Introduction
Section 181 of the Companies Act 1956 provides statutory relief for an aggrieved member in cases of oppression. While courts are traditionally reluctant to interfere in a company’s internal affairs, an aggrieved member may succeed if they can establish that:
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The company’s affairs are being conducted, or the powers of the directors are exercised, in an oppressive manner or in disregard of the member’s interests; or
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Some unfairly discriminatory or prejudicial company act has been passed or threatened, or a prejudicial resolution has been passed or is proposed, if introduced to protect minority shareholders’ interests in limited companies.
The court may grant any order it sees fit to end the oppressive conduct, including winding up the company. Malaysia’s provisions are among the broadest, as seen in Re Kong Thai Sawmill (Miri) Sdn Bhd, where Lord Wilberforce stated that the applicable test is whether there was “a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect.”
This long-established test was recently challenged in the Federal Court case Looh Siong Chee v Numix Engineering Sdn Bhd, where the court was invited to reconsider the test for oppression under Section 181 in light of recent developments in English law.
Facts
The dispute arose from a breach of agreements between appellant Looh Siong Chee, respondent Numix Engineering Sdn Bhd, and its subsidiary, Magic Telecom Sdn Bhd. The agreements were entered to secure investment from the appellant as the respondent faced financial difficulties.
The appellant persuaded the respondent to issue 4 million shares in Magic to Sejahtera Saluran Sdn Bhd (an affiliate of the appellant) in exchange for a RM4 million loan. Sejahtera then requisitioned an extraordinary general meeting to include two additional directors on Magic’s board.
The respondent filed an oppression petition under Section 181, seeking to declare the share allotment void and to exclude the appellant and Sejahtera from Magic’s management. The appellant and Sejahtera filed a civil suit seeking specific performance. Both matters were tried jointly before the High Court.
Decisions
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High Court: Granted the oppression petition, nullified the 4 million share allotment, ruled the appointment of two directors prejudicial, and ordered Magic to be wound up. Civil suit dismissed.
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Court of Appeal: Dismissed the appellant’s appeal.
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Federal Court: Dismissed the appeal, confirming that there was no reason to redefine the oppression test under Section 181. The Federal Court held that Section 994 of the UK Companies Act 2006 was not in pari materia with Section 181 of the Companies Act 1956. Previous cases (Pan-Pacific Construction Ltd v Ngiu Kee Corporation (M) Bhd and Jet-Tech Materials Sdn Bhd v Yushiro Chemical Industry Co Ltd) had already examined the development. The operative test from Re Kong Thai Sawmill — assessing “commercial fairness” — remains valid.
Comment
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Section 181 maintains a broad scope, allowing relief and damages, including winding-up, to end oppressive conduct.
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Winding-up is not the primary remedy; the court first establishes whether oppressive conduct occurred.
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English law of oppression is narrower, requiring justification under the “just and equitable” principle and considering prejudice to minority shareholders.
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Malaysia’s liberal approach allows courts to grant relief in the company’s best interest, reflecting a proactive stance against oppression.
Article Author
Gan Khong Aik
Partner, Gan Partnership
E: khongaik@ganlaw.my
