Shareholder Dispute Resolution Strategy

Summary

The case involves a shareholder dispute between WZS Berhad and CSS Pte. Ltd. Over board appointments and a proposed loan by Angleterre. Key issues include the precedence of the Shareholders Agreement over the companys Constitution, potential financial risks from the loan, and the need for legal remedies such as injunctions and declaratory relief. Legal principles from the Companies Act 2016 and contract law, along with case law like Tan Sri Dato Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad, are crucial. WZS Berhad may seek an injunction to prevent the loan, declaratory relief to enforce the Shareholders Agreement, and potentially initiate a derivative action. The case underscores the importance of adhering to agreed terms and the potential for irreparable harm from financial decisions.

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call me Leo please

Hi Leo! How can I assist you with your legal issue today?

Your client, WZS Berhad, a public listed company in Malaysia has several disputes as *% shareholder in a company called Angleterre Sdn. Bhd. (“Angleterre”), with the minority shareholder (*%) known as CSS Pte. Ltd., a company incorporated in Singapore. The disputes are ongoing and involve arbitration proceedings between the shareholders of Angleterre. You are informed that the shareholders of Angleterre had entered into a Shareholders Agreement in * that purportedly set the following terms: a. That the Board of Angleterre shall comprise of * Board members with CSS Pte. Ltd. appointing * Board members and WZS Berhad appointing * board members; b. No reserve matters were stated in the Shareholders Agreement; and c. That any disputes arising from the Shareholders Agreement shall be resolved by arbitration to the Asian International Arbitration Centre in Kuala Lumpur and be determined by * arbitrator.

Case Rating: *.
Leo, could you clarify the nature of the disputes between WZS Berhad and CSS Pte. Ltd. within Angleterre? This will help in providing more targeted legal information.

In January *, WZS Berhad, having majority shareholding proceeds to appoint * board members to the board of Director of Angleterre, thus increasing the number of board seats to * seats. This essentially changes the voting dynamic of the board of directors of Angleterre. Incidentally the contents of the Shareholders Agreement are not reflected in the Constitution of Angleterre. This owing to the fact that the shareholders had never undertake to amend the Constitution of Angleterre. The Constitution does not set a maximum number of board members. CSS Pte. Ltd. immediately filed for an injunctive relief in the Kuala Lumpur High Court to seek to restrain WZS Berhad from appointing the * new directors of Angleterre. Parties thereafter mediated their dispute, and a Consent Judgment was entered, where WZS Berhad may maintain the * new directors, but only * may vote in a board meeting of Angleterre.

Leo, it appears that the core issues involve the interpretation and enforcement of the Shareholders Agreement and the subsequent changes to the board composition. Since a Consent Judgment has been entered allowing WZS Berhad to maintain the directors but limiting their voting rights, it is important to ensure compliance with this judgment.
For further assistance:
- Review the Consent Judgment details.
- Ensure that the mediation agreement is reflected in the board's practices.
- Consider further legal advice to address any ongoing disputes or arbitration proceedings.
Is there any specific aspect of this situation you need more detailed information on?

The parties then referred the dispute with regards to their right to appoint directors to arbitration. That dispute is ongoing and centres on the premise of whether or not the Shareholders Agreement or the Constitution of Angleterre takes precedence with regards to the rights of shareholders to appoint board members. The Chief Executive Officer and the Legal Manager of Angleterre thereafter instruct the company secretary of Angleterre to remove * of the WZS Berhad appointed board members from the board of Angleterre. The company secretary refuses to do so initally, but shortly thereafter removes the * of the WZS Berhad appointed board members from the board of Angleterre. The board of directors, now under the control of CSS Pte. Ltd., thereafter, undertakes management of Angleterre and proposes that Angleterre take a US Dollar * million loan from a Singaporean company. It is not known whether said lending entity has a moneylending or financial services license.

Leo, it seems the main issue revolves around the precedence of the Shareholders Agreement versus the Constitution of Angleterre in appointing board members. Here's what to consider:
- Review the Shareholders Agreement and the Constitution: Determine which document holds precedence. Malaysian law generally respects the terms of a Shareholders Agreement if properly executed.
- Arbitration: Follow the arbitration proceedings closely as they will likely resolve the issue of board member appointments.
- Legal Compliance: Ensure any loans and financial transactions comply with relevant financial regulations and licensing requirements.
Do you need detailed information on the arbitration process or financial compliance?

