06/07/2026

Suing the Wrong Way: Why Choosing Between Oppression and Derivative Actions Can Make or Break Your Case

06/07/2026
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Suing the Wrong Way: Why Choosing Between Oppression and Derivative Actions Can Make or Break Your Case

Federal Court of Malaysia | Low Cheng Teik & Ors v Low Ean Nee [2024] 5 MLJ 579

When a director strips a company of its most valuable assets and transfers them to his own family’s business for a token sum, it feels personal. And for a minority shareholder watching helplessly, it is personal — in every commercial and emotional sense of the word.

But feeling personally wronged and being legally entitled to sue in a personal capacity are two very different things. The Federal Court’s decision in Low Cheng Teik draws that line with clarity, and the consequences for getting it wrong are severe: your claim fails, not because there was no wrongdoing, but because you sued under the wrong provision.

This is a decision that every minority shareholder — and every lawyer advising one — needs to understand.

What Happened

SNE Marketing Sdn Bhd was a 50/50 company. Low Ean Nee held one half; the three appellants, led by A1 as chairman, held the other. A1 then unilaterally executed a Deed of Assignment transferring the company’s registered trademarks — the SNE Trademarks — to SNE Global Sdn Bhd, a separate entity he co-founded and in which his own daughter held a 50% stake. The consideration: RM10.

Low Ean Nee sued under section 346 of the Companies Act 2016, the minority oppression provision, alleging that the appellants had acted oppressively and in disregard of her interests as a shareholder. She sought a buy-out of her shares.

The Federal Court unanimously allowed the appeal and threw out the oppression claim. Not because the trademark transfer was legitimate — it was not — but because the wrong she suffered was the company’s wrong, not hers alone.

The Central Question

Two remedies exist when a director breaches fiduciary duties. Under section 346, a shareholder sues in their own name for harm done to them personally. Under section 347, a shareholder seeks court leave to sue on behalf of the company, enforcing rights that belong to the company itself.

The Federal Court was asked to resolve exactly where the line sits — and to formulate a legal test that Malaysian courts can apply going forward.

The Test the Federal Court Laid Down

The Court established a four-part framework for determining whether a complaint belongs under section 346 (oppression) or section 347 (derivative action):

First, identify the specific act, omission, or series of conduct being complained of.

Second, ask whether that conduct can be characterised as oppressive to, in disregard of the interests of, unfairly discriminatory against, or otherwise prejudicial to one or more shareholders.

Third, determine who actually suffered the loss — the shareholder in their capacity as a shareholder, or the company?

Fourth, ask whether the loss suffered by the complaining shareholder is separate and distinct from the loss suffered by all the other shareholders.

If the answers point to a personal, individual injury that is distinct from what every other shareholder has experienced, section 346 is the right door. If the loss is felt equally across the shareholder base — because it is really the company that was wronged — section 347 is where the claim belongs.

Applying the Test to the Facts

The Federal Court walked through each limb methodically. The SNE Trademarks were company assets. Their wrongful transfer depleted the company’s value. Every shareholder — including A1 himself — suffered a diminution in the value of their stake as a consequence.

Low Ean Nee’s loss was not singular. It was not targeted. It was not the kind of conduct designed to squeeze out one shareholder while leaving the others untouched. It was a corporate wrong that happened to affect her, in exactly the same proportion as it affected everyone else.

Her loss — reduced share value, diminished dividends — was what the law calls reflective loss: a loss that simply mirrors the company’s own loss, measured by reference to her shareholding percentage. Under the rule against reflective loss, that is not a separate and distinct personal injury. It cannot found an oppression claim.

The Court was direct about this: there was wrongdoing. No one denied it. But the wrongdoing was done to the company, and the company’s rights must be enforced through the company’s remedy.

The Irony the Court Noticed

The Federal Court pointed out something that somewhat undermined the respondent’s position. Before filing the oppression action, Low Ean Nee had actually issued a statutory notice seeking leave to commence a derivative action — and the substance of that notice focused squarely on the trademark assignment. The Court observed that this suggested she herself understood, at some level, that her real remedy lay in the derivative route. The wrong course was nonetheless taken.

Three Things to Take Away

The nature of the harm — not the severity of the conduct — determines your remedy. A director can behave egregiously, and an oppression claim can still fail. What matters is not how bad the wrongdoing was, but who it was done to. If the primary victim is the company, the law requires the claim to be brought on the company’s behalf.

Reflective loss cannot substitute for personal harm. A shareholder whose shares fall in value because the company lost an asset has not suffered a personal injury in any legally meaningful sense. That loss reflects the company’s loss and nothing more. It will not sustain an oppression claim under section 346.

Choosing the wrong remedy can be fatal. The two provisions are not interchangeable, and courts will not allow a party to reframe a corporate wrong as personal oppression simply because doing so is more convenient. Getting the cause of action right from the outset — ideally before any proceedings are filed — is not a technicality. It is the foundation of the entire claim.

A Final Word

For minority shareholders in a deadlocked company, watching a controlling director funnel assets to a related party is one of the most frustrating situations imaginable. The instinct to act swiftly and personally is understandable. But the law demands precision about which wrong you are pursuing and whose rights you are vindicating.

If the company’s assets have been misappropriated, the starting point is almost always a derivative action. Section 346 remains a powerful tool — but only where the harm to the shareholder is genuinely distinct from the harm to the company itself.

If you are facing a situation involving director misconduct, asset stripping, or a fractured shareholder relationship, we would be glad to help you map the right path forward before the first document is filed.

The content of this article does not constitute legal advice. It is intended to provide general information. Specific advice should be sought in relation to your particular circumstances.

Zain Megat & Murad
 D2-5-1 to D2-5-3A, Block D, Solaris Dutamas No.1, Jalan Dutamas 1, 50480 Kuala Lumpur
 +603 6207 9331 | zmm@zainmegatmurad.com

 

ABOUT THE AUTHOR

MOHAMAD AMIN FEISAL AZAM

Associate

LL.B (HONS) IIUM

aminfeisal@zainmegatmurad.com

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