Nanyang Commercial Management Pte Ltd v Matex International Limited

Facts

Nanyang Commercial Management Pte Ltd (the claimant) became the largest shareholder of Matex International Ltd, a Catalist-listed textile dye company, after subscribing for new shares, holding 29.86%. At the 28 April 2025 AGM, shareholders including the claimant approved a mandate authorising the directors to issue further shares. Disputes then arose between the claimant's director and Matex's executive directors, Dr Alex Tan Pang Kee (also the CEO) and his son. On 7 July 2025 the claimant requisitioned an EGM to remove the two executive directors. On 11 July 2025 three of the six directors signed a paper board resolution approving subscription agreements with two investors, Lim and Gan, for stakes of 14.88% and 14.06%, which would cut the claimant's stake to 21.22%. A physical meeting of those three directors followed the next day.

In Originating Application No 733 of 2025 the claimant sought to restrain completion of the agreements, alleging they were made for the improper purpose of diluting its voting power and that the board's steps breached the company's constitution. Matex said the shares were issued to build strategic partnerships. After the hearing the parties settled; the executive directors resigned and the agreements were cancelled. Both sides asked the judge to publish the judgment already prepared.

Issues

1. Whether the share issue could be restrained on the ground that it was made for an improper purpose
2. Whether the board's paper resolution and meeting complied with the company's constitution
3. Whether the claimant, as a member, should be granted an injunction to restrain the breach of the constitution

Holding

The High Court granted the claimant permission to discontinue the originating application and ordered no order as to costs, as the parties asked. It published its reasons, stating that had the application not been discontinued it would have granted an injunction restraining completion of the subscription agreements until approved by a board resolution complying with the constitution or by shareholders in general meeting.

Reasoning

On improper purpose, the court declined to imply into the constitution a term, drawn from the Privy Council's decision in Tianrui, that shares must be issued in accordance with directors' fiduciary duties, noting that shareholders already have derivative and oppression remedies and that fiduciary breaches are usually wrongs to the company. In any event, although the timing four days after the requisition and the discount pricing raised question marks, the substantial factual disputes could not be resolved in an originating application. Issuing shares without a need for capital is not necessarily improper, as Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 shows, and the claimant had itself voted for the mandate.

On the constitution, the mandate authorised the board, and Art 103 required a written resolution to be signed by a majority of directors; three out of six was not a majority, and the chairman's casting vote under Art 99 applies only at meetings, as the company secretary had told the board. The meeting the next day lacked a quorum. The court read the words Directors present in Art 98 as meaning the directors for the time being, correcting an obvious drafting mistake as a matter of construction, so four directors plus the CEO were needed. Art 87 did not let the CEO act alone without proof of delegation. The share issue therefore fell outside the mandate and breached Art 4(A).

On remedy, an injunction is discretionary and a member must show personal harm, not only a corporate wrong. Here the claimant, the largest shareholder, lost almost a third of its voting power at a pivotal moment, and the stakes were set just below the level needing shareholder approval. The indoor management rule was for the third parties to invoke, and they had not.

From the judgment