The decision of a chairman : Decision of the board of directors?

Does a decision of a chairman in an AGM constitute a decision of the board of directors of a company, capable of being sued for oppression? This issue was briefly discussed in Safari Alliance Sdn Bhd v Tan Lee Chin & Ors. The short answer is no. The long answer can gleam below. 

Parties to the case

The plaintiff, in this case, is Safari Alliance, a substantial shareholder of the 8th defendant, Tiger Synergy Berhad. The rest of the defendants (from the 1st to the 7th, including Tan Lee Chin) are the current directors of Tiger Synergy.

Brief facts of the case

Tiger Synergy issued a notice to hold its AGM in June 2020. Before the AGM could commence, Safari Alliance put in a request to Tiger Synergy to nominate 6 persons as candidates for directors. Additional resolutions were added to the AGM to reflect Safari Alliance’s request. 

During the AGM (of whom Lee Chin was the Chairperson for the meeting by her being the Deputy Chairperson of the Board of Directors), Lee Chin announced the withdrawal of the proposed resolutions no. 6 to 11 which concerned the Safari’s Alliance nomination of the 6 individuals as directors. 

She explained that (after obtaining legal advice) the proposed resolutions did not comply with section 201 of the Companies Act that required the person’s consent in writing and declaration before appointment as a director and therefore exercised her discretion as the chairperson to withdraw these proposed resolutions. 

Parties’ contention

Aggrieved by her decision, Safari Alliance sued Lee Chin, the rest of the directors of Tiger Synergy, and Tiger Synergy itself under section 346 of the Act for oppression. Noting that Lee Chin’s decision (amongst others, to withdraw the resolutions) was made incorrectly (hence the oppression suit).

The defendants on the other hand contended that what Lee Chin did as a chairperson does not fall within the ambit of section 346 of the Act.

PS: Both party’s contention can be found specifically under section 346 (1)(a) of the Act, which states that:

“Any member or debenture holder of a company may apply to the Court for an order under this section on the ground that the affairs of the company are being conducted or the powers of the directors are being exercised in a manner oppressive to one or more of the members or debenture holders including himself or in disregard of his or their interests as members, shareholders or debenture holders of the company…”

The court’s decision

After hearing both sides of the claim, the court dismissed Safari Alliance’s claim. 

The court’s rationale

In coming to its decision, the court (amongst others) noted that:

1. Lee Chin’s rulings in the AGM were made in her capacity as chairperson of the AGM. Even though she is a director of Tiger Synergy, her rulings as Chairperson cannot be construed as a decision of Tiger Synergy’s Board of directors; and
2. For an oppression claim, the claim must relate to the affairs of the company itself or the exercise of powers by the directors in the directors’ capacity, not that of other capacities, such as in this case, where Lee Chin was flexing her powers as a chairperson to an AGM and not that of a director to Tiger Synergy. Essentially, the moment she became the chairperson, Lee Chin has temporarily switch hats until the AGM is over. 

Furthermore:

1. Lee Chin was appointed via Tiger Synergy’s constitution- a document that was agreed upon by all shareholders (should they decide to become a shareholder of Tiger Synergy); and
2. Based on the constitution, Lee Chin’s rulings were within the purview of her powers and duties as Chairperson of the AGM and were within the powers conferred on her as chairperson of a general meeting under the constitution.

It was on this basis that the court noted that their hands are tied and they have no choice but to dismiss Safari Alliance’s claim.