Resignation and Removal of Directors

1
Resignation and Removal of Directors
LEE SWEE SENGLLB, LLM, MBA Advocate
SolicitorNotary Public, Trademark, Patent Agent
Certified Mediator sweeseng_at_tm.net.my www.lee
sweeseng.com
2
Appointment of Directors
3
Who can be appointedas a director?

• The person appointed must-
• Consent to the appointment (s123 Companies Act
  1965)
• be an individual and not a company (s 122(2)
  Companies Act 1965)
• At least 18 years old (s 122(2) Companies Act
  1965)
• Not disqualified from being a director

4
Appointment of Directors

• Section 122(3) provides that the first directors
  of a company shall be named in the Memorandum and
  Articles of Association (MA).
• The first directors are deemed to have been
  appointed on the incorporation of the company.
• The first directors will hold office until the
  first Annual General meeting (AGM) where they
  will retire.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 85

5
Appointment of Directors

• Any subsequent appointment is governed by the MA
  and they are usually appointed by the directors
  themselves for filling of casual vacancy or as an
  additional director.
• The Articles of the company usually provides that
  directors appointed to fill casual vacancies or
  as additional directors shall hold office until
  the next AGM where they shall be eligible for
  re-election.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 85

6
Casual Vacancy

• May arise as a result of -
• Death
• Insanity
• Resignation
• Disqualification due to absence from board
  meetings
• Bankruptcy
• Failure to obtain qualification shares
• Becomes prohibited from being a director by
  reason of an order made under the Act.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 85

7
Statutory Declaration before Appointment as a
Director

• Form 48A
• Before a person is appointed as a director, he
  must lodge with the ROC a statutory declaration
  using Form 48A that -
• He consents to act as a director
• He is not an undischarged bankrupt
• He has not been convicted of any offence whether
  within or outside Malaysia
• He has not been imprisoned for any offence within
  the period of 5 years immediately preceding the
  date of the declaration.

8
Statutory Declaration before Appointment as a
Director

• An updated Form 49 must be lodged with the ROC
  for any appointment of directors.
• The Register of Directors, Managers and
  Secretaries must be updated.

9
Resignation of Directors
10
Resignation of Directors
Table A art 72(e) The office of director shall
become vacant if the director resigns his
office by notice in writing to the company
11
Resignation of Directors

• S141(6)(b) states that the company must notify
  the ROC of the directors resignation.
• If the company refuses to give notice to the ROC
  so that the directors name remain on records of
  the company, this will not affect the validity of
  the resignation.
• The failure to comply with the procedural
  requirement to notify ROC on the directors
  resignation will not force a person to remain as
  director without his consent.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 90

12
Resignation of Directors
Latchford Premier Cinema Ltd v Ennion 1931 2 Ch
409 The facts- A company's articles of
association provided that the office of a
director should ipso facto be vacated if by
notice in writing to the company he resigned his
office. Two of the directors orally tendered
their resignations at the annual general meeting
of the company and their resignations were
accepted by the meeting.
13
Resignation of Directors
Latchford Premier Cinema Ltd v Ennion 1931 2 Ch
409 Held- Where the company accepts the notice,
oral notice will suffice even where written
notice is required. Notice is presumably
effective not on posting but only on receipt by
the company.
14
Resignation of Directors
Latchford Premier Cinema Ltd v Ennion 1931 2 Ch
409 Held- A directors position is analogous to
an employee as far as resignation is concerned.
An employee is entitled to resign any time,
provided that he pays damages if he breaches his
contract by not giving sufficient notice. The
company cannot on principle refuse to let him go.
15
Resignation of Directors
Jimat bin Awang v Lai Wee Ngen 1995 3 SLR
293 The facts- The petitioners were directors
and shareholders of the company. They argued that
their resignation as directors was invalid as
there were no resolutions accepting their
resignation
16
Resignation of Directors
Jimat bin Awang v Lai Wee Ngen 1995 3 SLR
293 Held- The validity of any resignation did
not depend on whether it was accepted by
resolution unless this was provided for in the
contract or in the articles of association of the
company.
17
Resignation of Directors

• Glossop v Glossop 1907 2 Ch 370
• Neville J
• I have no doubt that a director is entitled to
  relinquish his office anytime he pleases by
  proper notice to the company, and that his
  resignation depends upon his notice and is not
  dependant upon any acceptance by the company,
  because I do not think that they are in a
  position to refuse acceptance.

