Members' Rights

Question 1

Members’ 3 Rights

Answer 1

Apart from the crucial right to have the provisions of the constitution observed, members have 2 other important rights:

1. Right to attend, speak and vote at general meetings (s180(1) CA).
   These rights may be restricted by the constitution (i.e. preference shareholders have no right to vote).
2. Right to be treated fairly and equally.

Question 2

Meetings and resolutions:

Background

Answer 2

1. In order for a company to take a decision, a resolution has to be passed at a general meeting of the members.
   Exception: 1-member coys have no such requirement as the sole member may record the resolution and sign the record (s184G(1) CA).
2. Where member is a corporation, the corporation’s rep duly authorised by the board may sign a minute to the effect that the resolution in question has been passed (s179(6) CA).

Question 3

Meetings and resolutions:

Resolutions by written means and AGMs

Meeting must be held

Answer 3

1. More than 1 member: generally, a meeting must be held.
   Although for pte coys and unlimited public coys, resos can be passed by written means if such reso is sent to each member (s184C(1) CA).
2. Must have AGM every year (s175(1) CA).
   a. At the AGM, routine biz is transacted (i.e. election of directors, declaration of dividends, fixing of director’s fees etc.):
   - - Financial statements are to be laid before members (but no need their approval) (s201(1) CA);
   - - Need to appoint auditors (ss205(2), 205A(1), 205B, 205C CA); and
   - - Approval given for share issuance (s161) (usual for listed coys).
   b. Constitution may specify what ordinary biz may be transacted at the AGM.
3. Pte coys may dispense with AGMs by unanimous consent of all voting members (s175A CA).
   a. Irl, small pte coys often resorted to ‘paper’ meetings, where the coy secretary writes up minutes as a fiction when no meeting was in fact held.
   b. Where AGM is dispensed with, whatever biz required to be transacted at the AGM is done by circulation of written resos (ss184A, 184B, 184C, 184D, 184E, 184F CA).
   c. Only for pte coys and unlisted public coys.
   d. This procedure may remove the need to apply to Court for a meeting if there is no quorum.

Question 4

Meetings and resolutions:

Resolutions by written means and AGMs

Informal Assent of resolutions by members

Answer 4

Alternative to stat procedures for calling of meetings and passing of resos: Judge-made rule that if all members of a coy agree, that agreement (if it can be proven) is as binding on the coy as a proper reso would be.

= If everybody agrees, it is pointless to hold a meeting.

[Jimat bin Awang v Lai Wee Ngen [1995] SGCA 77 (Court of Appeal)]

Question 5

Meetings and resolutions:

Resolutions by written means and AGMs

Informal Assent of resolutions by members

Jimat bin Awang v Lai Wee Ngen [1995] SGCA 77 (Court of Appeal)

Answer 5

Whether a General Meeting was required if all members assented during a Board meeting. Apps complained about, inter alia, the issuance of 9m shares w/o their consent.

Held: Unanimous and informal assent by all members of a coy in some manner is as effective as a reso passed at a GM, even if assent is given at diff times.

On the facts, As and Y acted in diff capacities to achieve the desired result of allotting shares during the same meeting: (1) as shareholders to given unanimous approval; and then (2) as dirs to successfully allot the shares.

** S161 CA restricted dirs from issuing shares w/o prior approval of coy; BUT, coy was not so restricted.

** Reasoning of informal assent could be extended to validate a transaction which was entered into by dirs in breach of fiduciary duty (but not yet confirmed by SG courts).

Question 6

Meetings and resolutions:

EGM

4 ways to call

Answer 6

(1) Constitution gives the board (or even a single dir) the power to call an EGM.

(2) Members holding 10% or more of paid-up shares (or 10% of the voting rights in a guarantee coy) may serve a requisition on dirs requiring them to call an EGM. (s176 CA) Meeting must be no later than 2 months from receipt of requisition. If no meeting within 21 days of receipt, requisitionists can hold own meeting within 3 months, chargeable to coy.
Requisitionists usually require coy to circulate notice of proposed resos (s183 CA).
[Credit Development v IMO Pte Ltd: If object of the meeting is to do that which cannot legally be carried into effect or to pass a reso which is ultra vires the meeting, then dirs don’t need to convene the meeting. If meeting is held and a reso passed, dirs are not bound to comply with it. The resolution is void and of no effect.]

(3) 2 or more members holding 10% or more of issued shares (or 5% of the members in a guaranteed coy) may call the meeting themselves w min 14 days’ notice in writing to every member (s177 CA).

