WTK Realty Sdn Bhd v KMWF & Anor And Other Appeals [2025] 6 MLRA 20

WTK Realty Sdn Bhd v KMWF & Anor And Other Appeals [2025] 6 MLRA 20

Federal Court (Putrajaya) 

Curability of Non-Compliant Section 132D Share Issuances under Section 63 

1. The dispute involves three family-owned companies, WTK Realty Sdn Bhd (‘WTK Realty’), Southwind Plantation Sdn Bhd (‘Southwind’) and Ocarina Development Sdn Bhd (‘Ocarina’), which were part of a conglomerate founded by the late WTK. Upon his death in 2004, his three sons, WKN, WKY and WKC, managed the businesses and initially held equal shares.
2. Between 2005 and 2007, new shares were allotted and issued to WKN in all three companies, 4,000,000 in WTK Realty, 3,000,000 in Southwind and 1,500,000 in Ocarina. WKY and WKC raised no objections to these issuances until after WKN’s death in March 2013. When WKN’s widow and executrix, KM, requested that these shares be registered in her name, WKY and WKC refused and filed suits to nullify the shares. They argued the issuances breached subsection 132D(1) of the Companies Act 1965 (‘CA 1965’) as they were carried out without prior shareholder approval.
3. KM responded by filing validation suits under sections 63 and/or 355 of the CA 1965. The High Court initially nullified the shares, but the Court of Appeal reversed this decision using the common law Duomatic principle of informal assent. The matter then proceeded to the Federal Court.

1. Whether the Duomatic principle (informal unanimous assent) creates an exception to the mandatory requirement of prior shareholder approval under subsection 132D(1) of the CA 1965.
2. Whether the Court can depart from the mandatory requirement of prior approval to allow subsequent approval of share issuances.
3. Whether a breach of subsection 132D(1) of the CA 1965 renders share issuances null and void, or if they are curable and can be validated under section 63 and/or section 355 CA 1965.

(1) Whether the Duomatic principle (informal unanimous assent) creates an exception to the mandatory requirement of prior shareholder approval under subsection 132D(1) of the CA 1965.

(a) The Federal Court held that the Duomatic principle (derived from Re Duomatic Ltd [1969] 2 Ch 365) cannot be used to circumvent or override a mandatory statutory requirement when the statute itself provides an express mechanism to cure a breach of that requirement.

(b) Under subsection 5(1) of the Civil Law Act 1956, English common law principles are only applicable in Malaysia in the absence of local legislation. Since the CA 1965 provides specific curative provisions (sections 63 and 355) for invalid share issuances, these statutory paths must be prioritized over the common law Duomatic principle.

(c) Within the scope of subsection 132D(1) of the CA 1965, the requirement for prior shareholder approval is a safeguard for the company and its members. While informal assent may be relevant evidence of the shareholders’ intentions, it does not legally replace the necessity of a formal resolution or a Court order for validation under the Act.

(2) Whether the Court can depart from the mandatory requirement of prior approval to allow subsequent approval of share issuances.

(a) The Court answered the above issue in the affirmative, stating that it has the discretionary power to validate share issuances even where prior approval was missing.

(b) The Court’s power under section 63 of the CA 1965 is broad. If an allotment is invalid due to a failure to comply with a provision of the Act (such as the “prior” approval requirement in section 132D of the CA 1965), the Court may validate it if it is “just and equitable” to do so.

(c) The Court looked at the purpose of the capital injection and the behavior of the parties. Since the companies utilized the funds and the other shareholders (WKY and WKC) acquiesced to the issuance for years, the lack of prior approval was a timing defect that the Court could cure retrospectively through a validation order.

(d) The Court cited Khaw Tiew Chai v Lee Chai Seng & Ors [2018] MLRAU 371, where a share issuance was declared valid despite non-compliance with subsection 132D(1) of the CA because no existing shareholders were prejudiced by the lack of a prior general meeting. 

(3) Whether a breach of subsection 132D(1) of the CA 1965 renders share issuances null and void, or if they are curable and can be validated under section 63 and/or section 355 of the CA 1965.

(a) A breach of subsection 132D(1) of the CA 1965 does not render the share issuance void ab initio (a total nullity). Instead, it makes the issuance “invalid” or “voidable”, which brings it within the scope of the Court’s curative jurisdiction.

(b) The very existence of section 63 of the CA 1965 (specifically for validating share allotments) and section 355 of the CA 1965 (for curing procedural irregularities) indicates the legislature’s intent that such breaches should be curable rather than automatically fatal. If a breach resulted in an absolute nullity, it would be logically impossible for a Court to validate it later.

(c) Under section 355 of the CA 1965, a proceeding is not invalidated by a procedural irregularity unless the Court is of the opinion that the irregularity has caused “substantial injustice” that cannot be remedied by a Court order. In this case, the Federal Court found that nullifying the shares would cause substantial injustice to WKN’s estate (the 1st Respondent), as the subscription monies had already been paid and used by the companies.

(d) The Court cited Kelapa Sawit (Teluk Anson) Sdn Bhd v Dr Yeoh Kim Leng & Ors [1990] 1 MLRA 553 whereby the Court in this case established that an irregular act (as opposed to a non-act) can be regularized through the “just and equitable principles embodied in section 63”. 

(e) The case of Millheim v Barewa Oil & Mining [1971] WAR 65 was cited for the principle that section 63 is designed to ‘make good what is really a defective title to shares’ where an irregularity in the allotment would, in strict law, result in invalidity. The Court uses this power to validate the proprietary interest represented by the share certificate. 

1. The Federal Court dismissed the appeals and affirmed the orders of the Court of Appeal, though for different reasons. While the Court of Appeal relied on the Duomatic principle, the Federal Court held that the correct path was statutory validation under section 63 of the CA 1965.
2. The Court can allow subsequent approval, provided the requirements of section 63 are fulfilled. Consequently, the validation orders requested by KM for the shares in WTK Realty, Southwind and Ocarina were granted. 

• Technical non-compliance with the requirement for prior shareholder approval for share issuances is an irregularity that can be cured by the Court, not fatal pursuant to subsection 132D(1) of the CA 1965.
• In Malaysian company law, parties should rely on express provisions for validation (sections 63 and/or 355 of the CA 1965) rather than common law doctrines like Duomatic when statutory remedies cover the same ground.
• The shareholders cannot “approbate and reprobate”, they cannot accept the benefits of a share issuance (like capital injection) and then seek to nullify it years later based on technicalities once it no longer suits them.
• The Court’s primary concern in validation applications is achieving a result that is just and equitable, particularly in family-run companies where management is often informal.