The judgment is being hailed in legal circles as a landmark decision as there has been no previous local authority on the point.

In its written grounds, the court said retirements by rotation and re-election to the board of a company are strictly governed by the express terms of the company’s articles.

“The retirement of directors, particularly by way of rotation, is inextricably intertwined with their eligibility for re-election,” said Justice Nazlan Ghazali in a 45-page judgment released recently.

The judgment was handed down in an appeal brought by Andrew Kam against five companies which had deemed him retired at the end of his term without a general meeting being held.

Kam named Grandfoods Sdn Bhd, Granny’s Kitchen Sdn Bhd, Lead Enterprises Sdn Bhd, Raub Mining & Development Company Sdn Bhd, and Raub Oil Mill Sdn Bhd as respondents in the appeal.

The respondents had contended that a director up for retirement at an AGM would retire automatically even if the meeting does not take place.

However, the three-member appeals court bench, which included Justices P Ravinthran and Choo Kah Sing, disagreed.

Nazlan said there was an “inseparable link” between retirement by rotation and eligibility for re-election. He said retiring directors have the right to seek re-election at a general meeting.

“Without a general meeting being convened, that director is deprived of his right to stand for re-election.

“The shareholders are likewise denied the opportunity to vote on the re-election and the continued service of that individual as a director of the company,” said Nazlan.

The court also distinguished the case of Wan Sidek Wan Abdul Rahman v. Rahman Hydraulic Tin (2012), pointing out that the case involved the retirement of a director appointed to fill a casual vacancy until the next AGM.

Nazlan warned that allowing a company to automatically retire a director without convening an AGM could lead to abuse. He said a majority of directors could deliberately decide not to convene the meeting to ensure the retiring director is not re-elected.

The court noted that Kam was not given the opportunity to remain on the boards of the five respondents for another term.

“The other part of the process, to address the possible need to fill the vacancy by the re-election of the retiring director, could not and did not happen, another departure from the governing provisions,” the judge said.

Nazlan also pointed to Section 205(6) of the Companies Act 2016, which states that if a vacancy left by a retiring director is not filled at an AGM, the retiring director shall, if he offers himself for re-election, be deemed re-elected unless the company’s shareholders vote not to fill the vacancy.

In addition, he noted that while two of the respondents were subjected to an injunction restraining them from convening an AGM, three others—Grandfoods, Granny’s Kitchen and Lead Enterprises—were free to hold one.

“Why did they not carry on their usual business by convening the AGM? The three respondents had in one fell swoop denied the appellant the possibility of re-election.

“We find that the stance of the respondents in this litigation does not match their conduct on the matter,” the judgment read.

Nazlan also said any attempt to deem a director retired without a general meeting was “inconsistent with shareholder democracy”. He said it undermines the right of the retiring director to seek re-election and the right of shareholders to vote on such resolutions.

In September 2017, each of the respondent companies sought to convene an extraordinary general meeting to remove Kam as their director.

In response, Kam filed a civil suit and obtained an injunction restraining Raub Mining and Raub Oil Mill from removing him as director and from holding their respective general meetings.

When Kam requested to be furnished with financial and contractual documents, the respondents refused, claiming that he was no longer a director.

This led to the filing of several originating summonses, which were heard together in the Kuala Lumpur High Court.

Justice Radzi Harun ruled in the respondents’ favour, declaring that Kam had retired from all five boards automatically. The present appeal arose from that decision.

Kam was represented by lead counsel Kenny Chan, assisted by Lim Poh Leong, Ooi Xi Fang and Siti Syahaneem Sajali.

The respondents were represented by Michael Chow, Wong Yee Chee, Hannah Yeoh, Elisa Oyenz Jason & Neon Kai Sheng.