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Weeks before its AGM, a listed company told its foreign shareholders that some of their votes might not count. No shareholder vote. No change to its constitution. Just announcements.

One shareholder with less than 2% went to court and got an order days before the meeting. The High Court then sided with the company. The Court of Appeal did not.

The lesson is not only for listed companies. If you have ever agreed a "rule" with your co-founders that was never written into your company's constitution, keep reading.

ICapital.Biz is a closed end fund listed on Bursa Malaysia. Its constitution has one simple cap: no single member can hold more than 20% of its shares.

In September 2023 it announced a different kind of cap. Foreign shareholders as a group could not hold more than 20%. If they went over, the most recently bought foreign shares could be treated as restricted. ICapital could then decide what rights came with them, including the right to vote. It repeated this in its AGM notice and its annual report.

POP Investments, an Isle of Man company, owned about 1.62% of ICapital through nominee accounts. It sued in October 2023 and got an interim order on 31 October. The AGM was on 4 November. ICapital complied. In March 2024 the High Court dismissed POP's case. POP appealed and won.

ICapital's case was that the new limit was already part of its rules. Its constitution, the Bursa listing rules and the Securities Commission guidelines all mention a 20% cap. So, it said, this was one scheme.

The Court of Appeal said the two caps share a number and nothing else. The one in the constitution looks at each member on their own. The announced one adds up every foreign holder as a group and can put voting rights at risk even when no single member is over the limit. Nothing in the constitution mentions nationality, foreign ownership or restricted shares.

ICapital's fallback was a Bursa rule that treats a constitution as containing anything the listing rules require. That failed too. The listing rules require the individual cap, which ICapital already had. They do not require a group cap on foreigners, so there was nothing to read in.

Under section 33 of the Companies Act 2016, the constitution binds the company and every member as if they had all signed it. Shares carry rights under section 71, including the right to vote. For a public company like ICapital, section 36 says the constitution changes by special resolution: at least 21 days' notice and at least 75% of those voting.

A rule about who can vote changes the constitution. So it needed that vote. ICapital never held one. And because the foreign ownership regulations only recognise limits written into a company's constituent documents, its limit had no legal effect.

ICapital also said POP could not bring the case, because its shares were in nominees' names when it started. The court disagreed. Section 351 lets anyone whose interests are affected ask the court to stop a breach of the Act, not only registered members. POP owned the shares, carried the financial risk and stood to lose its vote. That was enough.

Picture three co-founders of a private company. Early on they agree in a group chat that nobody sells shares without the others' say. Or that new investors do not get a vote until year two. It is never written into the constitution.

Years later there is a falling out. That chat message may not do what they assumed. Depending on what was actually agreed, it may bind the people who agreed it, but the constitution is what binds the company and every member, including ones who join later. This case is a reminder that courts read the document, not the understanding.

Even the High Court ruled for the company at first. If an argument like this can win in court once, it can certainly win round a boardroom table in the middle of a falling out. The cheapest time to get your rules straight is while everyone still likes each other.