Of Universal Application: Recognition Of The Doctrine Of Universal Succession

In the recent case of United Renewable Energy Co Ltd v TS Solartech Sdn Bhd [2019] 8 CLJ 721 ("United Renewable Energy"), the Malaysian High Court, for the first time, recognised the doctrine of universal succession and gave effect to the transmission of shares held in a Malaysian company by operation of law pursuant to a foreign merger.

DOCTRINE OF UNIVERSAL SUCCESSION

What is universal succession? The doctrine of universal succession originates from Roman law. It provides that where the law of incorporation recognises a succession of corporate personality from one corporate entity to another, then the law of the forum will recognise both the changed status of the company, and the fact that the successor has inherited all rights and liabilities of the preceding company. This doctrine has been widely recognised by the Commonwealth Courts. Various authorities are set out below which recognise the concept of a universal succession, where all assets and liabilities are vested in the successor entity. It did not matter whether the exercise was carried out pursuant to a statute that created a new successor entity or through a private merger agreement. United Kingdom The leading case on this doctrine is the English House of Lords' decision of National Bank of Greece and Athens SA v Metliss [1958] AC 509 ("Metliss"). This case laid down the principle that as far as the law of the forum is concerned, once an entity is recognised as having the status of a universal successor, then it will be clothed with both the assets and liabilities of the predecessor entity. In Metliss, the universal succession was triggered by the amalgamation of companies under a statute which provided that a new entity would inherit the rights and obligations of two Greek banks. The Court held that the new entity was bound by a guarantee issued by one of the predecessor banks. The English High Court decision of Astra SA Insurance and Reinsurance Co v Sphere Drake Insurance Ltd (formerly Sphere Drake Insurance plc, Sphere Drake Insurance plc and Odyssey Re (London) Ltd) [2000] All ER (D) 672 ("Astra") is also relevant. The question arose was whether Astra SA Insurance and Reinsurance Co ("Astra SA") had, under Romanian law, succeeded to the rights and liabilities of a former Romanian State Insurance Company ("ADAS"), and was thus liable under various international insurance and reinsurance contracts and bound by the arbitration clauses contained in those contracts. Pursuant to a development in Romanian Law, ADAS ceased to exist, and its assets and liabilities were divided among three new companies, one of which was Astra SA. It was held that the entire benefit and burden of ADAS' international insurance and reinsurance contracts had passed to Astra SA, and all the terms, including the arbitration clauses, were enforceable against Astra SA. In the context of the effect on an arbitration agreement where one party ceases to exist by virtue of a universal succession, a similar decision was reached in the English...