Overview of Golden Crescent Sdn Bhd v PDC Associates Sdn Bhd & Anor [2025] MLJU 1166
INTRODUCTION
Disputes between shareholders are not uncommon, especially when a company’s Shareholders’ Agreement contains provisions that appear inconsistent with its Constitution. Common points of contention often include the powers and appointment of directors, conduct of board and general meetings, quorum requirements, approval of audited accounts, funding obligations, and procedures for capital raising all of which can become flashpoints when shareholders’ interests diverge.
The recent High Court decision in Golden Crescent Sdn Bhd v PDC Associates Sdn Bhd & Anor[1] revisits this tension and provides valuable clarity on the primacy of a company’s Constitution over conflicting terms in an unincorporated Shareholders’ Agreement. In this case, disputes arose over quorum requirements for extraordinary general meetings, deadlock due to minority non-attendance, and the enforceability of Shareholders’ Agreement terms that were never incorporated into the Constitution, highlighting the practical risks of relying solely on private arrangements without ensuring statutory compliance.
FACTS OF CASE
Golden Crescent Sdn Bhd (“the Plaintiff”) held a 55% stake in Pelabuhan Bagan Datoh Sdn Bhd (“D2”), a company formed to develop and operate a ferry port through its 99% subsidiary, Ghadaf Marble Sdn Bhd. The 1st Defendant, PDC Associates Sdn Bhd (“D1”), held the remaining 45% of D2.
The Plaintiff and D1 had entered into a Shareholders’ Agreement dated 22 August 2019 which, among other things, required an 80% shareholder quorum for general meetings. However, this quorum requirement was not incorporated into D2’s Constitution nor lodged with the Companies Commission of Malaysia under Section 36(3) of the Companies Act 2016 (“CA 2016”)[2].
Due to D1’s repeated refusal to attend EGMs convened by the Plaintiff between April and July 2024, no quorum could be formed under the Shareholders’ Agreement 80% rule. The Plaintiff argued that urgent corporate action was required to approve audited accounts, raise new capital through rights issues, and appoint directors all critical to funding an ongoing port development project.
ISSUES BEFORE THE COURT
Whether the Shareholders’ Agreement’s quorum requirement was binding on the company and its members despite not being incorporated into the Constitution.
Key Issue: Which Prevails, Shareholders’ Agreement or Constitution?
In this case, the High Court revisited the well-established principle that a company’s Constitution (or Articles of Association, under the Companies Act 2016) is the supreme governing document of the company. This principle is expressly anchored in Section 33(1) CA 2016, which states that:
“The constitution shall, when adopted, bind the company and the members to the same extent as if the constitution had been signed by each member and contained covenants on the part of each member to observe all the provisions of the constitution.”
In essence, this means that once adopted, the Constitution operates as a binding contract between the company and its members, as well as among the members themselves, ensuring that all parties are legally obliged to comply with its terms.
In this case, the dispute arose because the Shareholders’ Agreement included a quorum clause that imposed a higher threshold (80% attendance) than the Constitution’s simpler quorum requirement of two members. The Plaintiff, holding 55% of shares, argued that the Shareholders’ Agreement’s quorum clause had no effect because it was never incorporated into the Constitution by a valid special resolution and notification to the Companies Commission of Malaysia, as required by Section 36(3) CA 2016.
The Court accepted this position, relying on principles established in the High Court case of Beh Chun Chuan v Paloh Medical Centre Sdn Bhd & Ors[3]. In Beh Chun, the court held that for terms in a SHA to be enforceable as part of the company’s statutory contract, they must be incorporated into the Constitution through the formal amendment process. Otherwise, the Shareholders’ Agreement remains only a private agreement binding the parties inter se, but it cannot override or amend the statutory contract formed by the Constitution.