18
Signed but Undated Resignation Letter

• Khoo Choon Yam v Gan Miew Chee 2000 6 MLJ 20
• The facts-
• The Plaintiff was a director of the company. A
  resolution was passed by for the appointment of
  additional directors of the company. This
  resolution was not sent to the plaintiff.

19
Signed but Undated Resignation Letter

• Khoo Choon Yam v Gan Miew Chee 2000 6 MLJ 20
• The facts (contd)-
• The Defendants contended that the Plaintiff had
  resigned from the company, and the resignation
  was effected through an undated letter of
  resignation given by the Plaintiff upon his
  appointment as a director. The Plaintiff
  contended that he never signed such resignation
  letter and his signature was forged.

20
Signed but Undated Resignation Letter

• Khoo Choon Yam v Gan Miew Chee 2000 6 MLJ 20
• Held-
• Whether or not the Plaintiff signed the undated
  letter of resignation could not be decided on
  conflicting affidavit evidence. However, even if
  the plaintiff had signed such a letter, it was
  void and of no effect.

21
Signed but Undated Resignation Letter

• Khoo Choon Yam v Gan Miew Chee 2000 6 MLJ 20
• Held (contd)-
• A resignation letter under compulsion is no
  resignation in law. When a person is required to
  sign an undated resignation letter as a condition
  for appointment as a director, what other
  inference can be drawn except that it was signed
  under compulsion or duress

22
Signed but Undated Resignation Letter

• Khoo Choon Yam v Gan Miew Chee 2000 6 MLJ 20
• Held (contd)-
• There is a procedure by which the board and the
  company may get rid of their directors. All that
  needs to be done is to follow the procedure.

23
Resignation of Directors

• Notwithstanding anything in the Articles, a
  director may not resign if his resignation will
  leave the company with less than 2 directors, or
  with no directors.
• Therefore, the last 2 directors of a company may
  not resign.
• However, a person who is disqualified from being
  a director by the provisions of the Act or the
  Articles, may resign notwithstanding that he is
  one of the last 2 directors, since continuing in
  office would be an offence.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 90

24
Retirement of Directors
25
Retirement by Rotation

• The Articles of the company will usually contain
  provisions relating to retirement by rotation.
• The purpose is to give the shareholders an
  opportunity to review the directors performance
  and to replace them, if necessary.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 90

26
Retirement by Rotation

• At the first AGM. all directors shall retire from
  office.
• At the subsequent AGM, one third of the directors
  for the time being shall retire from office. The
  directors who have been longest in office since
  their last election shall retire.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 90

27
Retirement by Rotation

• A director appointed to fill casual vacancy or as
  additional director in between two AGMs is
  required to retire at the forthcoming AGM.
• When considering the number to retire by
  rotation, directors appointed between two AGMs
  and managing director is not to be taken into
  account in determining the directors to retire by
  rotation.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 91

28
Retirement by Rotation

• The Articles usually provide that the retiring
  director shall be eligible for re-election.
• However, a company may elect some other person in
  place of the retiring director at the meeting.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 91

29
Retirement by Rotation

• Failing this, the retiring director will be
  deemed to have been re-elected, unless
• another person is elected
• a resolution not to fill the vacancy is passed
• a resolution for the re-election of that director
  is lost.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 91

30
See Teow Chuan Anor v YAM Tunku Nadzaruddin
Ibni Tuanku Jaafar Ors 2007 2 MLJ 212

• The facts-
• The Board of Directors made a resolution that
  all executive directors must retire on attaining
  55 years of age. The Plaintiffs brought an action
  challenging the introduction of a new term into
  their existing contract that they should retire.

31
See Teow Chuan Anor v YAM Tunku Nadzaruddin
Ibni Tuanku Jaafar Ors 2007 2 MLJ 212

• Held-
• The power to pass the resolution as to
  retirement of directors was a fiduciary power
  entrusted by the memorandum and articles of the
  Company. That power was used for a collateral or
  improper purpose, namely to remove the Plaintiffs
  and was invalid.

