Question

QUESTION 4

Sootera and Sateen each hold 10% of shares in Kayeen Sdn. Bhd. Batiq and Soon Kit, who are the directors of the company, hold the remaining 80% shares. Sootera and Sateen allege that Batiq and Soon Kit have managed the company as if it is their own disregarding the interest of the minority shareholders. Even though the company makes a considerable profit, dividends have not been declared for the past two years. Instead, a significant portion of the profits is used to pay annual bonuses to the directors.

In addition, the company has made a bad investment when the directors purchase a piece of land located near a landfill in Jitra for a price of RM1 million from Soon Kit’s brother Soon Sang. Complaints have been made to the directors, but they have gone unheeded.

Advise Sootera and Sateen on whether they can take legal action in the name of the company or seek a remedy on their own in the above situations.

Answer 1

I would advise Sootera and Sateen to take legal action in the name of the company, as the company is supposed to pay them their deserved dividants and not the directors Batiq and Soon Kit, personally. The former pair hold 10 % each shares of the firm and are entitled for dividend pay as deemed by the agreement and the state's law. It is noticed that the company has earned sufficient profits within the last two years, however, not paired to the shareholders. Instead paid annual bonuses to the directors. This is a tort. The bonuses must be paid after the shareholders receive their dividends. Hence, legal action can be taken.