(4) Application to court may be made under s182 CA if it is otherwise impracticable to call a meeting.
[Lim Yew Ming v Aik Chuan Construction Pte Ltd [2015] SGHC 101 (HC)]
[Naseer Ahmad Akhtar v Suresh Agarwal [2015] SGHC 256 (HC)]

Question 7

Meetings and resolutions:

EGM

4 ways to call

Lim Yew Ming v Aik Chuan Construction Pte Ltd [2015] SGHC 101 (HC)

Answer 7

There needs to be something which prevents the meeting from being conducted, though whether or not an order should be granted is for the court’s assessment of the circumstances.

Question 8

Meetings and resolutions:

EGM

4 ways to call

Naseer Ahmad Akhtar v Suresh Agarwal [2015] SGHC 256 (HC)

Answer 8

Held that court should exercise discretion, as:
(1) quorums should not be used as de facto vetos; and

(2) majority shareholders should, by right, get to appoint directors.

Question 9

Meetings and resolutions:

EGM

Special Notice for Resolutions

Answer 9

1. Certain resos require special notice before they can be passed. Notice is to coy from the members who propose the reso, stating that they intend to move it at the AGM or EGM (as the case may be) (s185 CA).
   a. Required for removal of dirs of public coys and auditors (ss152(2), 205(4) CA).
   b. Might require special notice for other situations, dependent on constitution of coy.
   c. Distinction b/w special notice and special reso.
2. Rationale behind special notice is to allow the target of the reso the opp to defend himself.

Question 10

Meetings and resolutions:

Notice for Meetings

Answer 10

To inform the members of a meeting, the company must send them notice. This is done so that they can decide whether to attend or not.

2 aspects to this: time and content.

Question 11

Meetings and resolutions:

Notice for Meetings

Time

Answer 11

1. Notice must be sent to the members not less than 14 days before the meeting (21 days if a special reso is to be passed by a public coy) (ss177(2), 184(1) CA).
   * * Constitution may specify a longer period of notice.
2. Exceptions:
   a. Short notice possible in AGM but requires 100% unanimous consent of all members that are entitled to attend and vote: s177(3)(a) CA.

b. Short notice possible in EGM, but requires 95% of vote: s177(3)(b) CA.

c. Where dirs and members are the same, AGM can be held w/o 14 day notice: Chow Kwok Ching v Chow Kwok Chi [2008] -
As directors already approved financial statements, would be ridiculous to requisition another 14 days before the same individuals can approve as shareholders.

Question 12

Meetings and resolutions:

Notice for Meetings

Content

Answer 12

1. Notice should contain sufficient info to allow members to make an informed choice whether to attend and how to vote. Rules pertaining to board meetings are analogous (i.e. similar).
2. Requires 2 items:
   a. s181(2) CA: Statement informing members of the right to appoint a proxy who need not be from the company.
   b. s184 CA: Any intention to propose a special reso.
3. If the notice is inadequate, proceedings at the meeting may be invalidated. An aggrieved member may apply for a declaration to that effect.
4. Test is whether the info is enough to enable a prudent member to decide whether he will attend the meeting, send parties in his stead, or is content to let matters take their own course at the meeting. As a matter of good corporate governance, it should generally provide the proposed reso.

[Hup Seng Co Ltd v Chin Yin [1962] (MS HC)]
[Lau Ah Lang v Chan Huang Seng [2001] SGHC 178 (HC)]

Question 13

Meetings and resolutions:

Notice for Meetings

Content

Hup Seng Co Ltd v Chin Yin [1962] (MS HC)

Answer 13

Members of coy served a requisition to call a GM. The draft reso to be discussed was sent with the requisition. Dirs failed to call a meeting in due time, so requisitionists proceeded to convene a meeting. In the notices sent out, the date, time, place of the meeting were specified, but stated only that “the business before the meeting will be to discuss and vote upon the resolutions set out in the notice of requisition”. No copy of the notice of requisition accompanied the notices calling a meeting.

Held: The notices calling the meeting failed to comply with Coy’s Arts of Assoc in that they didn’t specify the general nature of the biz to be transacted at the meeting. This was a fatal flaw to the validity of the meeting; the proceedings were void.