32
See Teow Chuan Anor v YAM Tunku Nadzaruddin
Ibni Tuanku Jaafar Ors 2007 2 MLJ 212

• Held-
• In common law, an attempt by a party to a
  contract to unilaterally introduce a new term
  into it is regarded as a breach of contract. This
  amounts to an intimation of an intention to
  abandon and altogether to refuse performance of
  the contract

33
Removal of Directors
34
How can a director be removed?

• It may be that a dispute in the company leads to
  either some of the directors or members wanting
  to remove a director from office. A director may
  have a service contract with the company
• If the company terminates the directors
  appointment in breach of the contract, the
  director may be entitled to damages.
• The rights that a director may have under a
  contract will depend upon the provisions
  contained in the contract.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 227

35

• Removal of Directors
• of Public Companies

36
Removal of Directorsof Public Companies

• Removal by other directors
• It is not possible for directors of a public
  company to remove another director.
• This is prohibited by section 128(8)

37
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• Section 128 of the Companies Act gives the
  members of a public company the power of control
  over the directors.
• The members of a public company can remove a
  director by giving special notice to the company
  to remove him, (usually a simple majority)
  notwithstanding any provision in the Articles
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 87

38
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• S128(1) Companies Act 1965
• A public company may remove a director by
  ordinary resolution before the expiration of his
  term of office.

39
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• S128(1) Companies Act 1965
• If the director who is being removed was
  appointed to represent the interests of a
  specific class of shareholders or debenture
  holders, the resolution to remove him will not be
  effective until a successor has been appointed.

40
Removal of Directorsof Public Companies

• Resolutions coupled with special notice (S153
  Companies Act)
• S128(1) Companies Act 1965
• Transposed to s. 128(1) of our Act the proper
  meaning of "A public company may by ordinary
  resolution remove a director ..." means that a
  simple majority of the shareholders of the
  company may vote to remove a director and no
  agreement made by the directors or the company
  can fetter that right.

41
Removal of Directorsof Public Companies

• The Courts will not interfere with the statutory
  right of shareholders to remove directors
  Soliappan v Lim Yoke Fan 1968 2 MLJ 21 Dato'
  H.M. Shah Ors. v. Dato' Abdullah b. Ahmad
  1991 1 MLJ 91 - a Supreme Court decision which
  applied s. 128(1) and upheld the shareholders'
  right to terminate the appointment of the
  executive chairman and managing director of the
  company in the 9 month of a three-year contract
  with the company appointing him to those
  positions Tuan Ishak Ismail v Leong Hup Holdings
  Or Appeals 1996 1 CLJ 393

42
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• S128(2) Companies Act 1965
• Special notice of the resolution to remove a
  director is required that is not less than 28
  days notice to the company of the intended
  resolution.

43
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• S153 Companies Act 1965
• defines special notice as the notice of
  intention of its member(s) to move the resolution
  proposed, served to the company not less than 28
  days before the meeting at which the resolution
  is to be moved.

44
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• The 28 days grace period is to allow the
  directors who are to be removed time to prepare
  for their defences.
• On receipt of the special notice of resolution,
  the company must then give notice of the
  resolution to its members at least 14 days before
  the meeting.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 124

45
Removal of Directorsof Public Companies

• Removal by members
• Resolutions coupled with special notice (S153
  Companies Act)
• If the twenty-eight days grace period was not
  complied with, the resolution shall not be
  effective.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 124

46
Removal of Directorsof Public Companies

• Removal by members
• Rights of director to be heard - S128(2)
• The director who is being removed has an
  opportunity to defend himself.
• He is entitled to be heard on the resolution at
  the meeting and to make written representations
  to the company and request the company to send
  copies of the representations to every member if
  the company notified in the meeting.
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Ltd, pg 67

47
Removal of Directorsof Public Companies

• Removal by members
• Rights of director to be heard - S128(3)
• If copies of the representations are not sent
  out because they were received too late, the
  director may ask for the representations to be
  read out at the meeting without affecting his
  right to be heard orally.
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Ltd, pg 67

48
Removal of Directorsof Public Companies

• Removal by members
• Rights of director to be heard - S128(4)
• However, the directors right to be heard is not
  absolute. That director cannot use his right to
  attract publicity for defamatory matter.
• If a director does that, the company or any
  affected person may apply to court to stop him
  from sending or reading out the representations
  at the meeting.

