6.

Discuss the scope of minority protection under the common law and Companies Act 2016

- Minority shareholder – a shareholder who does not exert control over a company
- Minority shareholders may find it difficult to obtain relief against the directors or the majority shareholders
- Constrained by 2 principles provided in Foss v Harbottle
o Proper plaintiff rule – the proper claimant to initiate an action in respect of a wrong done to the company must prima facie be the company
itself.
o Majority rule – the rights of the majority shareholders are taken into consideration to decide how the company’s affairs are to be conducted.

Common Law Companies Act 2016

Oppression
Def:
Re Jermyn Street Turkish Baths Ltd
[1971]
- When shareholders having
a dominant power in a
company either by exercise
that power to procure
something is done or not
done in the conduct of the
company’s affairs or
procure by an express or
implicit threat of an
exercise of that power that
something is not done in
the conduct of the
company’s affairs
- Conducts is unfair
Jaya Medical Consultants Sdn Bhd v Island & Peninsular
Bhd [1994]
- Oppression does not necessarily mean ‘illegal’ or
‘fraudulent’. For there to be oppression, there
must be a visible departure from the standard of
fair dealing or fair play
Here the part fair dealing or fair play it is based on the
court to decide. It could be in various reason at times it
could be just by using the test objective bystander (Re A
Company) where the objective bystander observes the
conduct of the respondent was for an improper purpose or
with an improper motive.
Section 346
- Provides remedy to any member of a company where
there is oppression or prejudice to the member.
- Court will have a wide flexibility in granting any
remedy in order to bring the oppressive conduct to an
end
Section 346 (1) (a) & (b)
- The aggrieved member must show that:
o The affairs of the company being conducted in
a manner oppressive or in disregard of the
interest of the member
o The power of the directors are being exercised
in a manner oppressive or in disregard of the
interests of the member
o Some act of the company has or is threatened
to be done which unfairly discriminates against
or is to otherwise prejudicial to the member
o Some resolution of the members has been
passed or is proposed which unfairly
discriminates against or is otherwise prejudicial
to the member
 Re Kont Thai Sawmill (Miri) Sdn Bhd & Ors v Ling Beng
Sung [1978]
- In order to establish oppression, there must be a visible
departure from the standards of fair dealing and a
violation of the conditions of fair play which a
shareholder was entitled to expect.

Pan-Pacific Construction Holdings Sdn Bhd v Ngiu-Kee

Corporation (M) Bhd & Anor [2010]
- Since keeping promises and honouring agreements is
an important element of commercial fairness, the
starting point in determining oppression is to look at the
agreement between the parties and this could take the
form of the articles of association or constitution
Fraud on minority - The majority of the company’s members use their
power to defraud or oppress the minority, their
conduct is liable to be impeached even by a single
shareholder.
Cook v Deeks (1916)
- the directors who were also the majority s/holders
of the company, expropriated a project which the
company was negotiating. As they formed the
majority, they passed a s/holders’ resolution to
declare that the company has no interest in the
contract. The minority s/holder, Cook, objected
and took action against the majority s/holders.
- Held: the s/holders’ resolution was invalid as it
was a fraud on Cook, a minority s/holder in the
company.
Menier v Hooper’s Telegraph Works
- Menier was a minority shareholder who
complained that there were self interested
transactions between a majority member and the
company. The main issue here on fraud is about
misappropriation of corporate assets. The court

Take the property belong to
minority shareholder
then held that a minority shareholder’s action was
properly given in such circumstances.
Brown v British Abrasive Wheel Co [1919] Wong Kim Fatt v Leong Co Sdn Bhd [1976]
- British Abrasive Wheel Co needed to raise further - In this case, it the company’s article allowed the
capital. The 98% majority were willing to provide majority shareholder to acquire the shares owned by the
this capital if they could buy up the 2% minority. minority shareholder. The court held that it is the nature
Having failed to effect this buying agreement, the of the article of the company. This means if it is stated
98% purposed to change the articles of in the constitution that it can do so.
association to give them the power to purchase the
shares of the minority. The proposed article
provided for the compulsory purchase of the
minority’s shares on certain terms. However, the
majority were prepared to insert a provision
regarding price which stated that the minority
would get a price which the court thought was
fair.
- Held: Astbury J held that the alteration was not
for the benefit of the company as a whole and
could not be made