Question 14

Meetings and resolutions:

Notice for Meetings

Content

Lau Ah Lang v Chan Huang Seng [2001] SGHC 178 (HC)

Answer 14

Mgmt comm of an association was dissolved at an EGM and a replacement comm, consisting of the Dirs, was elected pursuant to resos passed by members in attendance. As the notice calling for the meeting did not state that such actions would be taken, Ps sought a declaration that Dirs’ appt was void, and that the mgmt comm was still duly elected and effective.

Held: Declaration granted to Ps. The notice didn’t specify with sufficient particularity the matters to be discussed and resolved.

No indication to Ps that there would be a motion to replace the mgmt comm. Since Ps were unaware of the purpose of the meeting, they could not make an informed decision as to whether attend.

Consequently, they were deprived of their right to attend and contribute to the discussion and participate in the voting that took place when they failed to attend.

Question 15

Meetings and resolutions:

Mode of Communication

Electronic means allowed

Answer 15

1. Companies may send notice and documents by electronic means rather than snail-mail (ss387A, 387B, 387C CA).
2. Companies may also post notices and docs on their websites, but this is for convenience only and does not constitute notice (since it is impossible to prove that a member has read them).
3. BUT, posting on the website constitutes sufficient notice if the member has agreed in writing to this in accordance with s387B(2) CA.

Question 16

Meetings and resolutions:

Mode of Communication

Conduct of Meetings

Answer 16

1. s178 (Right to demand a poll) and s179 (Quorum, chairman, voting, etc. at meetings) CA govern the conduct of meetings.
2. This might also be prescribed within the constitution (which may in some instances override statutory provisions in CA).
   a. Quorum: Note s179(1) CA: Requires min of 2 members to form quorum.
   b. Voting: Number of votes that a member has depends on the constitution.
   ** General rule is that each share carries one vote (s64(1) CA).
   BUT, coys may issue diff classes of shares carrying diff voting rights (in the case of public coys, s64A CA).
   E.g. common to issue preference shares that carry no voting rights; (and in return, the holders of such shares get priority in payment of dividends (assuming profits exist to allow such payment)).
   ** s64 and s64A clarify that companies may issue non-voting shares or shares that carry multiple votes.
3. For directors’ meetings, procedure is governed in the constitution.

Question 17

Irregularities in proceedings:

General

Answer 17

1. Most coys do not play strictly ‘by the book’ when conducting meetings. In most cases, there are instances of non-compliance w notice reqs or procedure. Most of these are too trivial to complain of.
   In general, Courts are not sympathetic to members who bring proceedings about irregularities that can be cured by a simple majority of the coy.
2. Known as the rule in *Mozley v Alston (1847) 1 Ph 790, and explained by Mellish LJ in *MacDougall v Gardiner (1875) 1 Ch D 13, 25: If something is done irregularly or illegally that can be done regularly or legally which a majority of the Co is entitled to do, then a meeting has to be called, and ultimately the majority will get its wishes.
3. BUT, where the irregularity causes injustice, a person affected may apply for an injunction to prevent it happening (if he can do so in time), or a declaration to the effect that there has been an irregularity in a proceeding or reso (generally after the event) and consequential relief (usually, setting aside the resos or decisions made at that meeting).

Question 18

Irregularities in proceedings:

How to validate irregularity

Answer 18

1. D may apply under s392 CA to have the court validate the irregularity.

A. Procedural irregularities listed under s392(1) CA:

a. Absence of quorum; and
b. Defect, irregularity or deficiency in notice or time.

B. General meetings are also proceedings for the purposes of s392 CA (per Welch v Britannia Industries).

a. s392(1) CA: Applies to directors’ and creditors’ meetings on top of general meetings.
b. s392(2) CA: Savings provision for procedural irregularities, where A applies to court to save a reso tarnished by procedural irregularities. Has the effect of correcting procedural irregularities that fall within s392(1) CA unless they have caused, or may cause substantial injustice that cannot be remedied by any order of the court.

2. Thio Keng Poon v Thio Syn Pyn [2010] 3 SLR 143 (CA): 2 stage inquiry for the application of s392(2) CA.
3. Chang Benety v Tang Kin Fei [2012] 1 SLR 274 (CA): 3 principles in determining substantial injustice.

Question 19

Irregularities in proceedings:

How to validate irregularity

Thio Keng Poon v Thio Syn Pyn [2010] 3 SLR 143 (CA) -

2 stage inquiry for the application of s392(2) CA

Answer 19

(1) Whether the irregularity is substantive or procedural. (If substantive, s392(2) CA is not available to save the reso/meeting)
(2) Where it is procedural, there must have been no substantial injustice to the affected parties in order for the resolution/meeting to be valid.

