Amendments To Companies Act Strengthens Minority Shareholders’ Protection In Brunei

7 September, 2017

 

The Companies Act Cap. 39 has undergone a number of improvements over the past several years. In May 2016, the Companies Act (Amendment) Order, 2016 was introduced to increase the protection of minority shareholders. Very soon after, in 2017, two new amendment orders were introduced to the scene: the Companies Act (Amendment) Order 2017 and the Companies Act (Amendment) (No. 2) Order, 2017.

 

In this alert, we discuss some of the key highlights of these changes. 

 

Minority rights strengthened

 

The Companies Act (Amendment) Order, 2016 was introduced to further protect minority shareholders’ interests in a company.

 

Prior to the changes introduced by this Order, minority shareholders frequently found themselves in the precarious position of being unable to seek recourse in instances where the majority shareholders or board of directors of a company made a decision that affected their interests.

 

The amendments introduced by the Companies Act (Amendment) Order, 2016 were naturally a welcome addition to the corporate legal environment of Brunei Darussalam.

 

One of the major changes brought on by the Companies Act (Amendment) Order, 2016 was the recourse to personal remedies in cases of oppression or injustice.

 

Subject to prescribed conditions, any member or holder of a debenture of a company may apply to the court for relief in the event of oppressive or unfairly prejudicial conduct or conduct which unfairly disregards their interests as minority shareholders. Where such applications have been made, courts may then pass an order to:

 

• direct or prohibit any act or cancel or vary any transaction or resolution;
• regulate the conduct of the affairs of the company in the future;
• authorize civil proceedings to be brought in the name of or on behalf of the company by such person or persons and on such terms as the court may direct;
• provide for the purchase of the shares or debentures of the company by other members or holders or debentures of the company or by the company itself.
• in the case of a purchase of shares by the company, provide for a reduction accordingly of the capital of the company; or
• provide that the company be wound up.

 

In short, this provision allows both shareholders and directors to seek recourse against oppressive conduct.

Note, however, that despite the availability of this recourse, courts in Brunei have been cautious in their interpretation of alleged oppressive or unfairly prejudicial conduct.

 

In order to be successful, applicants must establish a lack of probity or fair dealing; a violation of the conditions of fair play on which every shareholder is entitled to rely on, or unfair discrimination against the minority.

 

Filing requirements relaxed

 

The Companies Act (Amendment) Order, 2017 was introduced on 4 May 2017 to further cater and adapt to the ever-evolving business needs of both domestic and foreign investors.

 

Since its introduction, companies are no longer required to upload a Notice of Situation of Registered Office form and Returns of Allotment of Shares form upon incorporation.

 

Additionally, with the amendments, taking into account the removal of the process of reservation of name with a fee of USD 5, the overall fee to incorporate a company is now fixed at USD 300.

Special notice requirements 

 

The Companies Act (Amendment) (No 2) Order, 2017 was introduced on 6 May 2017 to improve the ease of doing business in Brunei by strengthening the rights of minority shareholders.

 

One of the amendments introduced by this Order was that special notice was required for a resolution to be effective. Section 118A provides the following guidance on this matter:

 

“Where by this Act special notice is required of a resolution, the resolution shall not be effective unless notice of the intention to move it has been given to the company not less than 28 days before the meeting at which it is moved, and the company shall give its members notice of any such resolution at the same time and in the same manner as it gives notice of the meeting or, if that is not practicable, shall give them notice thereof, in any manner allowed by the articles, not less than 14 days before the meeting, but if after notice of the intention to move such a resolution has been given to the company, a meeting is called for a date 28 days or less after the notice has been given, the notice, although not given to the company within the time required by this subsection, is deemed to be properly given.”