49
Removal of Directorsof Public Companies

• Removal by members
• Rights of director to be heard
• In practice, it will usually be easier to
  proceed under the articles of association of the
  company rather than under the statutory
  procedure.
• Company articles usually provide that the
  company may by resolution remove a director
  before his term expires.
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Ltd, pg 67

50
Removal of Directorsof Public Companies

• Where a company adopts
• Table A as
• its articles or association

51
Removal of Directorsof Public Companies

• If a company adopts Table A as its articles or
  association, then the director may,
  notwithstanding the provisions of the Companies
  Act, be removed from office before the expiry of
  his term via an ordinary resolution without
  special notice.
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Limited, pg 67

52
Removal of Directorsof Public Companies
Table A art 69 provides that- Subject to
section 128, the company may by ordinary
resolution remove any director before the
expiration of his period of office.
53
Removal of Directorsof Public Companies

• Proceedings under the articles will also deprive
  the director the statutory right to make
  representations. That right only arises when
  special notice is given under the Acts
  procedure.
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Limited, pg 68

54
Removal of Directorsof Public Companies

• Meeting convened under
• Section 144 or Section 145
• Companies Act 1965

55
Requisition by shareholders (s 144, CA)

• If a company is unwilling to call a meeting
  pursuant to S128 and S 153 Companies Act 1965,
  the proposer of the resolution will fail in his
  bid to oust the director unless he has 10 of the
  voting rights in the company, or can muster
  support from members with equivalent voting
  power. This will enable him to have a meeting
  convened under S144 or S145 Companies Act 1965
• Guide to Company Law in Malaysia Singapore, 2nd
  Ed, CCH Asia Ltd, pg 67

56
Requisition by shareholders (s 144, CA)

• Requisition shall state the objects of the
  meeting and shall be signed by the
  requisitionists and deposited at the registered
  office of the company. The requisition need not
  be under corporations seal Roxy Electric
  Industries (Malaysia) Bhd v Syarikat Nominee
  Bumiputra Sdn Bhd 1989 3 MLJ 231.

57
Requisition by shareholders (s 144, CA)

• Upon receipt of requisition the director must
  convene an extraordinary general meeting not
  later than two months.
• If the directors do not convene a meeting within
  21 days, the requisitionists may do so themselves
  (s 144(3)) within 3 months.

58
Requisition by shareholders (s 144, CA)

• Any reasonable expenses incurred by the
  requisitionists in calling the meeting are to be
  paid by the company, which may reimburse itself
  out of any sums due to the defaulting directors
  by way of fees or other remuneration sub-s (4).

59
Requisition by shareholders (s 144, CA)

• If it is impracticable to call a meeting in
  accordance with the Act or the articles, the
  court may order a meeting to be called upon
  application of any director or of any member who
  would be entitled to vote at the meeting or of
  the personal representative of any such member,
  and may make such orders as are necessary to
  provide for its conduct (s 150)

60
Eg of a notice under s 144

• NOTICE OF EXTRAORDINARY GENERAL MEETING
• NOTICE IS HEREBY GIVEN THAT an Extraordinary
  General Meeting of the Company will be held
  pursuant to Section 144 of the Companies Act,
  1965 at location on date at time for the
  purpose of considering and if thought fit to pass
  the following ordinary resolutions-

61
Call for meetings s 145

• Meetings called by shareholders as provided by
  the articles where it may provide that the
  directors have power to convene extraordinary
  general meetings.
• The section gives members holding of at least 10
  of the voting rights in the company, the power to
  convene a meeting themselves.

62
Call for meetings s 145

• Differs from s 144 in that the directors are not
  involved in this section.
• At least 14 days notice must be given of
  meetings other than a meeting to pass a special
  resolution.

63
Eg of a notice under s 145

• We, HLB Nominees (Tempatan ) Sdn Bhd (Company
  No.47697-U) and Mr. Cheong Heng Choy (NRIC
  No.571002-10-5287), holders of not less than
  one-tenth of the paid-up share capital of SJA
  Berhad ("Company") intend to convene an
  extraordinary general meeting of SJA Berhad
  ("Meeting") pursuant to Section 145 of the
  Companies Act 1965 on 2 July 2003.

