| Kwa Hung Ceong & Anor v Zung Zang Trading Sdn Bhd [2018] 4 MLJ 773
Court of Appeal, Putrajaya
Companies and corporations – Extraordinary General Meeting – Requisition made by corporate representatives |
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| Facts | 1. The Respondent, Zung Zang Trading Sdn Bhd, claims to be a wholly-owned subsidiary of Kwan Chee Hang Sdn Bhd (KCHSB), which was set up as a family investment holding company by the late Kwan Chee Hang and his wife, Wong Wyuk Chin.
2. The First Appellant, Kwan Hung Cheong, is one of the sons of the late Kwan Chee Hang and was in charge of managing the family-owned businesses. The second Appellant is Kwan Hung Cheong’s wife.
3. The Respondent alleged that KCHSB, through Directors’ Circular Resolutions dated 2 December 2010 and 16 October 2013, appointed one of its directors, Mr. Kwan Huang Cheng (PW1), as its corporate representative to attend general meetings of the Respondent.
4. As the director, the First Appellant had issued a notice for an Extraordinary General Meeting (EGM) to be held on 26 July 2014 and stated in a letter dated 13 June 2014 that the EGM was convened on a “without prejudice” basis.
5. On 26 July 2014, the First Appellant claimed there was no quorum at 2:30 PM and declared the meeting aborted at 2:35 PM at the EGM. He left the meeting with another director. PW1 continued the EGM and chaired the meeting
6. PW1 requisitioned the Respondent’s Board of Directors to convene the EGM. However, disputes arose on the validity of the EGM, including whether there was sufficient quorum and whether PW1 was authorized to requisition and act as a representative during the meeting.
7. At the High Court, the Respondent succeeded in its claim against the Appellants. The Appellants then appealed to the Court of Appeal. |
| Issue | 1. Whether Extraordinary General Meeting of the Respondent held on 26 July 2014 was valid?
2. Whether PW1 have the authority to requisition and chair the EGM as KCHSB’s corporate representative?
3. Whether the resolutions passed at the EGM legally binding? |
| Ratio | 1. Whether Extraordinary General Meeting of the Respondent held on 26 July 2014 was valid?
(a) Article 46 of the Respondent’s Articles of Association provides that – “No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business. Save as herein otherwise provided, two members present in person shall be quorum. For the purposes of this Article ‘member’ includes a person attending as a proxy or as representing a corporation which is a member”.
(b) In the present case, the Appellant claimed that it was recorded that only the First Appellant was present as director and Mr Chung Tet Kan as alternate director. No ‘member’ or shareholder was recorded as present at the EGM.
(c) It can be clearly seen from the Respondent’s minutes that PW1 attended the EGM as a corporate representative for KCHSB. It is disputed by the Appellants that KCHSB is the 100% shareholder of the Respondent. However, it is not disputed by the appellants that KCHSB is a ‘member’ or shareholder of the Respondent.
(d) Thus, it can be accepted that the PW1 had attended the EGM as a shareholder’s representative ie as KCHSB’s representative. Therefore, the First Appellant’s allegation in his letter to KCHSB and its solicitors dated 20 February 2014 that ‘no shareholder/shareholder’s representative was present at the EGM’ is not true.
(e) The Respondent’s minutes recorded that three persons namely, PW1, Madam Wong Nyuk Ching and Mr Lam Chung Fatt, were present at the EGM even though the First Appellant and Mr Chung Tet Kan left as the meeting commenced. Therefore, the requirement in Article 46 of the Respondent’s Articles of Association that two members must be present in person to form the quorum, has been met. This point was correctly considered by the judge.
(f) Court of Appeal was of the view that EGM was conducted with sufficient quorum and cannot be challenged on that ground alone. That being the case, it can be accepted as a fact that the EGM did proceed on 26 July 2014
(g) Court of Appeal ultimately ruled that the EGM was validly convened, as the quorum requirement was met according to the Articles of Association.
