1. Introduction
A members’ meeting of a company, be it Sdn Bhd or listed companies would comprise of an Annual General Meeting (AGM) and an Extraordinary General Meeting (EGM). Every members’ meeting requires a chairman to regulate, conduct or ‘chair’ the meeting in compliance with the rules and orders of meetings as stipulated in the Constitution of the company.
Meetings are conducted under the control and supervision of the chairman to give effect on the purpose of the meeting, to ensure smooth transaction of the meetings, ensure voting of the various resolutions proposed is carried out in perfect manner and subsequently be recorded in the minutes accordingly. Only then will the resolution passed be valid and has a legal effect to bind the company and the shareholders.
An experienced, technically competent and skillful chairperson is needed to ultimately determine the quality of the meetings in the fulfillment of members’ needs and requirements.
2. The legislation
Section 329 of the Companies Act 2016 (CA 2016) requires the chairman of the board of directors (BOD) as the preferred designated person to chair the members’ meeting. Section 329(1) provides:
‘Subject to any provision of the constitution that states who shall be the chairperson, the chairman of the Board, if any, shall preside as the chairperson at every general meeting of the company.’
Section 329(1), however, would give effect to the person as stated in the Constitution as the chairman for the members’ meeting.
3. Chairman of Board of Directors – the ideal candidate
The chairman of the BOD who is elected by his/her fellow members of director would chair the company’s BOD’s meeting to operate and manage the company’s business or affairs in its best interest.
The familiarization of the law and procedures on the board meeting would inevitably lead him/her to be the best and ideal candidate as the chairperson of the general meeting of the company.
4. Constitution
Constitution is an option to the company under the CA 2016. It is a contract between the shareholders and the company; and among the shareholders themselves. The nomination of the chairperson in a members’ meeting may be redesignated by the constitution. In the event the chairman is absent or unwilling to act as the chairman in the members’ meeting, then the common practice would be to turn to other board members present at the BOD’s meeting as they would unequivocally have the needed required skills, experience, familiarity and acquittance with the protocol of the meeting procedures and minutes retention.
In general, the Constitution would line up the preferential sequence of the chairman for the general meeting beginning from the chairman, the deputy chairman followed by the other directors of the company based on seniority. Members present at the meetings would be the last option to be nominated by its members as chairman.
An illustration of the Constitution on the appointment of chairman in the general meeting would be as follows.
Article 54 of the Constitution provides:
‘The Chairman (if any) of the board of directors shall preside at every General Meeting but if there be no Chairman, or if at any meeting he shall not be present within fifteen (15) minutes after the time appointed for holding the same, or if he shall be unwilling to act as Chairman, the Deputy Chairman of the Company shall be the Chairman or if the Deputy Chairman be not present or shall be unwilling to act as Chairman, the Members present shall choose some Directors, or if no Director be present or if all the Directors present decline to take the Chair, they shall choose some Member present to be Chairman of the meeting.’
5. Chairperson of the meeting
The CA 2016 has codified the common law practice in governing the manner or conduct of convening an EGM or AGM. Section 329 expressly provides that the chairman of the Board of Directors shall preside as the chairperson at every of the shareholders’ meeting. The presence and punctuality of the chairman on the designated time, with an additional allowance of 15 minutes’ waiting time of the meeting is crucial and needed. The compliance of the 15 minutes is mandatory and has its paramount importance.
Section 329(2) further provides guidance on the non-presence, unwillingness to act or not being present within 15 minutes after the time appointed for the EGM or AGM, and the shareholders present shall then elect one of the shareholders to be the chairperson of the meeting. Section 329(2) provides:
‘If there is no such chairman, or if the chairman is not present within fifteen minutes after the time appointed for the holding of the meeting or is unwilling to act, the members present shall elect one of their members to be chairperson of the meeting.’
In Abdul Malek Faisal v Shaikh Markhzan Jalani & Ors [2023] 4 CLJ 51, the Court of Appeal held that the act of the defendant appointing himself as the chairman of the EGM within only 5 minutes past the appointed time to be ineffective and invalid. The subsequent resolutions passed were held to be null and void.
In this case, the members’ meeting was scheduled to convene at 10.30 a.m. The meeting started at 10.35 a.m. without compliance to the 15 minutes’ waiting requirement as stipulated in s 329(2). The defendant mooted and appointed himself as the chairman of the meeting, proceeded on the resolution to remove the plaintiff as director who is also the existing chairman of the Board. The meeting concluded at 10.41 a.m.
The Court of Appeal emphasized the trite principle of the right of the plaintiff to be heard as part of the rules of natural justice before a vote is taken as the resolution passed affected his right and position as a director and also chairman of the company. The non-compliance to the statutory requirement of waiting for 15 minutes after the time set for the holding of the meeting pursuant to s 329(2) is fatal. Thus, the meeting of members is not legal and valid, resulting in the resolution passed to be null and void.
