Distinction between 'Days' & 'Clear Days' in the Companies Act 2016

by Jason Yong Kok Yew ~ 21 September 2019

Distinction between 'Days' & 'Clear Days' in the Companies Act 2016

On 15.8.2019, Thomas Philip successfully defended an injunction application in the matter of Tan Than Kau & Anor v RHB Nominees (Asing) Sdn Bhd and 2 Ors (Kuala Lumpur High Court Originating Summons No.: WA-24NCC-295-06/2019) (the “Application”).

The Application sought to, inter alia, prevent an Extraordinary General Meeting (the “EGM”) of a Malaysian public listed company (the “Company”) from taking place. 

The EGM was called by a substantial shareholder of the Company for the main purpose of removing the then-current Board of Directors and electing new individuals as Directors of the Company.

One of the main grounds on which the Plaintiff sought to rely on in the Application was that the Notice of the EGM (the “EGM Notice”) did not meet the mandatory 14 days’ notice period as required by the Companies Act, 2016 (“CA 2016”) and the Company’s Constitution. For completeness, Section 316(2) CA 2016 provides, essentially, that a meeting of members of a public company must be called by “at least 14 days [notice] or any longer period specified in its constitution”.

The Plaintiff relied upon the case of Extreme System Sdn Bhd v Ho Hup Construction Company Bhd & Ors [2010] 1 LNS 338 to argue that the “14 days” notice period herein must necessarily mean “14 clear days”. 

Decision of the Court

If the ‘clear days’ reckoning were applied, there must be at least 14 days intervening between the date that the EGM Notice was sent, and the date of the EGM itself. In other words, neither the date the EGM Notice was sent nor the date of the EGM itself would be included in the calculation of time. 

The significance of the distinction between ‘days’ and ‘clear days’ is demonstrated by the fact that if the ‘clear days’ reckoning were applied,  the EGM Notice would be 1 day short of the required notice period. This then enabled the Plaintiff to further argue that the non-compliance with the required notice period rendered the EGM Notice invalid in law. 

On the other hand, the Defendant submitted that ‘days’ should not be equated with ‘clear days’ for the very reason that the words ‘clear days’ were not used in the Constitution. 

Further, the CA 2016 itself makes a distinction between ‘clear days’ (e.g. at Section 449(3)(a), ‘at least seven clear days’) and ‘days’ (e.g. at Section 322(4), ‘at least 14 days’). Given that Parliament had deemed it necessary to use and refer to ‘clear days’ in 1 section of the CA 2016 and ‘days’ in another section, the necessary implication is that Parliament intended for these 2 phrases to have distinct meanings.

The Defendant went on to distinguish Extreme System (supra) on the basis that the decision therein did not appear to take into account this distinction in the drafting of the CA 2016. Instead, the Defendant moved the Court to give reliance to Re John Fung Nyuk Foh; ex p Teck Guan Trading Sdn Bhd [1998] 7 MLJ 520 wherein the learned Judge stated that “Rule 26 [of the Bankruptcy Rules] does not say 3 clear days. It only says 3 days. Because r. 22 says clear days and r. 26 does not say clear days, r. 26 cannot intend clear days”.

Faced with the above contentions from each party, the learned Judicial Commissioner agreed with the Defendant in that it must be presumed that Parliament uses words with care, and that no word in the statute is superfluous. As such, the learned Judicial Commissioner stated that this suggests that our Parliament may have intended a distinction to be made between ‘clear days’ and ‘days’ in the CA 2016.

Conclusion

Though it may seem like an arbitrary exercise in semantics, lexical distinctions such as the difference between ‘days’ and ‘clear days’ can have a profound impact in practice, for instance in shareholder disputes where the appointment and removal of entire boards of directors of public listed companies may rise and fall on the nib of a pen. The author opines that the Court had, vide this decision, reinforced shareholders’ rights to corporate democracy in calling and proceeding with meetings of members without being frustrated by a mere 1 day deficiency of notice in calling the EGM.