Saliza Sulaiman
Senior Lecturer, Faculty of Accountancy, Universiti Teknologi MARA, Malaysia
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Abstract

This article examines the landmark ruling by the Malaysian Court of Appeal in Andrew Kam v. Grandfoods Sdn Bhd & Ors, which affirmed that directors cannot be automatically retired by rotation without holding an Annual General Meeting (AGM). This decision reinforces core principles of shareholder democracy and has significant implications for corporate governance practice in Malaysia. The article analyses the legal reasoning of the court, the role of statutory provisions under the Companies Act 2016,

and the broader impact on board accountability. A comparative analysis with international corporate governance frameworks is also presented, highlighting Malaysia’s progress toward aligning with global best practices. Recommendations for regulatory reform and practical enforcement are proposed to ensure integrity in corporate decision-making.

Keywords:
Corporate Governance, Director Retirement, Shareholder Democracy, Companies Act 2016, AGM, Malaysia, Board Accountability

1. Introduction

The integrity of corporate governance rests on structures that balance power, ensure transparency, and protect stakeholder rights. A pivotal aspect of these structures is the fair and accountable appointment and retirement of board directors (Yatim, 2009). In March 2025, the Malaysian Court of Appeal delivered a landmark judgement addressing the legality of retiring directors without convening an AGM, sparking critical discourse within the legal and corporate governance circles.

This study analyses the decision’s implications within the context of the Companies Act 2016 and Malaysia’s corporate governance landscape. By linking legal precedent, statutory interpretation, and international comparison, this study aims to provide a comprehensive understanding of how the ruling reinforces shareholder democracy and what it means for future governance practices in Malaysia.

2. Background of the Case

In Malaysia, the Companies Act 2016 requires public companies to hold Annual General Meetings (AGMs) where shareholders vote on key issues, including director re-elections. Directors typically retire by rotation (e.g., every 3 years) and must seek re-appointment at AGMs, ensuring accountability. Skipping AGMs risks breaching the law, as courts, in this study of the landmark case, can intervene to protect shareholder rights. This system balances board stability with democratic oversight, mirroring global standards while allowing judicial enforcement against abuses. For private companies, the retirement of directors by rotation and their re-election should conform to the same procedure, and the matter can only take place during general meetings. This is necessary, for the same reason, to ensure accountability.

The case of Andrew Kam v. Grandfoods Sdn Bhd & Ors involved the unilateral decision by five companies to consider a director, Mr. Andrew Kam, retiring by rotation despite not holding AGMs. The companies argued that his term had expired, and thus, retirement was automatic. The High Court initially ruled in favour of the companies, but the Court of Appeal reversed that decision.

Justice Nazlan Ghazali, delivering the lead judgement, held that director retirement by rotation is "inextricably intertwined" with eligibility for re-election, a process that can only occur during a general meeting. The judgement highlighted that depriving directors of their right to re-election without an AGM violates both their legal rights and the shareholders' democratic power to vote (FMT Reporters, 2025).

The court further referred to Section 205(6) of the Companies Act 2016, which explicitly states that if a vacancy is not filled during an AGM, a retiring director who offers themselves for re-election shall be deemed re-elected, unless shareholders resolve otherwise.

The judgment reaffirms the AGM's critical role in corporate governance as the key platform for shareholder oversight, emphasising that bypassing AGMs risks entrenching board control and sidelining independent voices. It is contrary to the accountability goals of Malaysia’s Companies Act 2016. Dr. Fairuz A. Razak (Vice President, M.A.T.A.) highlights this divergence, noting how AGM avoidance undermines transparency.

Justice Nazlan further warns of boardroom abuse, where majority factions could exploit delayed elections to consolidate power, echoing governance scholars like Haniffa & Hudaib (2006) on the dangers of director entrenchment. This ruling thus reinforces AGMs as a safeguard against governance erosion, aligning legal enforcement with shareholder protection principles.

3. Comparative Analysis

Comparative analysis in this study identifies global corporate governance best practices (e.g., UK/Singapore director re-election rules) to assess Malaysia’s progress and gaps.

Table 1: Comparing Director Re-Election & Shareholder Rights in Corporate Governance

Table 1 explains that in the United Kingdom, the UK Corporate Governance Code (2018) mandates that directors of FTSE companies stand for annual re-election, ensuring continuous shareholder scrutiny. Similarly, Singapore’s Code of Corporate Governance (2018) requires at least one-third of directors to face re-election yearly, reinforcing board accountability through structured performance evaluations. While the UK and Singapore rely on shareholder votes and comply-or-explain disclosure to uphold corporate governance, Malaysia strengthens these global standards by empowering courts to intervene when companies bypass rules, purposefully ensuring fairness and accountability. This judicial oversight makes Malaysia’s governance framework more effective than voluntary codes alone, as judges can directly address abuses like minority shareholder oppression. The result is stronger protections for small investors and closer alignment with international best practices, positioning Malaysia as a progressive model for emerging markets. By blending soft-law guidelines with enforceable legal mechanisms, Malaysia bridges the gap between principle and practice in corporate governance.

4. Policy Recommendations

Although the judgement provides legal clarity, practical enforcement remains a challenge. Companies can exploit procedural loopholes, such as injunctions, to delay or avoid AGMs. This situation necessitates a stronger regulatory framework and proactive enforcement by the Companies Commission of Malaysia (SSM).

The proposed reforms include several targeted regulatory and procedural enhancements to ensure robust enforcement and to prevent the circumvention of corporate governance principles. Such reforms will not only strengthen the spirit of the Court of Appeal’s ruling but also align Malaysia more closely with international best practices.

5. Suggestions for Further Study

Future research could explore the extent to which Malaysian companies have complied with AGM requirements since the enactment of the Companies Act 2016. Next, a qualitative research study to be conducted, involving interviews with board members, company secretaries, and governance consultants, aims to uncover cultural or structural resistance to independent board evaluations. Such studies could also examine how companies perceive external evaluations and whether these lead to actual governance improvements.

6. Conclusion

The Court of Appeal's decision in Andrew Kam v. Grandfoods Sdn Bhd & Ors marks a pivotal moment in Malaysian corporate governance. By affirming that directors cannot be retired automatically without an AGM, the court has safeguarded the fundamental rights of directors and shareholders alike. The ruling reinforces the AGM's role as a key accountability mechanism and a forum for shareholder democracy.

Moving forward, it is imperative for regulators, boards, and shareholders to uphold these principles to ensure integrity, transparency, and fairness within Malaysia's corporate landscape.