There and Back Again - Perspectives on the Law of Derivative Action in Malaysia

It gives me great pleasure to share the abstract of the article entitled 'There and Back Again - Perspectives on the Law of Derivative Action in Malaysia; [2017] 5 MLJ cxxiv which is also available online in ful at

Abstract :

The advent of ss 347–350 of the Companies Act 20164 (‘the CA 2016’) could not have presented a more fortuitous and opportune time to discuss recent developments on the law relating to derivative action; also commonly known as the exceptions to the rule in Foss v Harbottle.

This article paints a broad picture on the evolution of derivative action starting from the rule of Foss v Harbottle, the genesis of the common law derivative action or the exception to the rule of Foss v Harbotle, the inception of Malaysian common law derivative action, the statutory derivative actions vide ss 181A–E of the CA 1965 premised upon the CA (Amendment) 2007 Act and until recently, the new ss 347–350 of the CA 2016.

More importantly, this article discusses the development and judicial trends reflected in the Court of Appeal’s decisions in (i) Celcom (M) Bhd v Mohd Shuib Ishak [2011] 3 MLJ 636 and (ii) Abdul Rahim bin Suleiman (suing as the director and minority shareholder of Semangat Motor Sdn Bhd) & Anor v Faridah bt Md Lazim & Ors [2016] 6 MLJ 449 and last but not least, Mohd Nazlan JC’s (as His Lordship then was) decision in Ong Keng Huat v Fortune Frontier (M) Sdn Bhd [2015] 11 MLJ 604.

These decisions clearly illustrate the judicial trends, underlying principles and its applications in light of ss 181A–E of the 1965 Act as well as the ‘new’ principles beyond the statutory scope with the benefits, at that material time, of common law principles on derivative action that has not been abrogated.

It is envisaged with the introduction of s 347(3) of the CA 2016, where the application of common law principles on derivative actions is henceforth abrogated, the law and judicial trend on statutory derivative actions may be clearer.

Doubtlessly, this may be an opportune time to revisit the judicial trend and approaches discussed earlier and thus consider whether a ‘restrictive construction of the exclusive nature of the statutory scheme’ or the ‘... greater judicial activism and greater contractual freedom’ is to be the preferred and be the guiding judicial approach ahead.

I wish you a fruitful and happy reading.

Ainul Azam

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