PROVISIONS UNDER COMPANIES ACT 1965 and 2016 THAT

ALWAYS ENDED UP IN COURT

(1) Minority Members Actions

(a) Personal and representative actions

When personal rights have been infringed.
How might a member have a personal right?

(1) From an express contract

Between member and other members; between member and company

(2) From the statutory contract

Section 33 CA

(3) From the Companies Act 1965

Sections 144, 145 CA

(4) From the common law

(b) Derivative actions

When a wrong is done to the company (Proper plaintiff rule) and the
minority is bringing such an action.
Australian Agricultural Co v Oatmont Pty Ltd (1992) 10 ACLC 1220
Efficiency of the Common Law Derivative Action in Malaysia
Current position of derivative action under S.347(3) CA 2016

Proceedings on behalf of a company

Statutory derivative action (SDA)

ss 181A-181E
Salient feature of the new statutory derivative action

Mohd Shuaib Ishak v Celcom (Malaysia) Bhd. [2008] 5 MLJ 857

Reversed by Celcom (M) Bhd v Mohd Shuaib Ishak [2011] 3 MLJ 636 (CA)

Topic CA65 CA16

1. Derivative action Rely on common S.347(3)

law - no more
derivative action

2. Minority oppression S.181 S.346

 (2)Winding Up

S 211 CA1965 / s 432 CA 2016: Types of winding up-

(1) voluntary winding up ; and

(2) Involuntary winding up. [also known as compulsory winding-up]

Type of winding -up CA1965 CA2016

1. By order of Court (Compulsory/ involuntary) s.217 -226 s 464 475

Administration s.227 -253 s 476 491

2. Voluntary winding up s.254 s 439

1
(i) members voluntary winding-up s.258-259 s 445 448
(ii) creditors voluntary winding-up s. 260 263 s 449 457

S 218 (1) CA1965: The Court may order a winding up if -

(e) the company is unable to pay its debts;

S 218(2) CA 1965 / s 466(1) CA2016: A company shall be deemed to be

unable to pay its debts if

(a) a creditor having a debt exceeding RM500 has served on the company
by leaving at the registered office a demand requiring the company
to pay the sum so due, and the company has for 3 weeks thereafter
neglected to pay the sum;
(b) execution or other process issued on a judgment, decree or order of
any court in favour of a creditor of the company is returned unsatisfied
in whole or in part; or
(c) it is proved to the satisfaction of the Court that the company is unable
to pay its debts; and in determining this the Court shall take into
account all liabilities of the company.

Note: s 466(1) CA 2016 provides the mandatory notice.

S 217 CA 1965 / s 464 CA 2016 Lay down the parties who may petition.

S 219 CA 1965 / s 467 CA 2016 winding up is deemed to have

commenced the moment a petition for winding up is presented.

S 218 CA 1965 / s 465 CA 2016 circumstances for winding up

 Topic CA65 CA16

scheme of -corporate
arrangeme voluntary
Scheme of nt arrangeme
arrangement (S.176- nt (S.397)
181E)
judicial
manageme
nt (S.404)

*take note new commercial insolvency test under s 112 -114 CA 2016.

(3) Rescue mechanism

SCHEME OF ARRANGEMENT- CA 1965

S 1776 CA1965 provides for Court approved compromise with creditors and members.

S 176 allows the existing management to continue in management without adequate

protection for creditors against dissipation of assets and inappropriate application of cash
resources.

S 176 (1) CA1965 / s.366 CA2016 - Where a compromise or arrangement is proposed

between a company and its creditors, the Court may, on the application of the company or
any creditor or member of the company, or in the case of a company being wound up of the
liquidator, order a meeting of the creditors.
s.176 (3) - a compromise agreed to by majority of the creditors representing three-fourths in
value of the creditors can be presented to Court for its approval which (4) the Court has
discretion to amend.

S 366 (3) CA2016 - The compromise or arrangement shall be binding on:

(a) all the creditors or class of creditors;
(b) the members or class of members;
(c) the company; or
(d) the liquidator and contributories,

CORPORATE VOLUNTARY ARRANGEMENT CA 2016

s.395 - NOT applicable to a public company, a company licensed financial institution,

payment system regulated under laws of Bank Negara, or subject to the CMSA 2007 or a
company which creates a charge over its property or any of its undertaking.

s.396 - CVA can be proposed by:

(i) directors of a company other than a company which is under a judicial management
order or is being wound up.
(ii) requires the appointment of a nominee either as a trustee or supervisor for the purpose
of supervising the implementation of the voluntary arrangement.

(iii) A proposal for a voluntary arrangement may also be made:

(a) by a judicial manager if a company is under a judicial management order; or

(b) by a liquidator if a company is being wound up, who may also be the nominee for
the voluntary arrangement.
(iv) In the case where the liquidator is the Official Receiver, the nominee shall be an
insolvency practitioner.

s.398 - an automatic moratorium ( protection from any legal proceedings) shall commence
upon the filing of a CVA in Court .

JUDICIAL MANAGMENT - ss.403 430 CA2016

s.403 - shall not apply to licensed institutions or a designated payment system operator
regulated under the Bank Negara; and CMSA 2007

s.405 - the Court will grant an order for JM where -

(a) the Court is satisfied that the company is or will be unable to pay its debts; and
(b) the Court considers that the making of the order would be likely to achieve one or
more of the following purposes:
 (i) the survival of the company, or the whole or part of its undertaking as a going
concern;
(ii) the approval under s. 366 of a compromise or arrangement between the
company and any such persons as are mentioned in that section;
(iii) a more advantageous realisation of the company's assets would be effected
than on a winding up.

s.406 - shall be for a period of 6 months with an extension of 6 months on the application of
the JM with notice to Directors, creditors, members, Registrar CCM and any other relevant
persons.

s.407 - a nominee for a JM shall be an insolvency practitioner, who is not the auditor of the
company.

s.418 429 duties of JM