64
Eg of a notice under s 145

• The objects of the Meeting are as follows-
• To Appoint with Immediate Effect by way of
  Ordinary Resolution the Following Persons as
  Directors of the Company-

65

• INDIAN CORRIDOR SDN BHD ANOR
• V.
• GOLDEN PLUS HOLDINGS BHD 2008 5 CLJ 774 

66
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

•  
• The facts-
• The two appellants are shareholders of the
  respondent (a public listed company) holding
  19.745. On 27.12.2007, acting under s145
  Companies Act 1965, they issued a
  requisitionists' notice to the respondent
  company. The purpose of the meeting was to remove
  the directors of the respondent and to appoint
  others in their place.

67
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• The facts (contd)-
• The meeting was to be held on 26 January 2008 in
  Penang. However, on 16 January 2008, the
  respondent company took out an originating
  summons seeking declaratory relief which impugned
  the validity of the requisition.

68
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• The facts (contd)-
• An application to restrain the meeting was also
  made within the summons but was not pursued as
  both sides agreed to have the summons disposed
  off on its merits.

69
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• The facts (contd)-
• Article 55 of the respondents articles of
  association reads as follows-
• The Directors may, whenever they think fit,
  convene an Extraordinary General Meeting and
  Extraordinary General Meetings shall also be
  convened by such requisitionist, as provided by
  section 144 of the Act. If at any time there are
  not within Malaysia sufficient Directors capable
  of acting to form a quorum at a meeting of
  Directors, any Director or any two Members may
  convene an Extraordinary General Meeting in the
  same manner as nearly as possible as that in
  which Meetings may be convened by the Directors.

70
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal -
• In the present instance, the High Court held
  that the appellants had by reason of art 55 of
  the respondents articles of association
  contracted out of s. 145 of the Act and were
  therefore not entitled to rely on that section to
  requisition a meeting.

71
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal-
• If the High Court is right, the appellants are
  forever barred from requisitioning a meeting
  under s. 145 of the Act if they want to remove
  one or more of the directors.
• We must say at once that if so drastic a result
  was intended by the legislature it would be found
  in the Act
• But we must confess our inability to find such a
  limitation upon the right conferred by s 145.
• Therefore, the appellants were not barred from
  requisitioning a meeting under s. 145 of the Act

72
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal-
• ss 128(2) and 153 are to be read as follows. If a
  public company by resolution in general meeting
  wants to remove one or more of its directors,
  then special notice of that resolution must be
  given to the company. And special notice means
  notice of not less than 28 days.

73
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal-
• On having been given special notice, the burden
  is on the company, that is to say the board of
  directors having conduct of the management of the
  companys business and affairs to give notice of
  the meeting to the shareholders. If the company
  acting through its board of directors fails to do
  so, surely it cannot rely on its own omission to
  frustrate the requisitioning members from
  exercising the very valuable right conferred upon
  them by s. 145 of the Act.

74
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal-
• The setting out of the grounds for proposing the
  removal is not a requirement of s128
• The notice requirement in s128 meets the element
  of fairness as it makes the director concerned
  aware of the fact that there is a proposal to
  remove him.

75
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Court of Appeal-
• Nowhere in s128 does the Act require
  requisitionists to furnish explanatory statements
  along with a resolution moving for the removal of
  a director

76
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• Special Notice pursuant to Sections 153 128(2)
  of the Companies Act 1965
• We, Indian corridor Sdn Bhd. (Co No. 784936-A)
  and Pembangunan Qualicare Sdn. Bhd. (Co
  No.442213-M), being two (2) members of Golden
  Plus Holdings Berhad (the Company) holding not
  less than one-tenth of the paid-up and issued
  shares capital of the Company, hereby give notice
  of our intention to propose the following
  resolutions

