Relief to Public Listed Companies – The Federal Court's Decision in Concrete Parade

The recent Federal Court decision in Dato' Azizan Abd Rahman & Ors v Concrete Parade Sdn Bhd & Ors & Other Appeals [2024] CLJU 610 gives companies, in particular Malaysian public-listed companies (PLCs), long-awaited clarification following uncertainties brought on by the Court of Appeal’s decision in Concrete Parade Sdn Bhd v Apex Equity Holdings Bhd & Ors [2021] 9 CLJ 849.

The Federal Court held among others:

1. Section 85 of the Companies Act 2016 ("CA 2016"), which confers a statutory pre-emptive right to shareholders, is subject to the constitution of a company. The constitution may:


• provide for an ability to renounce or disapply such pre-emptive rights;
• be silent; or
• fortify such pre-emptive rights.

Where a provision in a company's constitution states that the shareholders' pre-emptive rights are subject to “any direction to the contrary that may be given in a general meeting” (or words to that effect), it will enable shareholders (in an extraordinary general meeting (EGM) voting on a resolution such as that of placement of shares to third parties) to decide whether their pre-emptive rights should be disapplied. There will be no need for the company to first make an offer of shares to existing shareholders or to stipulate or explain (whether in a circular to shareholders or in the resolution) the pre-emptive rights to the shareholders.


2. Section 223(1)(b) of the CA 2016 should be construed so that sub-sections (i) and (ii) of section 223(1)(b) are read disjunctively.

Thus, directors of a company may proceed with the company's entry into an agreement for a substantial value acquisition or disposal if the agreement contains a condition that the acquisition/disposal is subject to shareholders' approval. Alternatively, the board may seek shareholders' approval prior to the close of the transaction, i.e. before the actual acquisition or disposal.

This decision provides welcome legal and practical guidance and enables a return to normalcy for corporate transactions involving share issues and substantial acquisitions/disposals.