Tuesday, August 25, 1992

The rights of a shareholder

The Business Times

By Zakaria Othman

The primary source of a shareholder’s rights is his “contract” with the company as embodied in the company’s memorandum and articles of associations (MAA)

A company’s memorandum of association sets out a company’s objective while its articles of association lay down the internal regulations which govern the company.

Mr. Roger Tan Kor Mee, an Advocate and Solicitor said, however, there is no fixed set of rights which by law inheres the shareholder status although statutory provisions, particularly the Companies Act 1965 (the At), set out certain rights for shareholders.

Moreover, he added, company law is constantly subject to change.

Delivering a paper on the “Latest Implications of Holding Shares and the Rights” at the Corporate Management and Directorship conference in Kuala Lumpur yesterday, he said the term “ shareholder” is often loosely used as a synonym for “ member”.

He stressed that a person who owns shares does not make him a member of the company, as it is only those whose names are registered on the Register of members are members of the company.

Once a person joins a company as a member, Tan said , the MAA will bind the company and the member as if they have been signed and sealed by the member covenants to observe all the provisions laid down.

He added that a company cannot, by contract, deprive its members of their statutory right to alter the articles or provision in the memorandum. It may be altered in the manner provided for in the Act, and not otherwise.

In contrast, the articles of association may be freely altered or added to subject to Act and any conditions in the memorandum.

As for shareholders’ rights, Tan said they stem form the company’s constitution (the MAA) and the law, namely case law and statute law.

Generally, a member is entitled to have the MAA observed and to restrain ultra vires or other illegal acts. The members will also have access to the company’s records and certain information provided to them.

Every member is entitled to be sent a copy of the company’s accounts for the financial year and it must be done not less than 14 days before the annual general meeting at which the accounts are to be presented.

(Under the proposed amendment to Section 170 of the Act, copies of the company’s account may be sent less than 14 days before the date of the meeting if it is agreed to by all members entitled to attend and vote at the meeting.)

The annual report and accounts provide a member with an overview of the company’s financial position.

Tan said annual general meetings are a forum for members to review management and provide the best opportunity for a member to voice his opinion on company policy or to ask questions of the management.

Every member, he said, is entitled to be sent 21 days’ notice of each annual general meeting and 14 days’ notice of each extraordinary general meeting. Any notice shorter than the period prescribed by the Act can only be made with the unanimous consent of all members entitled to attend and vote.

Every member is also entitled at law to explanation and additional information as may be necessary for member to understand the implications of any proposed transactions.

In order that members are informed of what is happening in the company, a member has a right to inspect the company’s registers.

“Inspection may be made free of charge,: he said.

Among the registers that must be maintained by the company are the registers of members, registers of substantial shareholders and registered of directors, managers, secretaries and auditors.

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