30 September 2025

COMPANY LAW
Business Judgement Rule – Fiduciary Duties – Directors’ Duties – Good Faith

Iris Corporation Bhd v Tan Sri Razali Bin Ismail & Ors
Civil Appeal No: W-02(NCC)(W)-1736-09/2022 | Court of Appeal
– see the grounds of judgment here

Facts Iris Corporation Bhd (“the Appellant”), a pioneer in trusted identification technology, invested approximately £2.05 million (RM11.7 million) into Border Control Solutions Limited (“BCS”), a UK company, in pursuit of a border force privatisation project. The investment was approved through a Directors’ Circular Resolution in January 2016, and funds were paid both to BCS and to its sole shareholder, Joseph Vijay Kumar. However, the project failed, and BCS was wound up in 2018 with no refund to the Appellant. The Appellant later relied on an Ernst & Young (EY) forensic report alleging irregularities and breaches of duty by its directors (“the Respondents”). The High Court dismissed the claim, holding that the Respondents had acted in good faith, were protected by the business judgment rule under Sections 214–215 of the Companies Act 2016, and that no breaches of directors’ duties were established.

Issue 1. Whether the Respondents, as directors of the Appellant, had breached their fiduciary duties, statutory duties under the Companies Act 2016, and duties of care and skill in approving and carrying out the BCS Investment, thereby making them personally liable for the company’s losses.

Held In delivering the unanimous decision, YA Dato’ Ahmad Fairuz bin Zainol Abidin dismissed the appeal and affirmed the High Court’s decision. The Appellate Court held that the Respondents’ approval of the BCS Investment fell squarely within the protection of the statutory business judgment rule under Section 214 of the Companies Act 2016. The directors had acted honestly, without personal interest, and based on information they reasonably believed to be sufficient, drawing upon their industry knowledge and prior involvement in the project. The Appellate Court emphasised that subsequent failure of the project did not retrospectively invalidate the directors’ judgment, as courts should not substitute their opinion for bona fide business decisions or apply hindsight bias. The Court also found the Ferrier Hodgson report, which found no irregularities, to be more reliable than the later EY forensic report. Accordingly, no breaches of duty were established, and the directors were entitled to protection.

Zul Rafique & Partners
{30 September 2025}

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