77
INDIAN CORRIDOR SDN BHD ANOR V. GOLDEN PLUS
HOLDINGS BHD 2008 5 CLJ 774 

• which require special notice pursuant to
  Sections 153 and 128(2) of the Companies Act 1965
  as Ordinary Resolutions at an Extraordinary
  General Meeting of the Company to be convened
  pursuant to Section 145 of the Companies Act 1965
  to be held at Sri Pinang Ballroom, Level 4,
  Dorsett Penang Hotel, 3 Jalan Larut, 10050
  Penang, Malaysia on Saturday, 26 January, 2008 at
  9.00 am and any adjournment thereof-

78

• KOW KEK LEONG
• V.
• KL TEAM DEVELOPMENT SDN BHD ORS
• 1998 5 CLJ 328  

79
KOW KEK LEONG V. KL TEAM DEVELOPMENT SDN BHD
ORS 1998 5 CLJ 328  

• The facts-
• The petitioner was unhappy with the way the
  other directors had prepared and managed the
  companys accounts and had queried over the same
  in the general meetings of the company

80
KOW KEK LEONG V. KL TEAM DEVELOPMENT SDN BHD
ORS 1998 5 CLJ 328  

• The facts (contd)-
• An extraordinary general meeting of the company
  was held and a resolution was passed removing the
  petitioner from the directorship of the company.

81
KOW KEK LEONG V. KL TEAM DEVELOPMENT SDN BHD
ORS 1998 5 CLJ 328  

• The facts (contd)-
• Having removed the petitioner, the remaining
  directors thereafter convened a directors
  meeting and increased the payment of the
  directors fee to themselves.

82
KOW KEK LEONG V. KL TEAM DEVELOPMENT SDN BHD
ORS 1998 5 CLJ 328  

• The facts (contd)-
• The petitioner petitioned to wind up the company
  and applied for declarations that the resolution
  passed did not comply with s 128 of the Act, and
  was null and void

83
KOW KEK LEONG V. KL TEAM DEVELOPMENT SDN BHD
ORS 1998 5 CLJ 328  

• Held-
• S128(2) overrides the articles of association of
  the company in respect of the notice period for
  the removal of a director of the company. The
  notice given to the petitioner did not comply
  with s 153 and it was bad. Where a meeting is
  held pursuant to a bad notice, the meeting is
  void, and resolutions passed thereat is null and
  void

84

• Filling of vacancy - S128(5)

85
Removal of Directorsof Public Companies
Filling of vacancy - S128(5) A vacancy
created by the removal of a director if not
filled at the meeting at which he is removed, may
be filled as a casual vacancy.
86
Removal of Directorsof Public Companies
S128(6) Companies Act 1965 A person appointed
director in place of a person removed shall be
treated, as if he had become a director on the
day on which the person in whose place he is
appointed was last appointed a director.
87
Removal of Directorsof Public Companies
S128(7) Companies Act 1965 Nothing in
subsections (1) to (6) shall be taken as
depriving a person removed there under of
compensation or damages payable to him in respect
of the termination
88
Removal of Directorsof Public Companies
Southern Foundries (1926) Ltd v Shirlaw 1940 2
ALL ER 445 (House of Lords) The facts- Shirlaw
was appointed as managing director of Southern
Foundries by contract. Three years after the
appointment, the entire share capital of Southern
Foundries was acquired by Federated Foundries Ltd.
89
Removal of Directorsof Public Companies
Southern Foundries (1926) Ltd v Shirlaw 1940 2
ALL ER 445 (House of Lords) The facts- New
articles were then adopted by Southern, including
one that gave Federated the power to remove
Shirlaw at any time.
90
Removal of Directorsof Public Companies
Southern Foundries (1926) Ltd v Shirlaw 1940 2
ALL ER 445 (House of Lords) The facts- Federated
then removed Shirlaw as director under the new
articles. Shirlaw sued for damages for breach of
contract.
91
Removal of Directorsof Public Companies
Southern Foundries (1926) Ltd v Shirlaw 1940 2
ALL ER 445 (House of Lords) Held- Notwithstanding
that the removal was in accordance with the
articles, it remained a breach of contract. The
company could not be restrained from amending its
articles, but to act on the amended articles
might nevertheless amount to a breach of
contract.
92
Removal of Directorsof Public Companies

• The measure of damages is the salary he would
  have received during the period of notice.
• He cannot, however insist on remaining as a
  director.
• Nor would the court specifically enforce a
  contract so as to require the company to retain a
  director.
• Company Law by Walter Woon, Sweet Maxwell Asia,
  Second Edition, pg 244

93
Age Limit for Directors

• S129(1) provides that-
• Notwithstanding anything in the memorandum or
  articles of the company, no person over the age
  of seventy years shall be appointed or act as a
  director of a public company or of a subsidiary
  of a public company.

