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Malay Mail
5 hours ago
- Business
- Malay Mail
Federal Court validates share issuance in family company dispute: What it means for Malaysians and their rights — Justin Wee Kim Fang
AUGUST 1 — In a significant recent decision, the Federal Court of Malaysia resolved a complex legal battle involving a prominent Sarawak-based family business over the validity of shares issued in several private companies. The outcome affirms the principle that Malaysia courts can, in certain circumstances, validate share issuances even if proper approval procedures were not followed so long as it is fair and just to do so. The case, WTK Realty & Ors v Kathryn Ma Wai Fong & Ors, sheds light on the rights of shareholders, the responsibilities of directors, and how Malaysian courts balance formal legal requirements with real-world family and business dynamics. In a significant recent decision, the Federal Court of Malaysia resolved a complex legal battle involving a prominent Sarawak-based family business over the validity of shares issued in several private companies. — istock pic The dispute: A family affair turns contentious The late Wong Tuong Kwong built a successful group of companies, including WTK Realty Sdn Bhd, Southwind Plantation Sdn Bhd, and Ocarina Development Sdn Bhd. When he passed away, control of the group fell to his three sons — Wong Kie Nai ('WKN'), Wong Kie Yik ('WKY'), and Wong Kie Chie ('WKC'). In the mid-2000s, WKN was allotted and issued millions of new shares in the 3 companies. His two brothers, WKY and WKC, did not object at the time. However, after WKN passed away in 2013, his widow and estate executor, Kathryn Ma, tried to have those shares officially registered under his estate. That's when the dispute began. WKY and WKC filed suits in the High Court to nullify the shares issued to WKN, claiming they were issued without the approval of shareholders, as required under section 132D (1) of the Companies Act 1965 ('CA 1965'). They claim the issuance of the shares breached company law and internal company rules being the Articles of Association ('Articles'). Kathryn, in response, opposed the nullification suits and reciprocated by filing her own suits asking the court to validate the shares under section 63 and/or 355 of the CA 1965 despite any procedural issues. High Court — Strict compliance of the law required The High Court sided with WKY and WKC, ruling that because proper shareholder approval had not been obtained in advance, the shares were invalid. The High Court found that meetings approving the share issuance had either not happened or lacked proper documentation. Kathryn's argument — that the family had known about and accepted the shares over many years — was rejected. Her applications to validate the shares were also dismissed. The High Court reasoned that allowing the shares to stand would unfairly dilute the ownership of the other siblings and went against the legal requirement for prior approval under the CA 1965. Court of Appeal — Informal agreements may count Kathryn appealed. The Court of Appeal reversed the decision of the High Court. It found that even though the proper procedures weren't followed, the family had known about the issued shares for years and signed documents that referred to the new shareholdings. According to the Court of Appeal, this amounted to 'informal assent' — in other words, the brothers had accepted the share issuance through their conduct, even if there was no formal meeting or written approval. The delay by WKC and WKY in seeking reliefs through the nullification suits, which were commenced almost six to seven years after the shares were issued to WKN connotes knowledge and acquiescence on their part. The court relied on the Duomatic principle, a concept from English law, which says that if all shareholders agree — even informally — their decision can be as good as a formal resolution. This is particularly applicable to family run companies as it is a distinctive hallmark of family-run companies where the affairs are frequently conducted informally and often without adhering to the formal requirements of statutes or the company's Articles. Federal Court — Formal rules matter, but so does fairness The dispute didn't end there. WKY and WKC took the matter to the Federal Court, the apex court in Malaysia. The primary question was: Can informal agreement by the shareholders override legal requirements under the CA 1965? Or must the courts follow the law strictly? In its judgment, the Federal Court took a middle path. While agreeing that the shares were not validly issued under the law, the Federal Court took a different view. It held that the Duomatic principle cannot override clear statutory requirements under the CA 1965, but the CA 1965 itself allows the court to cure procedural errors, if it is fair to do so. Importantly, the Federal Court held that this validation should be done under sections 63 and 355 of the CA 1965, which give judges the power to cure certain legal mistakes as long as it won't cause serious injustice. In this case, the Federal Court amongst others found that: WKN had paid for the shares and the companies kept the money. His brothers knew about the shares for years, signed off on company accounts, and used the shares to get bank loans. The delay in objecting (6-7 years) showed they had accepted the situation. No one offered to return the money paid by WKN to his estate. Based on these factors, the court ruled that it would be unfair to nullify the shares. The share issuances were therefore validated. What does this mean for you? This case has broad lessons for Malaysian shareholders, business owners, and families who run companies together: 1. Follow statutory requirements — Share issuances and key decisions should always be properly approved in writing. Informality can lead to legal disputes later on. 2. Your conduct matters — If you know about something and benefit from it for years without objection, the court may treat that as acceptance. 