Section 291(1) of the Companies Act 2016 (“CA 2016”) provides that an ordinary resolution of members or a class of members of a company means a resolution passed by a simple majority of more than half of such members who are entitled to vote and do vote, whether in person or by proxy (if allowed), or who are entitled to vote on a written resolution. In the High Court case of Mohamed Zahid Yon bin Mohamed Fuad v Jason Jonathan Lo & 4 others [2019] 3 AMR 824, it was held that the words “more than half of such members” in s 291(1) of the CA 2016 must be read as in respect of members’ resolution in writing, more than half the number of shareholding of the members and not more than half in number of the shareholders.

The Facts

The plaintiff and second defendant are the only shareholders and directors of the fifth defendant (“Defendant Company”). The plaintiff and second defendant hold 40% and 60% respectively of the shares in the Defendant Company. The second defendant signed a directors’ resolution and a member’s resolution appointing the first defendant as a director of the Defendant Company. The plaintiff did not sign the resolutions.

The Issue 

One of the issues was whether the member’s resolution signed only by the second defendant who holds 60% of the shares in the Defendant Company was a valid ordinary resolution.

The Decision

The High Court referred to the following provisions of the CA 2016 in relation to the appointment of a director of a company:

1. Section 202(2) states that all directors subsequent to the person named as a director in an application for incorporation of a company may be appointed by ordinary resolution.

2. Pursuant to section 290(1), a resolution of the members of a private company (and the fifth defendant is a private company) shall be passed either: (a) by a written resolution; or (b) at a meeting of the members.

3. Section 291(1) provides that an ordinary resolution of the members of a company means a resolution passed by a simple majority of more than half of such members:

(a) who are entitled to vote and do vote in person, or where proxies are allowed, by proxy at a meeting of members; or

(b) who are entitled to vote on a written resolution.

4. Section 293(1) provides that unless otherwise provided in the constitution, in the case of a company having a share capital:

(a) on a vote on a written resolution, every member shall have one vote in respect of each share or stock held by him;

(b) on a vote on a resolution on a show of hands at a meeting, every member shall have one vote; or

(c) on a vote on a resolution on a poll taken at a meeting, every member shall have one vote in respect of each share or stock held by him.

Construing the provisions above, the High Court held that the second defendant as the majority shareholder holding 60% of the shares in the Defendant Company, can validly sign a written resolution of the members appointing the first defendant as a director of the Defendant Company. Such resolution was a valid ordinary resolution. In the context of members’ written resolution, the words “more than half of such members” in section 291(1) of the CA 2016 must be read as meaning more than half the number of shareholding of the members and not more than half in number of the shareholders.

Takeaway

This High Court case has decided that pursuant to section 291(1) of the CA 2016, a members’ written resolution signed by a simple majority of more than half of such number of shareholding of member(s) who are entitled to vote on a written resolution, is a valid ordinary resolution.

The information in this article is intended only to provide general information and does not constitute any legal opinion or professional advice. The law stated in this article is current as of 31 July 2019.