The loan is to be secured by both tangible and intangible assets (intellectual property) of Angleterre. In the event Angleterre defaults on its loan repayment obligations, the charged assets shall be transferred on owned by the singaporean entity to dispose off as it deems fit and to recover the money due to it. It is to be noted here that Angleterre’s business is the manufacturing of silicon chips and the industry it is in is heavily reliant on novel intellectual property, which Angleterre has developed and is used to make silicon chips and sell the said chips to its customers. WZS Berhad is extremely worried as to the dangers such a loan represents. It says that Angleterre taking on this loan will severely affect its interests in Angleterre, both monetarily and reputationally.

Leo, the situation appears complex and potentially risky for WZS Berhad. Here are some key points to consider:
- Legal Review: Ensure the loan agreement is thoroughly reviewed by legal experts to protect WZS Berhad’s interests.
- Risk Assessment: Evaluate the potential financial and reputational risks involved in taking this loan.
- Arbitration Impact: Consider how the ongoing arbitration might affect or be affected by this loan.
Would you like more detailed information on mitigating such risks?

It says that as it stands, Angleterre does not have the cash flow to repay this loan and the loan maybe a ploy for CSS Pte. Ltd. to backdoor acquire the tangible assets and intangible assets of Angleterre in the event the ongoing arbitration decision is not in CSS Pte. Ltd’s favour. Angleterre is a company valued at RM * billion.

Leo, this situation seems critical. Here are some steps WZS Berhad might consider:
- Injunction: Seek an urgent injunction to stop the loan agreement until the arbitration concludes.
- Expert Legal Advice: Consult legal experts specializing in corporate law and arbitration.
- Financial Audit: Conduct a thorough audit to assess Angleterre's financial health and the implications of the loan.
Would you like more detailed information on obtaining an injunction?

WZS Berhad appoints you to act on their behalf to prevent Angleterre from obtaining the USD * million loan and seeks your advise and strategy to prevent it.

Steps to Consider:
- Seek an Urgent Injunction: File for an urgent injunction in court to halt the loan process until the arbitration decision is made.
- Thorough Legal Review: Engage a legal expert to review the loan agreement and its implications.
- Highlight Financial Risks: Present the financial risks and potential for asset loss to the court.
- Arbitration Strategy: Continue to strongly pursue the arbitration process to resolve board appointment disputes.
Would you like detailed guidance on filing for an injunction in Selangor?

how would you initiate the suit?

Leo, to initiate the suit, you should follow these steps:
*. Prepare a Statement of Claim: Detail the background, the disputes, and the specific relief sought (e.g., injunction against the loan).
*. File for an Injunction: Submit an urgent application to the High Court in Selangor to halt the loan process until arbitration concludes.
*. Gather Evidence: Include the Shareholders Agreement, Consent Judgment, and any relevant communications or documents.
*. Legal Representation: Engage a lawyer with expertise in corporate law and arbitration to represent WZS Berhad.
Would you like detailed guidance on preparing the Statement of Claim?

explain about prepare a statement of claim with reference to legal principle and case law.

To prepare a Statement of Claim, follow these steps:
- Introduction: Identify the parties involved and provide background information.
- Facts: Clearly state the facts leading to the dispute, including all relevant details and events.
- Legal Basis: Reference pertinent laws, regulations, and case law that support your claims.
- Refer to the Companies Act * (Malaysia) for corporate governance and shareholder rights.
- Highlight past cases like *Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad* which dealt with shareholder disputes.
- Relief Sought: Specify the exact relief you are seeking (e.g., an injunction to prevent the loan).
- Conclusion: Summarize the key points and reiterate the relief sought.
Would you like more examples of relevant case law to strengthen the claim?

any legal principles to refer

Here are some legal principles and statutes to consider when preparing your Statement of Claim:
- Companies Act * (Malaysia): Deals with corporate governance and shareholder rights.
- Contract Law Principles: Enforceability and interpretation of the Shareholders Agreement.
- Equity Principles: Seeking injunctive relief to prevent irreparable harm.
- Case Law:
- *Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad*: Deals with shareholder disputes.
- *Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly*: Addresses issues of board composition and shareholder rights.
Would you like more detailed information on any of these principles or case laws?

detail information about the principles stated

Certainly, here is more detailed information on the principles mentioned:
*. Companies Act * (Malaysia):
- Section *: Board of directors’ duties and responsibilities.
- Section *: Rights of shareholders to take legal action.
- Section *: Powers of the court to grant relief in cases of oppression.
*. Contract Law Principles:
- Enforceability: Agreements must be clear, lawful, and mutually agreed upon.
- Interpretation: Terms within the Shareholders Agreement should be interpreted based on the intent of the parties and the context in which they were made.
*. Equity Principles:
- Injunctions: A court order to prevent an action that might cause irreparable harm. It requires showing a strong likelihood of success on the merits, potential for irreparable harm, balance of hardships, and public interest.
*. Case Law:
- Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad: A leading case on shareholder disputes, particularly regarding director appointments and corporate governance.
- Dato' Seri Dr. Ting SiehKiong v. Sarawak State Legislative Assembly: This case addresses issues surrounding the rights of shareholders and the composition of the board of directors, emphasizing the importance of adherence to agreed-upon terms in the governance documents.
Would you like further clarification on any of these principles or assistance with another aspect of your case?

explain about file for an injunction with reference to legal principle and case law.