[A was founder, dir, MD and chairman of both M’sia Dairy (“MaDa”) and Modern Dairy (“MoDa”) under the “Thio Group”. Audit unveiled A had made double expense claims from MaDa and Moda. A contended his removal was contrary to Arts of Assoc of the Coys. Notice for the meeting of Board of Dirs at MaDa was given to all dirs except A who was overseas. At the meeting, A was removed as a dir. The reso was ratified by members at AGM. Under MnAA, a request had to be made to A to resign as a dir.

Held: s392 CA couldn’t apply to validate the board meeting because the irregularity was not of a procedural nature. Moreover, found that non-compliance with the article had caused A substantial injustice.

a. A may not have been removed as a dir had he been able to present his case.
b. Fact that Coy was family-owned and operated was significant.
c. Fact that sons had waited till A was away before making their move was significant.]

Question 20

Irregularities in proceedings:

How to validate irregularity

Golden Harvest Films Distribution (Pte) Ltd v Golden Village Multiplex Pte Ltd [2007] 1 SLR(R) 940 (CA)

Answer 20

GV was a JV coy set up by GH and VR. Each entitled under SHA to nominate 3 dirs to the Board, VR entitled to appoint the Chairman w a casting vote. At a meeting, GH dirs objected to a VR dir being appted Chairman because the SHA giving VR the right to appoint the Chairman hadn’t been incorporated into the MnAA. VR dir still proceeded with the meeting, GH dirs walked out. Remaining VR dirs passed the reso. GH claimed that the self-appt was irregular and that GH had suffered substantial injustice as a result.

Held: No substantial injustice in the appt as meeting had been completed with a quorum (quorum is only needed at commencement).

In any event, even if procedure was irregular, GH had not suffered substantial injustice and so Court would validate the irregularity.

Must have a nexus b/w the irregularity and the injustice that has accrued. It is the procedural irregularity that must have caused the injustice, not the resos themselves: but for the irregularity, a different result would probably have followed at the meeting so that the irregularities had caused, or might cause, substantial injustice.

On the facts, even though chairman didn’t have to use his casting vote, had the GH dirs stayed, he would’ve had to use the vote; the nexus would’ve been established.

Nonetheless, s392 CA failed: any substantial injustice was perpetrated by GH against GV rather than the other way.

a. Intention of GH dirs in walking out was to deprive GV of its opp to have its case heard under the main action.
b. GH had previously agreed to allow the VR dir to chair all dirs’ meetings.
c. As GH’s nominee dirs, their primary duty was to protect the interest of GV and not GH. In determining the application of s392(2) CA, R’s (GV) perspective is also relevant in addition to A’s perspective.

Where proper procedure has not been complied with, a person affected may apply to court for a declaration to that effect and consequential relief, even if he is not a member.
** Exception to the general rule that third parties are not privy to the constitution, viz statutory contract b/w members and the Co.

Question 21

Irregularities in proceedings:

How to validate irregularity

Chang Benety v Tang Kin Fei [2012] 1 SLR 274 (CA)

Answer 21

Shareholders of PPLS are SML and PPL. C and T were dirs, C being PPL’s nominees and T being SML’s nominees. Dispute arose b/w SML and PPL re beneficial ownership of shares of Coy. C had breached their duties to the Coy by disclosing confidential info to X. The Company’s Arts of Assoc and SHA provided that more than 1 of PPL’s Nominee Ds had to be present to constitute a quorum for a board meeting. As a defensive tactic, C declined to attend the meetings, resulting in the lack of quorum. Nonetheless, T passed the resos and commenced an action to validate them under s392(2) CA.

Held: Appeal allowed. Quorum requirement was a procedural irregularity that led to substantial injustice.

Re quorum irregularity, where such a quorum req is breached, there will be prima facie substantial injustice to the side which exercised its deadlock rights.
Validation of the resos had the effect of overriding an agreement which T had made with C regarding the scope of X’s appt; this was a substantial injustice because C was deprived of the bargain that they had struck with T and X.

Question 22

Irregularities in proceedings:

How to validate irregularity

Chang Benety v Tang Kin Fei [2012] 1 SLR 274 (CA)

3 principles determining substantial justice

Answer 22

1. There must be a direct link between the procedural irregularity in question and the injustice suffered.
2. The injustice must be real, and not merely theoretical or fanciful.
3. The aggrieved party must show that there may or could have been a different result if not for the occurrence of the procedural irregularity.

