Ezion loses bid to get Teras Cargo to reveal unaudited accounts

Judicial Commissioner Aedit Abdullah noted that Ezion's complaint is that Teras has not held its AGMs or provided annual reports for a number of years, leaving Ezion blind to the status of the company's affairs.
Judicial Commissioner Aedit Abdullah noted that Ezion's complaint is that Teras has not held its AGMs or provided annual reports for a number of years, leaving Ezion blind to the status of the company's affairs.ST FILE PHOTO

Companies Act does not confer on shareholders right to financial info not presented at AGM

The High Court refused a novel bid by a minority shareholder to order a company to disclose its 2015 financial year accounts that have not yet been prepared and audited.

Ezion Holdings, which previously owned Teras Cargo Transport and is now a minority shareholder, had applied under the Companies Act, arguing that without the financial papers sought, "shareholders would not know what is going on".

"Despite the best efforts of counsel for (Ezion), I decline to grant the application," said Judicial Commissioner Aedit Abdullah in judgment grounds released yesterday.

NOT FOR NOVELTY'S SAKE

A novel proposition is not to be rejected because it is novel. But where statutory rights are invoked, a novel reading has to be supported by the clear words of the provision or, where the language is ambiguous or vague, by clearly telegraphed purposes.

JUDICIAL COMMISSIONER AEDIT ABDULLAH, on rejecting Ezion's novel attempt to gain access to unaudited accounts.

"A novel proposition is not to be rejected because it is novel. But where statutory rights are invoked, a novel reading has to be supported by the clear words of the provision or, where the language is ambiguous or vague, by clearly telegraphed purposes," he added.

Ezion, through lawyers Eric Chew and Daniel Li, argued that the financial accounts would enable shareholders to look at the company's affairs, and if these "disclose things going wrong", the shareholder could then ask for the underlying documents and consider further action.

It added that the last audited documents issued were for financial year 2012, and the annual general meeting for 2013 was called only in July this year, three months after the present application was filed. No AGM has been called for 2014.

Teras Cargo, defended by lawyers Chew Kei Jin and Tham Lijing, debunked the application as "a fishing exercise", pointing out that under the Companies Act, the shareholder can only request audited copies of financial statements that are put before the company at an AGM.

They added that there are mechanisms within the Act to deal with late AGMs and Ezion should look to these.

The judge said the Act does not confer a broad right to financial information to shareholders which includes data that has not been prepared, audited and presented at an AGM. He noted that Ezion's complaint is that Teras has not held its AGMs or provided annual reports for a number of years, leaving Ezion blind to the status of the company's affairs.

The judge added that this lack of information merits sympathy but is not a reason for the court to override the relevant provisions of the Act. He indicated there were remedies elsewhere.

He noted the present statutory regime balanced the rights and obligations of a number of different parties, not just of the shareholders and members, but also directors and creditors.

He said that while an unqualified right to financial information would benefit shareholders, such a right would probably burden the company and its directors.

"What may be thought a lacuna may only be (so) in one aspect, but it may also be balanced out by other shareholder rights.

"One trusts that while (Teras) has succeeded in defending itself, it would, in due course, direct its mind and effort to comply with its obligations to hold general meetings and provide its financial information," said the judge.

A version of this article appeared in the print edition of The Straits Times on September 02, 2016, with the headline 'Ezion loses bid to get Teras Cargo to reveal unaudited accounts'. Print Edition | Subscribe