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Case Update: Whether partnership can be deemed as "unregistered company" under Companies Act 1965

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COMPANY LAW
Winding-up – Setting aside – Whether bankrupt partner considered member in partnership – Unregistered companies – Partnership with more than five members – Whether unregistered company – Whether partnership could be wound-up – Companies Act 1965, sections 14, 314 & 315

TRA Mining (Malaysia) Sdn Bhd v Thien Hong Teck & Ors and Another Appeal
[2018] 10 CLJ 438, Federal Court
- see the grounds of judgment here

Facts One of the partners (‘Syed’) of ARCI Enterprise (‘ARCI’) had executed a power of attorney (‘POA’) in favour of one Cedric and a deed of assignment in favour of the appellant, TRA Mining (Malaysia) Sdn Bhd (‘TRA’) to sell all his rights, title and interests in his shares in ARCI to TRA. ARCI and TRA later entered into a joint venture agreement but ARCI terminated the same when disputes arose. In the meantime, Syed and another partner (‘Yee’) were adjudicated as bankrupts. After its expiry, the partnership was registered with the same name but with only five surviving partners (‘the respondents’), excluding Syed and Yee. During a creditors’ meeting, convened by Cedric, ARCI was determined to be insolvent. TRA, claiming to be a creditor to ARCI, filed a creditor’s petition at the Melaka High Court (‘the MHC’) to wind up ARCI and the MHC granted the petition; ARCI was wound up and one Afrizan was appointed as the liquidator (‘the MHC order’). The respondents initiated a claim at the Kuala Lumpur High Court (‘the KLHC’), against TRA and Afrizan, to set aside the MHC order. The KLHC set aside the MHC order. However, the Court of Appeal set aside the KLHC order and the respondents’ writ was reinstated. Hence, this appeal.

Issue The primary issue is whether a partner, on the true construction of section 33[1] of the Partnership Act 1961, who entered a partnership pursuant to an assignment, could be deemed as a partner for the purpose of ascertaining the number of partners under section 314[2] and 315[3] of the Companies Act 1965 (‘the CA’).

Held In dismissing the appeal, the Federal Court held that at the time of the presentation of the winding-up petition at the MHC, there were only five partners left and therefore ARCI could not be wound up under sections 314 and 315 of the CA. It was held that the assignee and the attorney of the bankrupt partner (Syed) cannot in law be considered as a partner in the partnership for the purpose of computation under section 314 of the CA.

 
 
[1] Rights of assignee of share in partnership
[2] For the purposes of this Division "unregistered company" includes a foreign company and any partnership, association or company consisting of more than five members but does not include a company incorporated under this Act or under any corresponding previous written law
[3] Winding up of unregistered companies.