94
Age Limit for Directors

• S129(2) provides that-
• the office of a director of a public company or
  of a subsidiary of a public company shall become
  vacant at the conclusion of the annual general
  meeting commencing next after he attains the age
  of seventy.

95

• Removal of Directors
• of Private Companies

96
Removal of Directors of Private Companies

• Removal by other directors
• It is possible for the constitution of a private
  company to have a provision that allows directors
  to remove another director.
• Commercial Applications of Company law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 227

97
Removal of Directors of Private Companies

• Removal by Members
• The provisions of section 128 do not apply to a
  private company.
• The removal of directors of private companies are
  governed by the companys articles of
  association.
• If there is no provision in the Articles
  pertaining to removal, the directors can be
  removed by not being re-elected when he is due to
  retire by rotation at the annual general meeting.
• Malaysian Company Secretarial Practice, Prentice
  Hall 2006 by Zubaidah Zainal Abidin at page 88

98
Removal of Directors of Private Companies

• The articles may permit the majority of members
  to remove a director.
• However, it is possible for the articles to limit
  this in some ways.
• For example, the articles might specify that a
  director cannot be removed by a majority of
  members for at least a year after taking office.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 228

99
Removal of Directors of Private Companies

• In the case of a public company section 128 would
  mean that even though this restriction is
  contained in the companys articles, the majority
  of members could still remove the director at any
  time.
• However, in the case of a private company, the
  restriction would have to be observed.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 228

100
Removal of Directors of Private Companies

• In addition to the above, the articles of a
  private company may provide for any other manner
  of removal.
• It may be possible for the company to request in
  writing that the director vacate his office.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 228

101
Removal of Directors of Private Companies

• The director cannot be removed if it will cause
  the number of directors to fall below two as this
  will go against the requirement that each company
  must have at least two directors. (see S.122 CA
  1965)

102
Removal of Directors of Private Companies

• Sometimes, a director is required to hold a
  specified amount of shares as a condition to
  being elected as director of the company. The
  share qualification must be acquired within a
  specified time, failing which the director is
  automatically removed from office. This
  requirement is mandatory and applies to a company
  even if it will cause the number of directors to
  fall below two see S.122(7) and S.124(3) of the
  Companies Act.

103
Removal of Directors of Private Companies

• A private company may adopt article 69 of Table A
  of the Companies Act 1965 and if so its
  shareholders will have the power to remove a
  director prematurely from office.
• Footnote at p.25 of A Consultative Document On
  Clarifying and Reformulating the Directors' Role
  and Duties by CLRC for CCM.

104
Removal of Directors of Private Companies

• Para 1.23 of A Consultative Document On
  Clarifying and Reformulating the Directors' Role
  and Duties By CLRC for CCM
• However, it was noted by the CLRC that one issue
  which requires clarification is whether the
  removal of a director which is done in accordance
  with the company's Articles of Association would
  still require a special notice to be served on
  the company.

105

• In Soliappan v Lim Yoke Fan Others 1968 2 MLJ
  21, the court decided that section 128 is an
  independent source for the power of removal that
  can be relied on in the absence of provisions in
  the Articles empowering the removal of a
  director.

106

• However, subsequent to this case, section 128(2)
  was amended where the words 'under this section'
  were removed, leading to arguments that whilst
  directors of a public company may be removed by a
  simple resolution passed at a general meeting
  irrespective of anything stated in the Articles,
  a special notice must still be given to the
  company in respect of the resolution to remove a
  director even if the removal is accordance with
  procedures specified in the Articles and even in
  the case of a director of a private company.

107

• The CLRC is of the view that special notice to
  the company is only required when the director of
  a public company is to be removed at a
  shareholders' general meeting. This is because
  the special notice is to be served by
  shareholders who want to propose for the removal
  of the director and as such, the special notice
  is to provide a reasonable opportunity to the
  directors of public companies to make their
  representations to the shareholders at the
  general meeting in relation to their removal. If
  the director is not removed at a shareholders'
  general meeting, a special notice will be
  irrelevant as no meeting will be called to
  consider the removal.

