Section 228. Transactions with directors, substantial shareholders or connected persons

(1) Subject to subsection (2) and section 229, a company shall not enter or carry into effect any arrangement or transaction where a director or a substantial shareholder of the company or its holding company, or its subsidiary, or a person connected with a director or substantial shareholder—

(a) acquires or is to acquire shares or non-cash assets of the requisite value, from the company; or

(b) disposes of or is to dispose of shares or non-cash assets of the requisite value, to the company,

unless—

(A) the entering into the arrangement or transaction is made subject to the approval of shareholders at a general meeting; or

(B) the carrying into effect of the arrangement or transaction has been approved by shareholders at a general meeting.

(2) An arrangement or transaction which is carried into effect in contravention of subsection (1) shall be void unless there is prior approval of the arrangement or transaction—

(a) by a resolution of the company; or

(b) by a resolution of the holding company, if the arrangement or transaction is in favour of a director or substantial shareholder of its holding company or person connected with such director or substantial shareholder.

(3) For the purposes of subsection (1), in the case of an unlisted subsidiary whose holding company is a listed company, the directors of such holding company shall procure the shareholders’ approval of the holding company in a general meeting for the arrangement or transaction by the unlisted subsidiary in addition to the shareholders’ approval of the unlisted subsidiary in a general meeting procured by the directors of the unlisted subsidiary.

(4) In the case of a public company or its holding company or its subsidiary, the director or substantial shareholder or person connected with the director or substantial shareholder who is interested in the arrangement or transaction referred to in paragraph (1)(a) or (b) shall abstain from voting on the resolution at the general meeting to consider the arrangement or transaction referred to in subsection (2).

(5) Where an arrangement or transaction is entered or carried into effect by a company in contravention of subsections (1) and (2), the director, substantial shareholder or person connected with a director or substantial shareholder and any director who knowingly authorized the arrangement or transaction shall, in addition to any other liability, be liable—

(a) to account to the company for any gain which he had made directly or indirectly by the arrangement or transaction; and

(b) jointly and severally with any person liable under this subsection, to indemnify the company for any loss or damage resulting from the arrangement or transaction.

(6) The Court may, on the application of any member or director of the company, restrain the company from entering or carrying into effect an arrangement or transaction in contravention of subsection (1).

(7) A director or substantial shareholder of a company or its holding company, or its subsidiary or a person connected with such director or substantial shareholder, in whose favour the company carries into effect an arrangement or transaction and who knows that such arrangement or transaction is carried into effect by a company in contravention of this section, or a director who knowingly authorized the company to carry into effect such arrangement or transaction, in contravention of this section, commit an offence and shall, on conviction, be liable to imprisonment for a term not exceeding five years or to a fine not exceeding three million ringgit or to both.

(8) For the purposes of subsection (1)—

(a) “person connected with a substantial shareholder” has the same meaning assigned to a “person connected with a director” in section 197 save that all references therein to a director shall be read as a reference to a substantial shareholder;

(b) “requisite value”, in the case of a company where all or any of its shares are quoted on the stock exchange or its subsidiary, shall be the same value as the value prescribed in the listing requirements of the stock exchange where approval of the shareholders at a general meeting is required;

(c) in the case of any company other than a company to which paragraph (b) applies, non-cash asset is of the requisite value if, at the time of the transaction, its value exceeds two hundred and fifty thousand ringgit or if its value does not exceed two hundred and fifty thousand ringgit but exceeds ten per centum of the company’s net asset value provided it is not less than fifty thousand ringgit, where—

(i) the value of the company’s assets is determined by reference to the accounts prepared under section 245 in respect of the last financial year prior to the arrangement or transaction; or

(ii) no accounts have been so prepared and laid before that time, the amount of the company’s called up share capital.

(9) In this section—

(a) a reference to the acquisition or disposal of a non-cash asset includes the creation or extinction of an estate or interests in, or a right over, any property and also the discharge of any person’s liability, other than liability for a liquidated sum;

(b) “cash” includes foreign currency; and

(c) “non-cash asset” means any property or interest in property other than cash.