INTRODUCTION

While it may be assumed that the retirement of a director guided by timelines and board terms and ends once their tenure expires, the recent legal developments highlights that the mere passage of time does not, on its own, end a director’s tenure. Instead, it involves a proper process anchored in the company’s constitution and shareholder participation in determining when and how a director retires from office.

This Article examines the case of Dato’ Sri Andrew Kam Tai Yeow v Grandfoods Sdn Bhd[1], in which the Court of Appeal (“COA”) emphasized on the issue of whether a company director who is due to retire under the articles of association of the company in an impending general meeting of the shareholders can be deemed to have retired upon the completion of the period the meeting ought to have been convened if the meeting could not be held for some reason.

BACKGROUND OF THE CASE

Around September 2017, the Appellant, Dato Sri Andre Kam Tai Yeow was a director for both first and second respondent companies (Raub Mining & Development Company Sdn Bhd and Raub Oil Mill Sdn Bhd) which operate an oil palm plantation and run a palm oil mill respectively. At that time, each company had four directors on the respective board of directors. In August 2017, both respondent companies issued notices to convene their respective annual general meetings (AGM), scheduled for 6 September 2017. Among the matters to be considered and voted on at these meetings was a resolution to remove the appellant from his position as director.

In response, the appellant filed a writ against both respondent companies. Shortly after, the appellant also obtained an ad interim injunction to restrain the respondents from convening any general meeting or removing him as a director on 6 September 2017.

While the injunction was still in effect, the appellant served two letters on each respondent company requesting access to financial statements, ledgers and certain contractual documents. The respondents refused, asserting he was no longer a director and lacked the standing to make such demands, further alleging his requests were made with an ulterior motive. The appellant, however, maintained that the injunction preserved his status as a director.

This led to the filing of five suits. The appellant filed two, seeking access to the requested documents in his capacity as a director of the respective respondent companies. In contrast, three suits were filed by the respondents and other related respondents, seeking declarations that the appellant had retired as a director pursuant to the companies’ respective articles of association.

HIGH COURT DECISION

The High Court accepted the respondents’ arguments and held that a director who is due for retirement at a particular year’s AGM will be deemed to have retired automatically, even if the AGM was not held. The Court reasoned that a director’s appointment is not perpetual and is subject to the limitations and conditions set out in the company’s articles of association. Accordingly, a director’s office may be vacated by way of retirement by rotation or deemed retired in accordance with the articles, even in the absence of an actual AGM.

COURT OF APPEAL FINDINGS

Here, the Court of Appeal unanimously reversed the High Court’s decision, holding that directors eligible for re-election cannot be regarded as having automatically retired in the absence of an annual general meeting. In reaching its decision, the Court of Appeal addressed the matter through the following key considerations:

1. Clear language of the articles on retirement at general meeting

The appellant was right to argue that, based on the articles of association of both respondent companies, directors are meant to retire at general meetings. There is no clause whether express or implied, that provide for any automatic vacation of office by way of retirement in the absence of the convening of an AGM. This view is also in line with Section 340 of the CA 2016[2], which lists director retirement as one of the matters to be decided at an AGM.

2. Retirement by rotation comes with eligibility for re-election

The Court of Appeal emphasised that the process of retirement and re-election of directors is intertwined and must take place at a general meeting. A director who retires by rotation or was appointed to fill a casual vacancy generally has the right to seek re-election at the AGM. In that context, retirement and re-election form a single process. If a director’s office is deemed vacated due to retirement without the AGM being held, the director is unfairly deprived of the chance to offer himself for re-election, and shareholders are equally denied the opportunity to vote.

3. Legal Provisions from Companies Act 2016

The Court of Appeal relied on section 205 of the CA 2016[3] to support its view that a director’s retirement is closely connected to their right to seek re-election. Notably, section 205(3) provides that retirement takes effect at the end of the relevant general meeting, while section 205(5) affirms that a retiring director remains eligible for re-election[4].

The Court of Appeal also emphasised that there were clear statutory mechanisms under the Companies Act 2016 that could have been utilised to convene a general meeting, even if the board failed or refused to act. While section 340 of the CA 2016[5] on annual general meetings formally applies to public companies, the articles of association of the respondent private companies still required AGMs and made reference to compliance with governing company law, including current legislation. As such, the companies could have applied for an extension of time to hold their AGMs or, in the case of the first and second respondents who were injuncted, sought a court order to convene one. Additionally, shareholders themselves had rights under sections 310, 311, 313, and 314 of the CA 2016[6] to either compel the board to convene a meeting, call it themselves if the board failed to do so, or apply to the court where convening a meeting had become impracticable. These provisions demonstrate that the law provides sufficient remedies to ensure the holding of general meetings, and the failure to pursue any of them does not justify treating the appellant as having automatically retired.

4. Three respondent companies were not injuncted to hold AGM where the appellant could retire and seek re-election

The Court of Appeal found that the injunction only applied to Raub Mining & Development Company Sdn Bhd and Raub Oil Mill Sdn Bhd, restraining them from holding shareholders’ meetings. The other three companies, Grandfoods Sdn Bhd, Granny’s Kitchen Sdn Bhd, and Lead Enterprises Sdn Bhd were not subject to this restraint and could have held AGM, but failed to do so. The respondents argued that the injunction only barred removal, not retirement. While the Court accepted that removal and retirement are distinct, it emphasised that retirement by rotation and re-election must occur together at an AGM. By not convening the meetings, the companies denied the appellant the chance to be re-elected, contrary to their articles and the principle of shareholder democracy. The Court held that automatic retirement cannot occur simply because no AGM was held.

CONCLUSION

The Court of Appeal concluded that the High Court had erred in declaring that the appellant had automatically retired and vacated his position as director upon the lapse of the period in which the AGM ought to have been held. Since no AGM was convened, the appellant neither retired in accordance with the articles nor had the opportunity to seek re-election. As such, the automatic cessation of office was not supported by the Companies Act 2016 or the company’s constitution, rendering the appellant’s purported retirement and vacation of office in all three appeals invalid.

SIGNIFICANTS OF THE COURT OF APPEAL RULING

This decision makes it clear that a director does not automatically retire just because a certain period has passed or their term has lapsed. Instead, retirement must follow the proper procedures set out in the company’s constitution where the process of retirement and re-election occurs hand in hand. The ruling affirms that any attempt to treat a director as having vacated office outside this process undermines both the statutory framework under the Companies Act 2016 and the principle of shareholder democracy. Ultimately, it serves as a reminder that the end of a director’s tenure is not automatic, but it must follow the correct legal and procedural steps.

[1] [2025] MLJU 819

[2] Companies Act 2016 [Act 77]

[3] Ibid

[4] Ibid

[5] Ibid

[6] Ibid