Lee Swee Seng JCA stressed on the importance of the compliance of 15 minutes- waiting time held at p 67:
“As the procedure had not been followed in a case where the rights of the director and chairman to be removed are affected, the result is that the members’ meeting is invalid and thus the resolution passed is invalid, null and void and so we had no hesitation in setting it aside.”
The requirement of the chairman of the Board to chair the members’ meeting is mandatory as stated in s 329 using the language ‘shall’. It must be given due respect and cannot be brushed out simply.
Lee Swee Seng JCA highlighted the essential strict compliance of the waiting timeline of 15 minutes and its significance at p 54:
“The mandatory language ‘shall’ in … s 329 with respect to the chairman chairing the meeting unless he could not be present after the lapse of 15 minutes from the scheduled time of the meeting cannot be ignored … Section 329 is not there for decorative purpose but for a designed purpose to ensure proper chairmanship of meeting.”
6. Diamond precious time of 15 minutes
Time is an essence in every members’ meeting more so in an EGM where the primary resolution commonly involves the removal of existing directors and replacement of new directors of shareholders’ choice.
The CA 2016 allows an abridge time of 15 minutes. Members present in the meeting shall elect one of their members to be the chairperson of the meeting in the event that the chairman is not present within 15 minutes from the time of the scheduled commencement of the meeting. In essence, the chairman loses the ‘chair’ upon expiration of the 15 minutes.
In Abdul Malek Faisal v Shaikh Markhzan Jalani & Ors [2023] 4 CLJ 51, the Court of Appeal held that the parties are not obliged to wait for the chairman any longer than 15 minutes. Lee Swee Seng JCA illuminating held at p 64:
“Whilst we accept the fact that the defendants were not obliged to wait past 10.45 a.m., we however cannot condone the convening of the members’ meeting at 10.35 a.m. and concluding it at 10.41 a.m. to be a members’ meeting that had complied with art. 49 and s 329 of the CA 2016.”
7. Function and power of the chairman
Once the chairman resumes the position to chair the members’ meeting, be it the AGM or the EGM, he/she must conduct the meeting and adopt the procedures at the meeting fairly and impartially, taking into account the shareholders’ interest because the results of a members’ meeting are binding on the shareholders. The authority and duties include:
- determining the qualification of the voters;
- deciding whether the proposed motions are in order; and
- deciding the points of order and other incidental matters to regulate the smooth conduct of the meeting.
In National Dwellings Society v Sykes [1894] 3 Ch 159, Chitty J held on p 162:
“A question of some importance has been mooted in this case, with regard to the powers of the chairman over a meeting. Unquestionably it is the duty of the chairman, and his function, to preserve order, and to take care that the proceedings are conducted in a proper manner, and that the sense of the meeting is properly ascertained with regard to any question which is properly before the meeting.”
In Safari Alliance Sdn Bhd v Tan Lee Chin & Ors [2022] 7 MLJ 27, the High Court held that it is within the right of the chairman of a meeting to determine the validity of the proxy forms. Although a member of the Board, the chairman’s decision remains an individual decision in the capacity as the chairman of the members’ meeting. It cannot be construed to mean as a decision of the BOD or form the ‘affairs of the company’, that can be relied on by members to invoke the minority oppression’s provision of s 346 of the CA 2016.
In this case, the defendant, as the deputy chairman of the BODs, becomes the chairman of the AGM by default based on Article 54 of the company’s Article of Association (now Constitution).
The High Court held that the ‘appointment’ of the defendant as the chairman of the AGM has nothing to do with the director’s duties and any ruling made by the chairman cannot be construed as a decision of the BOD. It remains as an individual’s decision acting in her capacity as the chairman of the AGM. The dissatisfied members cannot and would not to equate the chairman’s decision tantamount to ‘affairs of the company’ as stipulated in s 346, being oppression on minority interest.
8.0 Casting vote
The chairman who presides the members’ meeting would have an inherent casting vote in a situation of equality of vote on a proposed resolution. The right of the chairman to exercise his casting vote is provided in ‘Art. 53’ of Constitution which reads:
‘In the case of an equality of votes, whether on a show of hands or on a poll, the chairman of the meeting at which the show of hands takes place or at which the poll is demanded shall be entitled to a second or casting vote.’
In Abdul Malek Faisal v Shaikh Markhzan Jalani & Ors [2023] 4 CLJ 51, the plaintiff and defendant are both holding equal 50% shares. The defendant mooted an EGM to move a resolution to remove the plaintiff as a director. The plaintiff also holds the position of chairman.
As the plaintiff was not present at the scheduled time of 10.30 a.m., the defendant then appointed himself as chairman and started the meeting at 10.35 a.m. The plaintiff was removed as the director and chairman of the company. The meeting concluded at 10.41 a.m.
