law Firm

Menu

COMPANIES ACT 2016 – DIRECTOR’S RIGHT TO INSPECT RECORDS AND DOCUMENTS OF A COMPANY

A, a director and shareholder of the company, was denied access to inspect the company’s records. Although not involved in daily operations, A wants to determine the value of his shares for a separate lawsuit.

Can he file an application for inspection and appoint lawyers and auditors to do it on his behalf?

Section 245 of the Companies Act 2016 (CA 2016)

  • Section 245 of the Companies Act 2016 requires company, its directors and manager to maintain accounting and other records.
  • These records must be kept for 7 years and should be accessible to directors for inspection.
  • Sub-section (8) provides that the court may order that the accounting and other records of a company be inspected by an auditor on behalf of the director.
  • Non-compliance would be subject to fine and imprisonment.

Common Law Right

  • The right of company director to inspect its accounting and records is an absolute right under the common law.
  • This right originates from fiduciary responsibilities of good faith, care, skill and diligence that a director owes to the company.
  • The court would only restrict a director from utilising this right if there is an intention to use the information for purposes detrimental to the company.
  • If ulterior purpose is alleged, the burden of proof lies on that person to prove that allegation.
  • This common law right of inspection is not eliminated by the CA 2016.

Can the Company argue that the purpose of filing the application is to further another legal suit, helping A reclaim his shares? Hence, could there be ulterior motives?

  • No. Even if the inspection may help A in his claim for shares, it doesn’t necessarily mean that the company would suffer detriment or prejudice.
  • Put differently, the potential for further litigation between parties within the company does not imply that a director should be denied their right to inspect as director.
  • Can 3rd parties such as lawyers and auditors be appointed to inspect the documents?
  • Generally, the common law position of inspection is if a director has a right of inspection, equally his authorised agents ought to be accorded the same right. As such, 3rd parties such as lawyer and auditors can be appointed to inspect the documents on behalf of the director.

Case in point :

  1. Karen Yap Chew Ling v Binary Group Services Bhd and another appeal [2023] 11 MLJ 120
  2. Dato’ Tan Kim Hor & Ors v Tan Chong Consolidated Sdn Bhd [2009] 2 MLJ 527
Back to Latest Legal Updates

Recent Post

STRATA MANAGEMENT – MANAGEMENT FEE SHOWDOWN – RESIDENTIAL VS. COMMERCIAL – WHO’S PAYING FOR THE EXTRAS?

In a landmark decision in Aikbee Timbers Sdn Bhd & Anor v Yii Sing Chiu & Anor and another appeal [2024] 1 MLJ 94 , the Court of Appeal clarified the rules on maintenance charges and sinking fund contributions in mixed strata developments. Developers and management corporations can impose different rates based on the distinct purposes of residential and commercial parcels. The judgment emphasizes fairness, ensuring residential owners bear the costs of exclusive facilities like pools and gyms, while commercial owners aren’t subsidizing amenities they don’t use. This ruling highlights the importance of transparency in budgeting and equitable cost-sharing in mixed-use properties.

Read More »
16 December ,2024 No Comments

ILLEGALITY OF UNREGISTERED ESTATE AGENTS’ CLAIM – FINDER’S FEES AND ILLEGALITY: COURT DRAWS THE LINE ON UNREGISTERED ESTATE AGENTS

In a pivotal ruling, the Court of Appeal clarified that finder’s fee agreements are not automatically void under the Valuers, Appraisers, Estate Agents and Property Managers Act 1981. The Court emphasized that illegality must be specifically pleaded and supported by evidence, and isolated transactions do not trigger the Act’s prohibition. This decision highlights the importance of precise pleadings and a clear understanding of the law’s scope.

Read More »
16 December ,2024 No Comments

COMPANIES ACT – OPPRESSION – DRAWING THE LINE: FEDERAL COURT DEFINES OPPRESSION VS. CORPORATE HARMS

In a decisive ruling, the Federal Court clarified the boundaries between personal shareholder oppression and corporate harm, overturning the Court of Appeal’s findings. The Court held that claims tied to the wrongful transfer of trademarks belonged to the company, not the individual shareholder, reaffirming that corporate harm must be addressed through a derivative action rather than an oppression claim.

Read More »
16 December ,2024 No Comments

COMPANIES LAW – WHEN DIRECTORS BETRAY: COURT CONDEMNS BREACH OF TRUST AND CORPORATE MISCONDUCT

In a stark reminder of the consequences of corporate betrayal, the court found that the directors had systematically dismantled their own company to benefit a competing entity they controlled. By breaching their fiduciary duties, conspiring to harm the business, and unjustly enriching themselves, the defendants were held accountable through significant compensatory and exemplary damages, reaffirming the critical importance of trust and integrity in corporate governance.

Read More »
16 December ,2024 No Comments

JURISDICTION – CHOOSING THE RIGHT COURT: THE SEA JUSTICE CASE HIGHLIGHTS WHERE MARITIME DISPUTES SHOULD BE HEARD

In The Sea Justice cases [2024] 2 Lloyd’s Rep 383 and [2024] 2 Lloyd’s Rep 429, the Singapore courts tackled a key question: which country should handle a maritime dispute when incidents span international waters? After examining the location of the collision, existing limitation funds in China, and witness availability, the courts concluded that China was the more appropriate forum. This ruling highlights that courts will often defer to the jurisdiction with the closest ties to the incident, ensuring efficient and fair handling of cross-border maritime disputes. This approach is also relevant in Malaysia, where similar principles apply.

Read More »
17 November ,2024 No Comments
en_USEN
zh_TWZH ms_MYMY en_USEN
× Contact Us