Question 23

Irregularities in proceedings:

How to validate irregularity

Sum Hong Kum v Li Pin Furniture Industries [1996] 2 SLR 488

Answer 23

Coy was incorporated to take over biz of the partnership and 3 OG partners continued as dirs and shareholders. P fell out with the other 2 shareholders and was removed at an AGM. The constitution provided for a quorum of 3 and this quorum was not satisfied.

Held: In considering s392 CA, courts held that the agreement was to form a partnership of equal partners and interpreted the relevant quorum provision as to requiring all 3 founding director-shareholders to be present before a quorum is constituted.

Absence of P in the circumstances meant that P was deprived of this right, and the lack of quorum was thus a defect that would cause substantial injustice to P and could not be cured by the section.

Question 24

Irregularities in proceedings:

Minority oppression

Answer 24

Sometimes persistent breach of the constitution and the Act may be evidence that the majority is treating the minority unfairly. This can be remedied by an action under s216 CA.

Note that a breach of constitution, provided that it has not and will not lead to substantial injustice, will, if it is a procedural irregularity under s392 CA, not invalidate the acts of the members or dirs.

Moreover, even if the breach is more serious, it may nevertheless be validated by court order, provided again that is has not and will not lead to substantial injustice.

Question 25

Irregularities in proceedings: Remedies

Answer 25

Court may, on the application of the person concerned, make any of the following orders: (1) Declare any act, matter or thing to be done, any proceeding instituted to be valid: s392(4)(a) CA; (2) Rectify a register kept by the Registrar under the Act: s392(4)(b) CA; (3) Relieve a person in whole or in part from any civil liability arising from the act: s392(4)(c) CA; (4) Extend the period of time for doing any act or instituting any proceeding under the Act: s392(4)(d) CA; and (5) Any consequential or ancillary orders as the court thinks fit. The right to require compliance with the constitution is a fundamental right for all members. However, in practical terms, if what is complained of is something that the majority may do through an exercise of majority votes, there is little point in suing. The court has power under s392 CA to validate procedural irregularities if no injustice is done to anyone.

Question 26

Voting: Fundamental right to vote

Answer 26

A right of property, to be exercised as member sees fit (under s180 CA). *North-West Transportation Co Ltd v Beatty (1887) 12 App Cas 589 (PC on appeal from Canada): D (shareholder) caused the Coy to buy a steam ship (price was not unreasonable and steam ship was the only one suited for the role needed at that time). D also had the contract ratified by a majority of shareholders, but he held a large portion of the shares that voted for the ratification. Whether D could ratify a transaction that breaches his fiduciary duty and act as SH and vote regarding ratification of that impugned transaction. Held: When voting, member owes no duty to the coy and may vote as he wishes, even if the member may have a personal interest differing from that of the Coy.

Question 27

Voting: Member may enter into a contract restricting his power to vote in certain ways

Answer 27

Such shareholders’ agreements are enforceable by injunction. Russell v Northern Bank Development Corporation Ltd [1992] 1 WLR 588 (HL) [accepted as good law in Singapore] - Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] (SG CA)

Question 28

Voting: Member may enter into a contract restricting his power to vote in certain ways Russell v Northern Bank Development Corporation Ltd [1992] 1 WLR 588 (HL)

Answer 28

Shareholders undertook an agreement to not further create share capital w/o written consent of all shareholders party to the SHA. EGM was held and considered a proposal to increase the share capital. P sought an injunction to prevent other shareholding party to the agreement from voting on the proposal. Held: Granted injunction. *An agreement amongst the shareholders was enforceable as a personal contract.* As all the shareholders were party to the agreement, this had the same effect as if the coy were bound by agreement in that the shareholders would have been in breach had it voted to increase share capital. While a provision in a Coy’s Arts of Assoc which restricts its stat power to alter those articles is invalid, an agreement that does not include the articles b/w shareholders as to how they shall exercise their voting rights on a reso to alter the articles is not necessarily so. A private SHA could bind the voting rights of those party to the SHA where the SHA related to such voting rights.