Case Rating: *
To file for an injunction, follow these steps with reference to legal principles and case law:
*. Preparation:
- Statement of Claim: Detail the disputes and specific relief sought.
- Affidavit: Support your claim with evidence (Shareholders Agreement, Consent Judgment).
*. Legal Principles:
- Equity Principles: Injunctions prevent actions causing irreparable harm (likelihood of success, irreparable harm, balance of hardships, public interest).
- Companies Act *: Sections *, *, and * address directors’ duties, shareholders’ rights, and court relief.
*. Case Law:
- Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad: Shareholder disputes.
- Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly: Board composition and shareholder rights.
Would you like more detailed guidance on any specific step?

explain about gather evidence with reference to legal principle and case law.

To gather evidence effectively, consider these legal principles and case law:
*. Legal Principles:
- Relevance: Evidence must be directly related to the issues at hand.
- Admissibility: Evidence must be legally permissible in court.
- Documentary Evidence: Contracts, emails, minutes of meetings.
- Witness Testimony: Statements from individuals involved.
*. Case Law:
- Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad: Emphasized the importance of documentary evidence in shareholder disputes.
- Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly: Highlighted the role of witness testimony and documents in proving board composition issues.
Would you like more detailed information on what specific types of evidence to gather?

explain about legal representation with reference to legal principle and case law.

Legal representation involves advocating on behalf of a client in legal matters. Here’s an overview with reference to legal principles and case law:
*. Legal Principles:
- Fiduciary Duty: Lawyers must act in the best interest of their clients (Rule * of the Legal Profession (Practice and Etiquette) Rules *).
- Confidentiality: Lawyers must maintain the confidentiality of client information (Section * of the Evidence Act *).
- Competence and Diligence: Lawyers must provide competent and diligent representation (Rule * of the Legal Profession (Practice and Etiquette) Rules *).
*. Case Law:
- *Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad*: Emphasized the importance of legal representation in complex shareholder disputes.
- *Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly*: Highlighted the role of legal representation in cases involving board composition and shareholder rights.
Would you like more detailed information on any of these principles or case laws?

considering the fact of the case above, what would be the relief sought? Provide legal principles and case law to refer.

Based on the facts provided, the relief sought by WZS Berhad would include:
*. Injunction: To prevent Angleterre from obtaining the USD * million loan.
*. Declaratory Relief: To clarify the precedence of the Shareholders Agreement over the Constitution of Angleterre regarding board appointments.
*. Specific Performance: To enforce the terms of the Shareholders Agreement.
*. Damages: For any financial losses incurred due to CSS Pte. Ltd.'s actions.

Legal Principles:
- Companies Act * (Malaysia):
- *Section **: Duties and responsibilities of the board of directors.
- *Section **: Rights of shareholders to take legal action.
- *Section **: Powers of the court to grant relief in cases of oppression.
- Contract Law Principles:
- Enforceability: Terms within the Shareholders Agreement should be clear, lawful, and mutually agreed upon.
- Interpretation: Terms must be interpreted in the context.
- Equity Principles:
- Injunctions: To prevent actions causing irreparable harm (likelihood of success, irreparable harm, balance of hardships, public interest).

Case Law:
- Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad:
- Deals with shareholder disputes, particularly regarding director appointments and corporate governance.

- Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly:
- Addresses issues of board composition and shareholder rights, emphasizing the importance of adhering to agreed-upon terms.
Would you like more information or guidance on any specific relief?

considering the fact of the case above, what are the elements to be satisfied in obtaining the relief sought? Provide legal principles and case law to refer.