3. The Courts can intervene — Even when procedures aren't followed strictly, the courts have the power to cure the problem, if it's fair and no one is unfairly prejudiced. 4. Time is of the essence — Delaying your objections can weaken your case. Courts may view long silence as acceptance. Final thoughts This decision reflects the maturity and flexibility of Malaysian company law, which tries to balance formal legal requirements with commercial reality and fairness. For family-run businesses, it's a timely reminder that mixing business and personal relationships without clear documentary records can lead to bitter legal fights. If you're a shareholder, director, or company owner, this case is a lesson: Document your decisions, know your rights, and act early when something seems wrong. P/S: Sections 63 and 355 of the CA 1965 have been repealed. Similar provisions are now found in sections 108 and 582 of the Companies Act 2016 respectively. * Justin Wee Kim Fang (Advocate & Solicitor), Partner of Messrs Justin Wee ** This article is for informational purposes only and does not constitute legal advice. If you're facing a similar situation, consult a qualified lawyer. *** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
BreakingNews.ie
4 days ago
- Business
- BreakingNews.ie
Noel O'Callaghan says sons trying to freeze him out of business he set up
Hotelier Noel O'Callaghan claims in Commercial Court proceedings that two of his sons, who took over the running of his business in 2016, have excluded him and prevented him from exercising his right to retake control. Mr O'Callaghan (74) stepped back in 2016 from the business he built from scratch over 40 years. The first hotel his group acquired was the Mont Clare in Dublin in 1984. Advertisement In addition to five hotels it operates, it also owns the 450-acre Mountarmstrong stud farm outside Cashel in Co Tipperary, along with around 100 rent apartments owned by Só Living. In his proceedings, it is claimed he stepped down from the day-to-day management of the group to focus on Mountarmstrong and his bloodstock business. He left the day to day running to his sons. The transfer was done in time for his 66th birthday in order that substantial Capital Gains Tax relief would not be lost. It is claimed that in agreeing the transfer of his shares in Saira Co Dublin Unlimited Company, in which he is a director along with his sons Paul and Charles who now run the group, he wanted a "fallback position in the event of any future dispute" whereby he could retake control of Saira. Advertisement Accordingly, Paul and Charles, along with his third son Bryan who was involved in the business until he departed in 2023, signed a form of proxy appointing their father to act as each of their proxy and vote on their behalf at meetings of the Saira board. The proxy is still extant and binding, it is claimed. As part of the 2016 agreement, their father was to be paid an annual salary of €500,000 for the rest of his natural life and to have his credit card expenses discharged along with giving him the benefit and control of Mountarmstrong. After Bryan left in 2023, a new shareholders agreement was made but it is claimed this did not replace the 2016 agreement. The stud farm, which comprises a large number of racehorses, was operated by Saira subsidiary, Sherborough Development Co Unlimited Company, and Noel O'Callaghan is the full or partial beneficial owner of the bloodstock, it is claimed. Advertisement It is alleged that since 2024, Paul and Charles have attempted to exercise control over the bloodstock with instructions for valuations and sales of some done without their father's consent. In 2024, Noel sold his interest in a commercial property called the Archers Building in Fenian Street, Dublin, to Saira. It is claimed that there was a failure to disclose KBC was negotiating the surrender of its lease on the building, which was eventually done for €16.6m, and this resulted in an undervaluation of the building at the time the father sold his interest. It constituted a material non disclosure and secret profit, it is claimed. His relationship with Paul and Charles began to deteriorate in 2024 with the purchase of residential properties in Warrenpoint for their personal use, the withdrawal of instructions to prepare board packs for directors meetings and the payment of a dividend of €3.2m to the two sons. Advertisement When Noel challenged these decisions, his sons began to "freeze" him out by removing clerical support and the cancellation of payments to him by Saira, including health insurance. The proceedings by Noel are against Paul and Charles, Saira and Sherborough. On Monday, the case was admitted on consent to the Commercial Court on the application of Martin Hayden SC who said, in reply to a question from Mr Justice Mark Sanfey, that mediation had been tried already. The judge said in cases involving close family members mediation was desirable. He approved agreed directions for the progress of the case and adjourned it to November.