(h) Court of Appeal affirmed the decision of the High Court that the quorum was met, despite the departure of certain members, as the minutes recorded sufficient attendance at the EGM.
2. Whether PW1 had the authority to requisition and chair the EGM as KCHSB’s corporate representative?
(i) Pursuant to subsection 147(3) of the Companies Act 1965, PW1 was appointed as “the Company’s representative to attend and vote for and on behalf of the Company at any meetings of a company which the Company is a member”.
(j) Thus, in this case, the corporate representative is only allowed to attend and vote at meetings on behalf of the company by resolution. PW1’s appointment as a corporate representative did not include the power to call (requisition) or chair meetings. [Drico Ltd v Drico (Water Specialist) Sdn Bhd [2011] MLJU 439]
(k) In Drico’s case, it was held that a corporate representative’s role is limited to attending meetings. They cannot carry out actions like signing agreements or making decisions on behalf of the company. Therefore, if PW1 tried to act beyond this role, such actions (like calling the EGM) would be invalid.
(l) In the present case, from a perusal of the Directors’ Circular Resolution dated 2 December 2010, PW1 is not given the authority to requisition the EGM. Since PW1 issued the requisition of the EGM when he does not have the capacity to do so, it renders the requisition of the EGM and the EGM itself invalid.
3. Whether the resolutions passed at the EGM was valid and legally binding?
(m) The Respondent did not provide an official certificate under the seal of KCHSB or proper documentation to prove that PW1 was legally appointed as the corporate representative of the company, KCHSB. Without this proof, there is no basic evidence to confirm PW1’s role to empower him to act on behalf of KCHSB in respect of the EGM.
(n) The judge made a mistake by accepting the Respondent’s claim that KCHSB had appointed PW1 as its corporate representative under Article 79 of its Articles of Association. In reality, the Directors’ Circular Resolution stated that the appointment was made under a non-existent Article 109. Furthermore, the version of Article 79 included in the Respondent’s trial documents did not reflect the amended version of Article 79.
(o) The Court of Appeal held that the EGM was not properly conducted. Therefore, the resolutions (decisions) made during the meeting, such as removing and appointing directors and changing the company’s registered office, were invalid.
(p) Article 79 of the Articles of Association of KCHSB stated that – “A resolution in writing signed by all the directors shall be as valid and effectual as it has been passed at a meeting of the directors duly called and constituted.”
(q) According to Article 79, it is a requirement that the resolution must be signed by all directors to be valid. However, the Directors’ Circular Resolution dated 2 December 2010 was missing the signature of one director, Kwan Chee Hang.
(r) Furthermore, the Court of Appeal held that there was no evidence showing that Article 79 was actually amended as claimed. The notice of resolution dated 14 June 2007 only stated an intention to amend it, but no proof of the amendment being finalized was provided.
(s) Since the resolution appointing PW1 was not properly signed by all directors, his appointment was invalid. As a result, PW1 had no authority to call for the EGM or participate in voting.
(t) Without the approval of all the directors of KCHSB, the appointment of PW1 as corporate representative is invalid to begin with. Without a valid appointment, it follows that apart from having no authority to requisition the EGM, PW1 also did not have the authority to attend and vote in the EGM.
(u) Consequently, court held that all the resolutions passed at the EGM are not valid and unenforceable against the Appellants. |
| Decision | Appellants’ appeal allowed with costs and overturned the High Court’s decision. |
| Key Takeaways | 1. A corporate representative’s powers are limited to those expressly provided by law or the appointing resolution. Unauthorized actions, such as requisitioning or chairing meetings, are invalid.
2. If a director’s signature is missing from a resolution, it can lead to the invalidation of that resolution. For instance, without the approval of all directors, the appointment of a corporate representative can be deemed invalid, affecting the legitimacy of any resolutions passed thereafter
3. A meeting must comply with statutory and corporate governance requirements, including proper quorum, to be valid. |