The High Court in Golden Crescent therefore concluded that the quorum clause in the Shareholders’ Agreement was invalid and unenforceable insofar as it sought to override Article 46 of the company’s Constitution. The Constitution’s quorum rule of two members prevailed. The Court noted that allowing an external agreement to supersede the Constitution without proper incorporation would effectively undermine statutory safeguards designed to protect all members and ensure certainty in corporate governance.
Importantly, the Court stressed that the statutory mechanism for altering the Constitution is not a mere formality but a mandatory safeguard under Malaysian company law. Any attempt to bypass it, for example, by introducing Shareholders’ Agreement terms that are never lodged or formalised, would defeat the entire statutory scheme under the CA 2016. The Court highlighted that giving effect to unincorporated Shareholders’ Agreement provisions could enable shareholders to create backdoor amendments to the Constitution, risking confusion and potential abuse.
In practical terms, the Court further held that if deadlock or deliberate non-attendance frustrates the operation of the valid constitutional quorum, the proper remedy lies under Section 314 CA 2016, which empowers the Court to modify meeting procedures such as by allowing a single member to constitute quorum. This statutory power preserves corporate functionality without rewriting the Constitution by stealth through private contracts.
The Golden Crescent case reaffirms a clear rule: A Shareholders’ Agreement cannot override a company’s Constitution unless its terms are duly incorporated through the statutory process. This upholds certainty, protects minority rights, and prevents private side arrangements from undermining core corporate governance rules. Parties who wish Shareholders’ Agreement terms to have binding corporate effect must comply with the Companies Act requirements especially Section 36(3) or risk those terms being treated as mere private promises with no impact on the company’s internal rules.
DECISION OF THE CASE
The High Court ruled that the quorum for D2’s general meetings remained as provided in Article 46 of its Constitution; namely, two members present in person or by proxy. Given D1’s repeated non-attendance, the Court exercised its powers under Section 314 CA 2016 to order that a single member present would constitute quorum to break the deadlock and allow urgent business to proceed.
The Court also rejected D1’s technical objections about defective notices and the failure to notify the auditor. Any procedural defects were held to be curable under Section 582 CA 2016, as they caused no substantial injustice. In short, the Court prioritised the need to protect the company’s functioning and prevent abuse by a minority shareholder deliberately frustrating meetings through non-attendance.
CONCLUSION
Golden Crescent reaffirms a clear rule in Malaysian company law; the Constitution is the supreme governance document for a company and binds its shareholders as a statutory contract pursuant to Section 33(1) of the Companies Act 2016. This means that any person who becomes a new member of the company will automatically be bound by the Constitution, even if they are not party to a separate Shareholders’ Agreement.
The decision also makes clear that a Shareholders’ Agreement cannot override the Constitution unless its terms are properly incorporated by following the prescribed statutory procedure under Section 36(3) of the Companies Act 2016, which requires a special resolution and lodgement with the Registrar.
Importantly, if a company does not have a formal Constitution and relies only on a Shareholders’ Agreement, this case serves as a caution that courts will still look for the governing constitutional document in the event of conflict. Without one, there is a risk that the Shareholders’ Agreement may not be fully enforceable as internal governance rules. It is therefore advisable for parties who rely on a Shareholders’ Agreement to ensure that its key governance terms such as quorum requirements, voting thresholds, director powers or appointment rights are formally adopted as the company’s Constitution and duly notified to the Registrar.
Finally, the decision illustrates that courts may intervene to break deadlocks when minority shareholders misuse quorum requirements to block legitimate corporate action, but this judicial remedy cannot be a substitute for sound corporate drafting and proper compliance with statutory procedures. For practitioners, Golden Crescent is a timely reminder that good corporate governance requires aligning any critical terms in a Shareholders’ Agreement such as quorum rules, voting thresholds, or director appointments with the company’s formal constitutional framework by ensuring they are passed by special resolution and duly notified to the Registrar.
[1] [2025] MLJU 1166
[2] Companies Act 2016
[3] [1999] 3 MLJ 262