Irish Times
4 days ago
- Business
- Irish Times
Hotelier Noel O'Callaghan takes legal action against two sons
Hotelier Noel O'Callaghan claims in Commercial Court proceedings that two of his sons, who took over the running of his business in 2016, have excluded him and prevented him from exercising his right to retake control. Mr O'Callaghan (74) stepped back in 2016 from the business he built from scratch over 40 years. The first hotel his group acquired was the Mont Clare in Dublin in 1984. In addition to five hotels it operates, it also owns the 450-acre Mountarmstrong stud farm outside Cashel in Co Tipperary, along with around 100 rent apartments owned by Só Living. In his proceedings, Mr O'Callaghan claims he stepped down from the day-to-day management of the group to focus on Mountarmstrong and his bloodstock business, leaving the day-to-day running to his sons. READ MORE The transfer was done ahead of his 66th birthday in order that substantial capital gains tax relief would not be lost. It is claimed that, in agreeing the transfer of his shares in Saira Co Dublin Unlimited Company, in which he is a director along with his sons Paul and Charles who now run the group, he wanted a 'fallback position in the event of any future dispute' whereby he could retake control of Saira. Accordingly, Paul and Charles, along with his third son Bryan who was involved in the business until he departed in 2023, signed a form of proxy appointing their father to act as each of their proxy and vote on their behalf at meetings of the Saira board. The proxy is still extant and binding, it is claimed. As part of the 2016 agreement, Mr O'Callaghan snr was to be paid an annual salary of €500,000 for the rest of his natural life and to have his credit card expenses discharged along with the benefit and control of Mountarmstrong. After Bryan left in 2023, a new shareholders' agreement was made but, it is claimed, this did not replace the 2016 agreement. The stud farm, which comprises a large number of racehorses, was operated by Saira subsidiary, Sherborough Development Co Unlimited Company, and Noel O'Callaghan is the full or partial beneficial owner of the bloodstock, it is claimed. It is alleged that, since 2024, Paul and Charles have attempted to exercise control over the bloodstock with instructions for valuations and sales of some animals done without their father's consent. In 2024, Noel sold his interest in a commercial property called the Archers Building in Fenian Street, Dublin, to Saira. It is claimed that there was a failure to disclose KBC Bank was negotiating the surrender of its lease on the building, which was eventually done for €16.6 million, and this resulted in an undervaluation of the building at the time the father sold his interest. It constituted a material non-disclosure and secret profit, it is claimed. Noel O'Callaghan's relationship with Paul and Charles began to deteriorate in 2024 with the purchase of residential properties in Warrenpoint for their personal use, the withdrawal of instructions to prepare board packs for directors' meetings and the payment of a dividend of €3.2 million to the two sons. When Noel challenged these decisions, his sons began to 'freeze' him out by removing clerical support and the cancellation of payments to him by Saira, including health insurance. The proceedings by Noel are against Paul and Charles O'Callaghan, Saira and Sherborough. On Monday, the case was admitted on consent to the Commercial Court on the application of Martin Hayden SC who said, in reply to a question from Mr Justice Mark Sanfey, that mediation had been tried already. The judge said in cases involving close family members mediation was desirable. He approved agreed directions for the progress of the case and adjourned it to November.