108

• The CLRC recommends that
• where the right of the shareholders at a general
  meeting to remove a director (as reflected in
  section 128 of the Companies Act 1965) is
  concerned, this right should be made applicable
  to public companies only and should not be
  extended to private companies and
• (b) where a director of a public company is to be
  removed, special notice is required when the
  director is to be removed in accordance with
  section 128 of the Companies Act 1965.

109
Removal of Directors

• Where directors do not serve under a contract of
  service-
• They may be removed in accordance with the
  articles without the necessity of paying them
  damages
• The power of removal is usually vested in the
  general meeting. (Table A art 69)
• Company Law by Walter Woon, Sweet Maxwell Asia,
  Second Edition, pg 244

110
Removal of Directors

• Where directors do not serve under a contract of
  service-
• In the case of a public company, even if the
  articles provide that the board shall have power
  to remove a director, such an article is
  ineffective. s128(8)
• In the case of a private company, a power granted
  to the board to remove directors is a fiduciary
  power which must be exercised in the interests of
  the company.
• Company Law by Walter Woon, Sweet Maxwell Asia,
  Second Edition, pg 244

111
Removal of Directors

• Entrenchment of Directors
• In the case of a private company-
• Possible to entrench directors by including
  suitably drafted articles. For eg
• by providing that a director may not be removed
  without a special resolution
• that a particular director will hold office for
  life.
• Company Law by Walter Woon, Sweet Maxwell.
  Second Edition pg 245

112
Removal of Directors

• Entrenchment of Directors
• In the case of a public company-
• Not possible to entrench directors.
• S128(1)provides that a public company may always
  remove a director by ordinary resolution,
  notwithstanding anything contained in the
  companys memorandum or articles or in any
  agreement that may exist with the director.

113
Removal of Directors

• Entrenchment of Directors
• In the case of a public company-
• S128(2)
• special notice must be given of such resolution.
• S128(3)
• The director who is to be removed is entitled to
  make representations in writing to the company,
  which is bound to circulate them.

114

• How does a Company amend its Articles of
  Association?

115
How does a company amend its Articles of
Association?

• Section 31 Companies Act 1985 states that the
  amendment or repeal of any provision in the
  articles requires a special resolution of
  members.
• A company may also include in its articles of
  association a further requirement that must be
  satisfied before the special resolution takes
  effect.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 124

116
How does a company amend its Articles of
Association?

• For eg, in a small company, the members may agree
  that amendments to the articles require the
  written consent of all of the members.
• If such a requirement were included, any
  purported amendment to the articles by special
  resolution would not take effect unless that
  additional requirement was satisfied.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 124

117
How does a company amend its Articles of
Association?

• Section 31(2) Companies Act 1965
• Where a company has passed a resolution to amend
  or repeal its articles, that resolution will take
  effect on the day it is passed or on a later date
  specified in the resolution.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 124

118
How does a company amend its Articles of
Association?

• Section 31(2) Companies Act 1965 Alteration of
  the articles must be made by special resolution.
• The alteration of the companys articles is also
  subject to some limitation on the members voting
  power. The members must vote in the best
  interests of the company as a whole.
• Commercial Applications of Company Law in
  Malaysia, 2002 CCH Asia Pte Ltd, pg 124

119
How does a company amend its Articles of
Association?

• This stipulation prevents the majority
  shareholders from exercising their vote to alter
  the articles to the prejudice of a minority.
• It is for the members to decide what is best for
  the company. The court will not interfere unless
  the decision is not one that a reasonable man
  could have made.
• Guide to Company law in Malaysia Singapore, 2nd
  Edition, CCH Asia Limited, pg 50

120
Conclusion

• Directors hold office at the behest of the
  shareholders and at the end of the day, unless
  there is a valid compensation agreement for
  removal before expiry of a directors term of
  office, the director so removed may have little
  recourse in law.
• Courts are reluctant to interfere generally with
  shareholders decision in removing directors if
  proper procedure has been followed.

121
The End Thank you Assisted by Patricia Boo LLB
(Hons) London, CLP