asso ii presentation

8/3/2019 Asso II Presentation

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The 4th issue :

Whether Okid can be remove from her position

as a director in the company (Good Hope Sdn.

Bhd) due to her constant questioning over the

actions of the rest of the directors .


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` In common law, where a director is appointed

under the articles for a definite period, there is no

inherent power to remove him before the

expiration of the period without first altering thearticles; even a special resolution to remove him

may be held to be ineffective. This common law

position has been modified by the Act at least in

relation to a public company.


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` Section 128(1) only applies to a public company andnot to a private company. It will be very exceptional forthe articles of a private company not provide for theremoval of a director before the expiration of his office.

If the memorandum or articles of a private companydo not provide for the removal of a director or theremoval of a director before the expiration of his office,it would appear that the company may not have powerto remove a director. If it desires to do so, it must first

alter its articles to give the company the necessarypower.


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` Since the mode of removing directors is left to thearticles, it is possible to entrench directors byincluding suitably drafted articles. For instance, it maybe provided that a director may not be removed

without a special resolution or that a particular directorwill hold office for life. Having done it so, it can thenremove the director subject to any contractual rightsthe director may have against the company. If theinterpretation is correct, then a private company may

by its memorandum or articles require the removal ofa director to be made of a special resolution.


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` Section 152(1) defines a special resolution as a

resolution that has been passed by a majority of

not less than three-fourths of such members as

being entitled so to do vote in person or, whereproxies are allowed, by proxy at general meeting

of which not less than twenty-one days notice

specifying the intention to propose the resolution

as a special resolution has been duly given.


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` The articles of a company may stipulate that aperson is to be appointed as a director for lifeunless he is disqualified on certain specifiedgrounds. The presence of such a stipulation,

however, does not prevent the company fromaltering the articles by adding a new ground andthen subsequently removing the director on thatnew ground. Such alteration will be valid if it is

made bona fide and for the benefit of the companyas a whole.


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` In the case of private company, a power granted to the board toremove directors is a fiduciary power which must be exercised inthe interest of the company. However, the fact that the power isexercised with ulterior motives does not invalidate the removal ofthe director; the breach of fiduciary duty can only be redressedby an action by the company. There is English authority to theeffect that a director of a company who is wrongfully removedfrom office can sue for relief by injunction or by declaration andinjunction. Such relief may be refused by the court where themembers of the company in general meeting resolve not to havethe particular director in their company; the director maynevertheless claim damages, if any, to which he is entitled.


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` Samuel Tak Lee v. Chou Wen Hsien & Ors [1984], 1 WLR 1202 (PrivyCouncil on appeal from Hong Kong)

:-The Privy Council held that if a director of a company was removed fromoffice by his fellow directors in line with the articles and challenged theirdecision on the ground that it had been made in breach of their fiduciary duty,the wrongly expelled director would be subject to the ordinary principles of Fossv. Harbottle and would be precluded from maintaining an action in his own nameto restore himself to office. In that case, a director of a company was removedpursuant to article 73(d) of the companys articles which provided that the officeof a director should be vacated, inter alia, if he is requested in writing by all hisco-directors to resign. Lord Brightman in delivering the judgment of the boardstated that the power given by the article 73(d) to directors was fiduciary, in thesense that each director concurring in the expulsion must act in accordance withwhat he believed to be the best interest of the company, and that he could not

properly concur for ulterior reasons of his own.


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` Bersel Manufacturing Co. v. Berry [1968]

:-the power was given to two permanent life directors toterminate forthwith the directorship or any of the ordinarydirectors of the company by notice in writing. Their Lordships

found it not intended for the benefit of the company, but for thebenefit of the two life directors themselves in order that it mightserve their own interests in preserving their position in thecompany. As Diplock L.J. had apparently observed in the Courtof Appeal the special powers given to the two directors are notdirectors powers in the ordinary sense. They are not exercisedin directors meetings but as special powers simply to appoint

and dismiss other directors.


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` In applying the law to the fourth issue, according to the Section 128(1)of the Act, only a public company has the authority to remove thedirector before the expiration of his office. However, the privatecompany like Good Hope Sdn Bhd, in the situation given still may doso, in the condition that there shall be provision provided inmemorandum or articles about this matter. If there is no provision, then

there shall be an alteration of memorandum or articles to insert thismatter. Furthermore, there shall be special resolution to remove thedirector. However, there is nothing in the situation given that told aboutthe provision provided in memorandum or articles of Good Hope SdnBhd regarding to the removal of the director. It is only stated that Okidhas been threatened with removal from her position as a director byRose, Mawar and Teratai due to the constant questioning of theiractions that breach the duties of directors.


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` Although, the provision provided in memorandum or articles, or the alterationhave been made to insert this matter but the power granted to Rose, Mawarand Teratai regarding to the removal of Okid is a fiduciary power which theymust be exercise in the interest of the company. The authority in thememorandum or articles of the company on the issue of removal which conferson the directors is a fiduciary power which can only be exercised bona fide byRose, Mawar and Teratai in the best interests of the company. In this case, if

Rose, Mawar and Teratai decide to remove Okid due to the constantquestioning of their actions which breach the duties of directors, the removal isnot intended for the benefit of the company, but for the benefit of themselves, inorder that it might serve their own interests in preserving their position in thecompany. As a consequence, in such situation, according to English authority,in the issue of removal, Okid may sue the company for relief by injunction, or bydeclaration and injunction, or else if the members of the company in generalmeetings constantly refuse to have Okid as the director, Okid may claim for the

damages to which she is entitled.


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` In conclusion, Okid can not be remove from herposition as a director of Good Hope Sdn Bhd by theother directors (Rose, Mawar and Teratai) due to theconstant questioning of their actions which breach theduties of directors because the removal is notintended for the benefit of the company, but for thebenefit of themselves, even though the provisionprovided in memorandum or articles because theauthority in the memorandum or articles of thecompany on the removal of director is a fiduciary

power which they must be exercise in the interest ofthe company and can only be exercised bona fide, forthe best interests of the company.

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