A Member’s Right to Sue on Behalf of a Company: Statutory Derivative Action Under Section 181A Companies Act 1965

The case under review, Mohd Shuaib Ishak v. Celcom (M) Bhd., is the first reported case in Malaysia where the court has granted leave to an individual shareholder to commence a statutory derivative action. By an amendment made to the Companies Act 1965, Section 181A which came into force on 15 August 2007, 3 enables current and former members and directors of a company to bring an action on behalf of the company to enforce the company s right, or intervene in proceedings to which the company is a party. This action, known as the statutory derivative action, was introduced to rectify the inadequacies of the common law derivative action.Aderivative action is an action brought by a member on behalf of a company or where a member steps into the shoes of the company to enforce the company s right.