A Director's Right to Inspect the Accounting Records

In a shareholder dispute, the first shot is rarely a petition. It is a letter from a minority director asking to inspect the accounting records — and it works because the board has almost nothing to say in reply.

The right itself

Section 245(4) of the Companies Act 2016 requires that a company’s accounting and other records shall at all times be open for inspection by the directors.

Three words carry the weight. Shall — not discretionary. At all times — no notice requirement in the text. The directors — every one of them, individually, not the board collectively.

Nothing in the subsection requires a director to give a reason, demonstrate a need to know, or show that the request relates to a matter before the board. Malaysian courts have treated the right as prima facie absolute and put the burden of resisting it on the company. The reported position, as summarised in Malaysian commentary:

Case	Point taken from it
Dato’ Tan Kim Hor & Ors v Tan Chong Consolidated Sdn Bhd [2009] 2 MLJ 527	A director need show no particular reason for the request; the company must prove improper purpose by clear evidence
Dato’ Seri Timor Shah Rafiq v Nautilus Tug & Towage Sdn Bhd [2018] 8 MLJ 394	Suspicion of wrongdoing can make inspection part of discharging a director’s duties, not a reason to refuse it
Low Ean Nee v SNE Marketing Sdn Bhd [2024] 1 MLJ 447	A strong case is needed to disentitle a director; but the right belongs to serving directors, and an ex-director cannot invoke it unless the removal is impugned
Haw Par Bros (Pte) Ltd v Dato Aw Kow [1973] 2 MLJ 169	A former director has no proprietary or managerial interest in the records

The practical lesson from Low Ean Nee is the one that decides real disputes: remove the director first and the right evaporates. A minority director who suspects something and waits until after an EGM has lost the cheapest tool available.

The subsidiaries extension

This is the part accounting sites never cover, and it is the reason the remedy is more powerful than it looks in a group structure.

In Datuk Beh Kim Ling & Anor v NEP Holdings (Malaysia) Bhd, a director of the holding company sought inspection of the accounting and other records of the company and of some twenty direct and indirect subsidiaries, including subsidiaries outside the jurisdiction, in which he was not a director and which were not parties to the proceedings.

The High Court, following the Singapore Court of Appeal in Mukherjee Amitava v DyStar Global Holdings (Singapore) Pte Ltd, held that the section 245 right extends to the accounting and other records of the company’s subsidiaries where those records are necessary to give a true and fair view of the state of the company’s affairs. The decision was upheld by the Court of Appeal on 27 September 2023 and has since been followed.

The reasoning tracks the statute. Section 245(1)(a) defines the records by reference to what is needed to prepare true and fair accounts. For a holding company, those accounts are consolidated — so records one level down are within the description.

Inspection through an auditor

Section 245(8) provides a route for a director who cannot personally make sense of the material. The Court may order that the records be open to inspection by an approved company auditor acting for a director, subject to a written undertaking given to the Court that information acquired during the inspection will not be disclosed by the auditor except to that director.

Two things to note. It requires a court order, unlike the personal right in s.245(4). And the undertaking runs to the Court, which makes onward disclosure a contempt risk rather than a commercial judgement call.

Common mistakes

• Answering an inspection demand with conditions. Requiring an undertaking, a stated purpose or a confidentiality agreement as a precondition is not something s.245(4) provides for, and courts have treated such conditions unfavourably.
• Refusing on suspicion of motive without evidence. The company bears the burden and needs more than an assertion that the director is hostile.
• Assuming subsidiary records are out of reach. They are not, where they are necessary to a true and fair view of the parent’s affairs.
• Forgetting that refusal is an offence. Denying access contravenes s.245, and s.245(9) carries a fine up to RM500,000 or three years imprisonment, or both, on the company and every officer.
• Waiting until after removal. The right is a serving director’s right.

What’s next

Where records are held offshore on a group ERP or in a regional shared service centre, the practical answer to an inspection demand depends on what the company is required to hold in Malaysia in the first place — which is a separate set of conditions under s.245(5) to (7).