Yew Huoi, How & Associates | Leading Malaysia Law Firm

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

Recent Post

NAVIGATION AND SHIPPING LAW – COLLISION REGULATIONS – COLLISION AT SEA – A WAKE-UP CALL FOR ADHERING TO NAVIGATION RULES

The collision between the FMG Sydney and MSC Apollo highlights the critical importance of adhering to established navigation rules. Deviations, delayed actions, and reliance on radio communications instead of clear, early maneuvers can lead to disastrous outcomes. This case serves as a stark reminder for mariners: follow the rules, act decisively, and prioritize safety above assumptions.

Read More »

SHIPPING AND ADMIRALTY IN REM – A SINKING ASSET – COURT ORDERS SALE OF ARRESTED VESSEL TO PRESERVE CLAIM SECURITY

In a landmark admiralty decision, the High Court ordered the pendente lite sale of the arrested vessel Shi Pu 1, emphasizing the principle of preserving claim security over the defendant’s financial incapacity. The court ruled that the vessel, deemed a “wasting asset,” could not remain under arrest indefinitely without proper maintenance or security. This case reinforces the necessity for shipowners to manage arrested assets proactively to prevent significant financial and legal repercussions.

Read More »

EMPLOYMENT LAW – IS DIRECTOR A DIRECTOR OR EMPLOYEE? UNPACKING DUAL ROLES IN EMPLOYMENT LAW

The Court of Appeal clarified the dual roles of directors as both shareholders and employees, affirming that executive directors can qualify as “workmen” under the Industrial Relations Act 1967. The decision emphasizes that removal as a director does not equate to lawful dismissal as an employee unless due process is followed. This case highlights the importance of distinguishing shareholder rights from employment protections, ensuring companies navigate such disputes with clarity and fairness.

Read More »

REGULATIONS – GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT 1947 ) – ARTICLE I

This legal update explores key provisions of the General Agreement on Tariffs and Trade (GATT 1947), focusing on Article I (Most-Favoured-Nation Treatment), Article II (Schedules of Concessions), Article XX (General Exceptions), and Article XXI (Security Exceptions). Article I mandates that any trade advantage granted by one contracting party to another must be extended unconditionally to all other parties. Article II ensures that imported goods from contracting parties receive treatment no less favourable than that outlined in agreed schedules, while also regulating permissible taxes and charges. Articles XX and XXI provide exceptions for measures necessary to protect public morals, health, security interests, and compliance with domestic laws. The provisions reflect the foundational principles of non-discrimination, transparency, and fair trade, while allowing for limited, well-defined exceptions. This summary is intended to provide a concise reference for businesses and legal practitioners involved in international trade law.

Read More »
en_USEN
× Contact Us