Ng Yew Nam and others v Loh Sin Hock Anthony and others and another matter [2023] SGHC 351

Introduction

Section 177 of the Companies Act 1967 (Companies Act) enables members of a Company to call general meetings upon fulfilling its prescribed requirements – it is, however, silent as to the proper party to conduct such meetings.

In a landmark judgment handed down on 12 December 2023, the General Division of the High Court held that to call a meeting and to conduct it are distinct concepts under the Companies Act. Accordingly, the right to conduct a meeting may not be implied from the right to call such meeting; the constitution of a company ultimately governs the conduct of meetings.

Background

Certain shareholders of ASTI Holdings Limited (ASTI) (Convening Shareholders) sought to call an extraordinary general meeting (EGM). Among the resolutions tabled at the EGM was a resolution to replace the incumbent directors of ASTI (Incumbent Directors) with a new set of directors. On the premise that they were entitled to conduct the EGM, the Convening Shareholders informed the Incumbent Directors that they intended to proceed with the EGM to the latter's exclusion. The Incumbent Directors cautioned the Convening Shareholders that, as the former were the proper parties to conduct the EGM, proceeding with the EGM in their absence would impugn the validity of any resolutions passed at the EGM. Nevertheless, the Convening Shareholders carried on with conducting the EGM sans the Incumbent Directors.

Post-EGM, the Convening Shareholders filed an action against the Incumbent Directors and ASTI to secure their compliance with the resolutions passed at the EGM. Similarly, ASTI commenced an action to seek a declaration that the EGM was not a valid EGM of ASTI and that the resolutions passed were not valid.

Holding

The Court dismissed the Convening Shareholders' action and allowed ASTI's action, granting a declaration that the resolutions passed at the EGM are invalid and of no legal effect.

In arriving at its conclusion, the Court gleaned guidance from two authorities in particular.

First, the Court looked to the local case of Naseer Ahmad Akhtar v Suresh Agarwal and another [2015] 5 SLR 1032, in support of the proposition that the calling of the meeting refers only to the process by which a general meeting of the members is formally convened. By contrast, the conduct of the meeting refers to all matters pertaining to the carriage of the meeting, which includes the procedural requirements governing the transaction of business at the meeting.

Second, the Court found the Australian Federal Court decision of Wun v CellOS Software Ltd [2018] FCA 1947 (Wun) to be pertinent. At issue in Wun was the extent of rights conferred to shareholders under section 249F of the Corporations Act 2001 (Cth), which entitles them to "call, and arrange to hold, a general meeting". Section 249F is similar to Section 177 of the Companies Act. Notably, Section 249F goes further than Section 177 with the additional provision of "arrange to hold". Despite this, the court in Wun found that a distinction exists between the calling and holding of a meeting, and section 249F did not confer on shareholders the additional right to hold or conduct a meeting. Once the meeting is held, in the normal course it would be conducted by the chair of the existing board, according to the normal procedures applicable to the general meeting of shareholders. As a result, the provisions of the constitution of the company or the general law dealing with such matters as adjournments, quorum, voting and proxies will apply to the meeting.

The Court noted, however, that Section 177 does not expressly disentitle shareholders from conducting a meeting they have called. Consequently, the determination of this issue necessitates reference to the company's constitution.

In the present case, the Court relied on Regulation 76 of ASTI's constitution which furnished Incumbent Directors with a right to receive notice, attend and speak at General Meetings. The Court also turned to section 152(1) – (3) of the Companies Act, which provides a right to be heard for directors subject to a resolution for their removal. Considering both Regulation 76 and section 152, the Court decided that the Incumbent Directors had a right to attend and speak at the EGM and to be heard on the special resolution relevant to their removal as directors. The Court was also mindful of Regulation 52 of ASTI's constitution which provides for the Chairman of the Board of Directors to preside as Chairman at a General Meeting. Reading Regulations 76 and 52 together, the Court held that the right to conduct the meeting, if the Chairman of the Board so chose to exercise it, followed from his right to attend the meeting. The practical effect of this is that other shareholders could only conduct the meeting if, having been notified, the directors omitted to attend or declined to conduct the meeting. Therefore, the exclusion of the Incumbent Directors, including the Chairman of the Board, from the EGM caused the resolutions passed to be invalid.

Conclusion

The Court's interpretation of section 177 of the Companies Act has afforded valuable insight on the ambit of shareholders' concomitant rights. Importantly, it comports with the trite principle of the division of powers between the board of directors and general meeting, which is governed by contract i.e. the company's constitution. Insofar as the company's constitution delineates powers between the board of directors and the general meeting, shareholders cannot themselves usurp the powers which by the regulations are vested in the directors any more than the directors can usurp the powers vested by the regulations in the general body of shareholders.

For any queries, please feel free to contact Mr Yoong Nim Chor (yoongnc@unilegal.com.sg), Mr Ranvir Kumar Singh (ranvir.kumar@unilegal.com.sg) or Mr Shiv Kumar Singh (shiv.kumar@unilegal.com.sg).