To obtain the relief sought, WZS Berhad needs to satisfy the following elements:
*. Injunction:
- Irreparable Harm: Demonstrate that Angleterre obtaining the loan would cause irreparable harm to WZS Berhad.
- Likelihood of Success: Show a strong likelihood of success in the arbitration or court proceedings.
- Balance of Hardships: Prove that the hardship to WZS Berhad outweighs any hardship to CSS Pte. Ltd. if the injunction is granted.
- Public Interest: Argue that granting the injunction aligns with public interest.
*. Declaratory Relief:
- Validity and Interpretation: Establish that the Shareholders Agreement is valid and should take precedence over the Constitution of Angleterre.
- Compliance: Show that the current composition of the board violates the agreement.
*. Specific Performance:
- Enforceability: Demonstrate that the Shareholders Agreement is enforceable and that CSS Pte. Ltd. has breached its terms.
- Adequate Remedy: Argue that monetary damages are insufficient and that specific performance is necessary.
*. Damages:
- - Proof of Loss: Provide evidence of financial losses suffered due to the actions of CSS Pte. Ltd.
- Causation: Show a direct link between CSS Pte. Ltd.'s actions and the losses incurred.

Legal Principles and Case Law:
Legal Principles:
- Companies Act * (Malaysia):
- *Section **: Duties and responsibilities of the board of directors.
- *Section **: Rights of shareholders to take legal action.
- *Section **: Powers of the court to grant relief in cases of oppression.
- Contract Law Principles:
- Enforceability: Agreements must be clear, lawful, and mutually agreed upon.
- Interpretation: Terms within the Shareholders Agreement should be interpreted based on the intent of the parties and the context in which they were made.
- Equity Principles:
- Injunctions: A court order to prevent an action that might cause irreparable harm. It requires showing a strong likelihood of success on the merits, potential for irreparable harm, balance of hardships, and public interest.
Case Law:
- **Tan Sri Dato' Tajudin Ramli v.

considering the fact of the case above, how can a shareholder initiate a derivative action against another shareholder? Provide legal principles and case law to refer.

To initiate a derivative action against another shareholder, follow these steps:
*. Notice of Action:
- Section * of Companies Act *: Notify the company of the intention to commence derivative action.

*. Application to Court:
- Section * of Companies Act *: Seek court leave to proceed with the action.
- Grounds: Demonstrate that the company failed to take action, and the action is in the company’s best interest.
*. Supporting Evidence:
- Provide documentary evidence and witness testimony supporting the claim of wrongful acts by the other shareholder.
*. Case Law:
- Ng Heng Liat v. Wong Teck Seng: Highlights principles of derivative action and the court’s discretion in granting leave.
Would you like more detailed guidance on any specific step?

how to initiate a derivative action against another shareholder?

To initiate a derivative action against another shareholder, follow these steps:
*. Notice of Action:
- Section * of Companies Act *: Notify the company of the intention to commence a derivative action.
*. Application to Court:
- Section * of Companies Act *: Seek court leave to proceed with the action.
- Grounds: Demonstrate that the company failed to take action and the action is in the company’s best interest.
*. Supporting Evidence:
- Provide documentary evidence and witness testimony supporting the claim of wrongful acts by the other shareholder.
*. Case Law:
- Ng Heng Liat v. Wong Teck Seng: Highlights principles of derivative action and the court’s discretion in granting leave.
Would you like more detailed guidance on any specific step?

considering the fact of the case above, what are the factual arguments to present to court to justify the maintenance of status quo and justify such arguments against precedent? Provide legal principles and case law to refer.

To justify the maintenance of the status quo and counter precedents, here are the key factual arguments, legal principles, and case law references:

Factual Arguments:
*. Risk of Irreparable Harm: The potential loan poses significant financial and reputational risks to Angleterre and WZS Berhad.
*. Violation of Shareholders Agreement: The current board composition and proposed actions contravene the Shareholders Agreement.
*. Pending Arbitration: The arbitration outcome on board appointments should be awaited to avoid irreversible consequences.
*. Financial Instability: Angleterre lacks the cash flow to repay the loan, increasing the risk of asset loss.

Legal Principles:
*. Companies Act * (Malaysia):
- Section *: Duties and responsibilities of directors.
- Section *: Rights of shareholders to take legal action.
- Section *: Court’s power to grant relief in cases of oppression.
*. Contract Law Principles:
- Enforceability: Valid and enforceable agreements must be respected.
- Interpretation: Contracts should be interpreted based on the intent of the parties.
*. Equity Principles:
- Injunctions: Courts grant injunctions to prevent actions causing irreparable harm, considering the likelihood of success, balance of hardships, and public interest.

Case Law:
*. Tan Sri Dato' Tajudin Ramli v. Pengurusan Danaharta Nasional Berhad:
- This case involves shareholder disputes, particularly regarding director appointments and corporate governance.

*. Dato' Seri Dr. Ting Sieh Kiong v. Sarawak State Legislative Assembly**:
- This case addresses issues of board composition and shareholder rights, emphasizing the importance of adhering to agreed-upon terms.
Would you like further details on any specific legal principle or case law?

Shareholder Dispute Resolution Strategy

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