'Deadlock' in corporations emerge upon disagreement between the participants of a corporation on fundamental business and company’s policies that cannot be resolved due to the absence of majority vote or unanimity voices.
Deadlocked Companies are able to be wound up pursuant to section 218 (1)(I) of the Companies Act 1965, as follow:-
“The Court may order the winding up if-the Court is of opinion that it is just and equitable that the company be wound up;”
Just and Equitable to Wound-up Deadlocked Companies?
The provision of ‘just and equitable appearing in s. 218 (1) (i) of the Act encompass a very wide concept and the court should not summarily strike out petition based on the ground of deadlock as a result of loss in mutual confidence and trust, without conduct a full hearing. A petitioner who presented his petition on such ground shall show the court that the company should no longer be allowed to continue and that it shall be wound up.
However, to invoke s.218(1)(i) of the Act, on the ground of just and equitable, which is an equity remedy, the petitioner must come with clean hands. In the case of Dato Ting Check Sii v Marine Utama Sdn Bhd & Anor, the Respondent contended that the Petitioner did not come with clean hands as he had been disruptive, uncooperative and obstructive to the management of the company thus preventing the company from filing its audited reports and complying with the statutory requirements of Commissioner for Companies in Malaysia (‘the CCM’). However, this was expressly ignored and was not given consideration by the Court. The court is of the opinion that since the objective the main object of the company has disappeared and thus a court is able to wind up the company on just and equitable ground.
I find that decision of the case is rather disturbing as it had allowed parties to seek equity without clean hands. As such, a party with mala fide intention can now disturbed the management of the company resulting in deadlock and is able to foresee that the company will be wound up, be it prosperous or not. This had in effect assist the party of mala fide intention to do badly in equity.
Section 218 (1)(i) of the Act is not always the best remedy to curb and break deadlock disputes in the management of companies. There are circumstances whereby the court has relax the application of s.218(1)(i) of the act and had perhaps widened it too much to allow for companies to be wound up on the just and equitable ground despite the availability of other suitable grounds found in s.218(1). The section is adopted from the principle of equity and the maxim of equity shall in no way be ignored to allow parties to come with unclean hands.
Malaysia judiciary should not be too prepared to exclude other alternatives available to curb deadlock disputes as there is nothing to preclude our court to do so. In fact, in considering whether there are other available remedies, especially the availability of s.150 and s.362 of the Act would ensure that the law does not assist parties with mala fide intention in hoping to wind up the company with the assistance of our court and legal system. This would also ensure that protection is given to companies, especially a prospective and prosperous one, and also their stakeholders, including employees and creditors.
 Tan Kim Hor & Ors v Tan Heng Chew & Ors  4 MLJ 358 at p.386 Supra   MLJU 28
Written by Chris Chin Shang Yoon Email: firstname.lastname@example.org