Free Malaysia Today
15-07-2025
- Free Malaysia Today
Man arrested for threatening couple in dispute over Japan tours
Police said the suspect is known to the victims, a couple who run a travel agency, and is from a different travel agency. PETALING JAYA : Police have arrested a 36-year-old man for allegedly threatening a couple who operate a travel agency after a business dispute about tour packages to Japan. Sepang police chief Norhizam Bahaman said the incident took place at a restaurant in Dengkil on July 22 last year. Norhizam said the suspect is known to the victims and is from a different travel agency. 'The couple lodged a police report, and we have opened an investigation paper,' he said in a statement. Police will apply for a remand order tomorrow. When contacted, Norhizam confirmed that the suspect was linked to a part-time tour guide who claimed she was threatened with death and beaten by a fellow Malaysian tour operator at a rented house in Japan on Jan 24. However, the man was not the same person involved in the incident in Japan. Harian Metro reported today that the woman said the tour operator slammed her head against a bed frame, pulled her hair, and stomped on her with his boots, leaving her covered in bruises. The woman said she lodged a police report in Japan and reported the matter to the Malaysian high commission in Tokyo. She subsequently filed a report at the Sepang police headquarters and underwent medical examinations upon returning to Malaysia.
Free Malaysia Today
06-06-2025
- Business
- Free Malaysia Today
I was silent at Sapura board meetings, Shahriman tells court
Shahriman Shamsuddin (left) is petitioning to wind-up Sapura Holdings Sdn Bhd, the parent of the Sapura group valued at RM832 million, on account of an alleged breakdown of mutual trust and confidence with elder brother Shahril. KUALA LUMPUR : Sapura Holdings Sdn Bhd director Shahriman Shamsuddin told the High Court here that he did not oppose proposals made by elder brother Shahril to the Sapura Resources Bhd (SRB) board, citing a 'conflict' on account of them being siblings. In cross-examination, lawyer S Rabindra, representing Shahril, questioned Shahriman about complaints contained in his petition to wind-up Sapura Holdings due to an alleged breakdown of mutual trust between the brothers. In the petition, Shahriman had claimed that Shahril was 'effectively cornering' SRB into accepting either a RM100 million loan offered in September 2022, which involved a rights issue, or a RM40 million bridging loan offered by the Sapura group, failing which the company stood to lose its collateralised properties. 'The petitioner (Shahriman) was not consulted on this matter at Sapura Holdings level,' the document said further. Rabindra: Your point here is that Shahril is saying to SRB: 'You have to pay back the RM40 million that was previously advanced (by the Sapura group) unless you agree to carry out a rights issue based on the September 2022 terms and conditions.' Is that a fair summary of what you're saying? Shahriman: Pay immediately or do the rights issue. Another of Shahriman's complaints was that Shahril had written on behalf of Sapura Holdings to SRB, undertaking to provide financial assistance of up to RM152 million without consulting him. He also claimed Shahril had offered to personally underwrite any rights issue by SRB that was not taken up, to a value of RM113 million. Shahriman said this would dilute his position in both SHSB and SRB and break the 'equal joint holdings spirit' laid down by their parents. Rabindra: You mentioned earlier the distinction between Shahril's personal position and that of the company. As a director of Sapura Resources, during the time when letters were being exchanged, did you ever raise the question: 'Was this a private initiative (by Shahril), or an SRB initiative?' Shahriman: I did not raise it because I would have been conflicted. I am his brother and also a shareholder of the holdings. So I had to keep quiet. Rabindra: You sat on the Sapura Resources board with your brother, correct? Shahriman: Yes. Rabindra: You've disagreed with your brother during board meetings before, haven't you? Shahriman: Sometimes, yes, about this matter, too. Rabindra: So, in your capacity as a director of Sapura Resources, you could have raised the question: 'Why are we entertaining a personal proposal by Shahril?' Shahriman: Shahril is my brother. I'm not allowed to say anything at the board (meeting). Rabindra: I put it to you that that is far from the truth. You could have spoken up, you simply chose not to. Do you agree or disagree? Shahriman, however, chose not to respond. Sapura Holdings is the parent entity of over 40 subsidiaries valued at RM832 million, including the publicly-listed SRB. Both Shahril and Shahriman hold a 48% stake each in Sapura Holdings, with the remaining 4% owned by Rameli Musa. In the petition filed last September, Shahriman claims that an irreparable breakdown of mutual trust and confidence between him and Shahril necessitated the dissolution of Sapura Holdings. However, Sapura Holdings, Shahril and Rameli, all named as respondents, oppose the petition, contending that the company was never intended to be a family business and that dissolution would be neither just nor equitable. The hearing before Justice Leong Wai Hong will continue on June 13.
