A Short Drama

The members of ABC Bhd’s members are Abby, Billy, Hamid and Tony. Abby is holding 200,000 shares in the company, Billy is holding 100,000 shares, Hamid is holding 100,000 shares and Tony is holding 50,000. The articles of association were amended to allow the company to acquire every member of the company to increase his shareholding to at least 150,000 shares in the company. Tony seeks your advice on the following issues.

1. Will the resolution is passed if Tony does not vote for it?

Yes, the resolution is still passed if Tony does not vote for it.

The resolution here is referred to special resolution. According to Section 28, a special resolution is passed when there is 75% of members present and voting. Since there are 3 out of 4 members of ABC presented and voted for the special resolution, it fulfilled the condition stated in Section 28. Thus, the special resolution is passed although Tony did not vote for it.

1. Assuming that the Article was altered, is Tony bound to the new article (ie is he required to increase his shareholding upon the notice from the company to do so?)

According to the Companies Act 1965 Section 33(3), any alteration which has the effect of increasing the liability of an existing member or which require an existing member to increase his holding will not bind to it unless he has given his written consent.

Tony is not bound with the new article unless he agrees to it in writing.

The altered article required every member of the company to increase his shareholding to at least 150,000 shares in the company. However, if he cannot be compelled to subscribe for another 100,000 shares (as he is holding 50,000 shares now), then such alteration is effective against new members but not effective against existing member like Tony unless he agrees to it in writing.

1. Assuming that the article was altered. Is the new article binding on Billy and Hamid who voted for it?

1. Assuming that the article was amended. Tony sold his shares to Chong, is Chong bound to the new Article?

Yes, Chong is bound to the new Article. According to the Companies Act 1965 Section 33(3), such alteration is effective against new members. Since Chong is the new member of the company, he is bound to the new Article.