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

INDUSTRIAL LAW – NAVIGATING THE LEGALITIES OF RETRENCHMENT

The dismissal of X by Company ABC, citing economic downturns, presents a compelling case on the complexities of employment termination and retrenchment legality. X contested his redundancy, claiming his role in property management and services was unaffected by the property development market’s challenges. This case probes into the legitimacy of retrenchment under economic duress and the employer’s duty to act in good faith, as guided by Section 20(3) of the Industrial Relations Act 1967. The burden rests on Company ABC to prove the necessity and genuineness of X’s redundancy, with failure to do so possibly leading to a verdict of unjustified termination. This scenario underscores the critical importance of evidence and intention in retrenchment cases, as reflected in precedents like Akilan a/l Subramanian v. Prima Awam (M) Sdn Bhd.

Read More »

PROPERTY LAW – LEGAL IMPLICATIONS OF SALE AND PURCHASE AGREEMENT BREACHES AND THE RIGHT TO OFFSET IN MALAYSIAN PROPERTY TRANSACTIONS

In the realm of Malaysian property transactions, the intricacies of Sale and Purchase Agreements (SPAs) and the enforcement of Liquidated Ascertained Damages (LAD) play pivotal roles in safeguarding the interests of both developers and purchasers. This article delves into the legal framework governing the rights and obligations of parties involved in property transactions, particularly focusing on the consequences of contractual breaches and the conditions under which a purchaser can exercise the right to offset against LAD. Through the examination of relevant case law and statutory provisions, we illuminate the legal pathways available for resolving disputes arising from the failure to adhere to the terms of SPAs, thereby offering insights into the equitable administration of justice in the context of Malaysian property law.

Read More »

WINDING-UP – OFFICIAL RECEIVER AND LIQUIDATOR (“ORL”)

In cases of compulsory winding up, the court would appoint a liquidator under s.478 of the Companies Act 2016 (“CA 2016”) to expeditiously recover and realise the assets of the wound-up company for the distribution of dividends to creditors and administer any outstanding matters involving………..

Read More »

JUDICIAL REVIEW – PROCEDURAL FAIRNESS AND LOCUS STANDI

This excerpt illuminates the foundational principles of judicial review as outlined in Order 53 of the Rules of Court 2012. It highlights the criteria for challenging public decisions on grounds of illegality, irrationality, or procedural impropriety. Central to the discussion is the question of timing in judicial review applications, particularly in cases of procedural unfairness. The practical scenario underscores the significance of a “decision” by the relevant authority as a prerequisite for locus standi, drawing insights from the case of Hisham bin Halim v Maya bt Ahmad Fuad & Ors [2023] 12 MLJ 714.

Read More »

CONTRACT LAW – CONTRACTUAL INTERPRETATION REMEDIES UNVEILED: DECIPHERING CONTRACTUAL CLAUSES AND LEGAL BALANCE

This legal updates explore the principles governing the interpretation of agreements, emphasizing the importance of clarity and unambiguity in contractual terms. It delves into a key issue involving restrictions on remedies for breach of contract, shedding light on the court’s commitment to upholding plain meanings. The illustrative scenario involving shareholders X and Y dissects a pertinent clause, showcasing the delicate balance between restricting remedies and ensuring fairness in legal proceedings.

Read More »
en_USEnglish
× How can I help you?