The Court of Appeal drew an adverse inference on the hasty action of the defendant who had only waited until 10.35 a.m. to begin the meeting and concluded it at 10.41 a.m. This vividly shows that the defendant was worried that should the plaintiff arrive by 10.45 a.m., the resolution may not be approved and he would be defeated as the plaintiff, being the chairman of the meeting, has the casting vote giving the situation most likely to be equal vote which is 50:50. The plaintiff had been deprived of his rights to be present at the EGM wherein he was allowed until 10.45 a.m. to be present and remain to have the statutory right to chair the meeting governed by s 329(1) since he was the chairman of the Board at the material time. The Court of Appeal placed strict compliance on the statutory requirement of s 329(2) on the waiting time of 15 minutes. Waiting for the 15 minutes to pass before convening the requisitioned EGM is a virtue to uphold and parties must be patient to proceed accordingly.
Lee Swee Seng JCA held at p 73:
“We hasten to add that in a case like this where the irregularity can be rectified by issuing a fresh notice and by exercising patience, which after all is a virtue, in waiting for the 15 minutes to pass before convening the requisitioned EGM with all gusto, then the party so minded should proceed accordingly. It is not the business of the court to second-guess the outcome of the EGM but to hold the parties to the bargain that they had struck in the articles as well as the need to comply with the statutory requirement under s 329 of the CA 2016.”
9.0 Quorum
A valid and legal members’ meeting requires to achieve a quorum before moving on to transact the business of the meeting. Section 328(2) provides that the physical presence of at least two members to fulfill a quorum for a members’ meeting is a must before the meeting can be called into motion. Section 328 states:
‘(1) In the case of a company having only one member, one member personally present at a meeting shall constitute a quorum. (2) In any other case, two members personally present at a meeting or by proxy shall be a quorum unless a higher number is specified in the constitution.’
The CA 2016 allows a single member company. Only in such a situation, the single member will suffice to constitute a quorum.
10.0 Company Secretary
A company secretary has to be technically competent in the CA 2016 regime. Being the company officer, the company secretary has every duty and responsibility to assist in resolving the shareholders’ conflict, if any.
In Abdul Malek Faisal v Shaikh Markhzan Jalani & Ors [2023] 4 CLJ 51, the defendants attempted to rely on the company secretary in approving to proceed the scheduled meeting, also the presence of the secretary to record the meeting as a valid defence to legalise and validate the members’ meeting. The Court of Appeal refuted it entirely and express in clear terms that having the company secretary to proceed with convening the EGM meeting at 10.31 a.m. does not, in any manner, legalise the meeting, making the resolutions passed to be valid.
The compliance of the quorum in s 328 and the waiting time of 15 minutes for the chairman to be present is a mandatory requirement provided in s 329. It has to be followed for there to be a valid meeting. Section 329 ensures proper chairmanship of the meeting.
Lee Swee Seng JCA concluded at p 65:
“Moreover the provision of s 328 on “Quorum at meetings” is parked under Subdivision 5 titled “Procedure at Meetings” and immediately after s 328 is s 329(1) on the mandatory requirement of the chairman of the Board to preside at every general meeting of the company and then s 329(2) with respect to the waiting time of 15 minutes for the chairman to be present, failing which the members present shall elect one of their members to be chairperson of the meeting. Clearly both requirements of ss 328 and 329 of the CA 2016 must be met with respect to convening a meeting for there to be a valid meeting. Section 329 is not there for decorative purpose but for a designed purpose to ensure proper chairmanship of meeting.
The fact that the Company Secretary gave the go-ahead for the meeting to convene does not make the meeting valid where the contractual and statutory requirements have not been complied with.”
The Court of Appeal has reprimanded the secretary to be technical competent and should not act in the whim and fancy of the members. Failing which, the professionalism would be at stake.
11.0 Conclusion
In conclusion, the primary object of s 329 is to ensure the proper chairmanship of a meeting which is a mandatory requirement to be complied with. The chairman may lose his ‘chairs’ in 15 minutes.
* Dr Choong Kwai Fatt is an advocate and solicitor with special interest in tax and company law matters. He was an associate professor of tax of Faculty of Business, University of Malaya.
Note : The deliberation on “Chairman – Loses its Chairs in ‘15’ Minutes ” is the writer’s own opinion and conclusion.
References:
- Real Property Gains Tax: Law and Practice – Supplementary 1, Peng You Solutions Plt, 2023, 1st ed.
- Company Law: Conceptual Framework, Real Life Applications, InfoWorld, 2021, 1st ed.
- MyCoID – Procedures, Mechanism and Real Life Applications, Choong Consultants Plt, 2021, 1st ed.
- Dr Choong on Companies Act 2016, Peng You Solutions Plt, 2020, 3rd ed.
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- Hallmark Legal Principles on Companies Act 2016, Choong Consultants Plt, 2019, 1st ed.
- Single Person Company, InfoWorld, 2018, 2nd ed.
- To order the books, please email to pengyou.solutions@gmail.com
