{"id":4940,"date":"2023-09-27T21:47:11","date_gmt":"2023-09-27T13:47:11","guid":{"rendered":"https:\/\/yhalaw.com.my\/?p=4940"},"modified":"2023-09-27T21:47:13","modified_gmt":"2023-09-27T13:47:13","slug":"companies-act-2016-directors-right-to-inspect-records-and-documents-of-a-company","status":"publish","type":"post","link":"https:\/\/yhalaw.com.my\/my\/companies-act-2016-directors-right-to-inspect-records-and-documents-of-a-company\/","title":{"rendered":"COMPANIES ACT 2016 \u2013 DIRECTOR\u2019S RIGHT TO INSPECT RECORDS AND DOCUMENTS OF A COMPANY"},"content":{"rendered":"<p><strong>A, a director and shareholder of the company, was denied access to inspect the company&#8217;s records. Although not involved in daily operations, A wants to determine the value of his shares for a separate lawsuit.<\/strong><\/p>\n\n\n\n<p><strong>Can he file an application for inspection and appoint lawyers and auditors to do it on his behalf?<\/strong><\/p>\n\n\n\n<p><strong><u>Section 245 of the Companies Act 2016 (CA 2016)<\/u><\/strong><\/p>\n\n\n\n<ul>\n<li><strong><em><u>Section 245 of the Companies Act 2016<\/u><\/em><\/strong> requires company, its directors and manager to maintain accounting and other records.<\/li>\n\n\n\n<li>These records must be kept for 7 years and should be accessible to directors for inspection.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>Non-compliance would be subject to fine and imprisonment.<\/li>\n<\/ul>\n\n\n\n<p><strong><u>Common Law Right<\/u><\/strong><\/p>\n\n\n\n<ul>\n<li>The right of company director to inspect its accounting and records is an absolute right under the common law.<\/li>\n\n\n\n<li>This right originates from fiduciary responsibilities of good faith, care, skill and diligence that a director owes to the company.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li>If ulterior purpose is alleged, the burden of proof lies on that person to prove that allegation.<\/li>\n\n\n\n<li>This common law right of inspection is not eliminated by the CA 2016.<\/li>\n<\/ul>\n\n\n\n<p><strong>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?<\/strong><\/p>\n\n\n\n<ul>\n<li>No. Even if the inspection may help A in his claim for shares, it doesn\u2019t necessarily mean that the company would suffer detriment or prejudice.<\/li>\n\n\n\n<li>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.<\/li>\n\n\n\n<li><strong>Can 3<sup>rd<\/sup> parties such as lawyers and auditors be appointed to inspect the documents?<\/strong><\/li>\n\n\n\n<li>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, 3<sup>rd<\/sup> parties such as lawyer and auditors can be appointed to inspect the documents on behalf of the director.<\/li>\n<\/ul>\n\n\n\n<p>Case in point :<\/p>\n\n\n\n<ol type=\"i\">\n<li><strong><em><u>Karen Yap Chew Ling v Binary Group Services Bhd and another appeal <\/u><\/em><\/strong>[2023] 11 MLJ 120<\/li>\n\n\n\n<li><strong><em><u>Dato\u2019 Tan Kim Hor &amp; Ors v Tan Chong Consolidated Sdn Bhd<\/u><\/em><\/strong> [2009] 2 MLJ 527<\/li>\n<\/ol>","protected":false},"excerpt":{"rendered":"<p>A, a director and shareholder of the company, was denied access to inspect the company&#8217;s records. Although not involved in daily operations, A wants to determine the value of his shares for a separate lawsuit.<\/p>\n<p>Can he file an application for inspection and appoint lawyers and auditors to do it on his behalf?<\/p>","protected":false},"author":1,"featured_media":4942,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1568],"tags":[2286],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v19.4 (Yoast SEO v19.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>COMPANIES ACT 2016 \u2013 DIRECTOR\u2019S RIGHT TO INSPECT RECORDS AND DOCUMENTS OF A COMPANY | Yew Huoi, How &amp; Associates | Leading Malaysia Law Firm<\/title>\n<meta name=\"description\" content=\"A, a director and shareholder of the company, was denied access to inspect the company&#039;s records. 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