Question 29

Voting: Member may enter into a contract restricting his power to vote in certain ways Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] (SG CA)

Answer 29

SML and PPL were initially JV partners who each owned 50% of the JV Co, PPLS. 3% of PPL’s share was owned by its sub, E-Interface. Under the terms of the JVA and PPLS’ MnAA, SML and PPL Holdings were entitled to appoint 3 dirs each, so long as they both held 50% of the shares in PPLS. SML subsequently increased its stake to 85% by purchasing 35% from PPL Holdings under a supplemental agreement. 3 more SML-nominated dirs were then appointed. Later, PPL’s parent Co received an offer from a TP to purchase PPL’s remaining 15% stake in PPLS which it accepted. PPLS’ 6 SML-nominated dirs then took steps, incl passing several resos reducing PPL’s board influence and exec control in PPLS. PPL argued that they still retained equal voting rights and exec control over PPLS. Held: An “Equality Premise Clause” provided that where there was no equal shareholding interest, the provisions of the JVA and SHA would cease to apply upon either party acquiring majority of the issued and paid-up share capital. PPL thus lost its right to have a nominee dir on the board. Thus, the quorum requirements failed to apply and the resos taken by SML dirs was valid.

Question 30

Voting: Member may enter into a contract restricting his power to vote in certain ways Judge-made rule in UK that in some instances the members must vote ‘bona fide in the interest of the coy’ when exercising their voting rights (applies principally when the constitution is amended).

Answer 30

Allen v Gold Reefs of West Africa Ltd [1900] Ch 656 (CA, England): Gold Reefs’ MnAA gave it a “first and paramount lien” (the right to retain possession) on all partly paid shares held by any member for any debt owed to the Co. Z held some partly paid up shares. He also owned the only fully paid up shares issued by the Co. He died insolvent. The Co altered its MnAA by special resolution to create a lien on all fully paid shares (deleting the words ‘upon all shares (not fully paid) held by such members’). A, one of the executors of Z (trying to get money back) sued to get the fully paid shares’ value. Held: Alteration of MnAA was valid. So long as the reso was done bona fide for the benefit of the Co as a whole, restrictions on freedom of co. to alter its Arts of Assoc are invalid. ** Followed in a Court of Appeal of the Straits Settlements in *Re Tan Keng Tin and Re Chop Soon Bee [1932] MLJ 134, but not by the present CA. o Probably better to deal with cases of this sort under s216 CA rather than create a special rule.

Question 31

Voting: Member's Rights in Proxy

Answer 31

1. s181(5) CA: Impermissible to send out proxy forms which only allows the member to vote 1 way; 2 way proxy forms must be sent out, and it is a criminal offence to not comply with this provision. 2. Proxy forms have to be deposited with the coy prior to the meeting (usually 48 hrs) for verification. Logical to assume that the proxy would have to cast the votes in acc with instructions; apparently this is not so. [Tong Keng Meng v Inno-Pacific Holdings Ltd [2001] 3 SLR(R) 311 (HC)] 3. Member not allowed to change instructions to proxy or change proxy at any time before vote as that would be tantamount to him giving the proxy a discretion in the first place as to which way to vote, as well as circumvent the deadline for the submission of the proxy form.

Question 32

Voting: Member's Rights in Proxy Tong Keng Meng v Inno-Pacific Holdings Ltd [2001] 3 SLR(R) 311 (HC)

Answer 32

P was shareholder, dir, and chairman, and was removed as a dir at EGM. EGM had been sought at the behest of 2nd D (Quah) and like-minded supporters. In a proxy form given by a member (Teo to Quah), Teo had specified that Quah was to vote against all the resos. Contrary to such instructions, Quah cast Teo’s votes in favour of the disputed resos, and resos were passed. If Teo’s votes had been cast against the said resos, they would not have been passed. If Teo’s votes were treated as spoilt votes, the resos would still have been passed, albeit by a smaller majority. Held: Judgment for IPH on the basis that a vote cast by a proxy in a direction contrary to that specified in the proxy form was a spoilt vote. Thus, Tong’s removal still was valid, albeit by a smaller majority. 1. Can be circumvented by Member being allowed to: a. Attend meeting and vote notwithstanding proxy form or proxy’s attendance; b. Contact proxy and instruct him not to cast member’s vote; or c. Inform Coy in writing about revocation of proxy’s authority.

Question 33

Voting: Member's Rights in Proxy Specificity vs Flexibility

Answer 33

1. If Member wished to retain the option of changing his instructions to his proxy, he should not specify in the proxy form which way the proxy was to vote. BUT, by doing so, he risked the proxy voting contrary to his intentions and the vote would be valid as far as the coy was concerned. Thus, Member should elect to either have flexibility or specificity, and not both. - On the facts, Teo’s (Tong Keng Meng v Inno-Pacific Holdings Ltd ) instructions (specificity) were taken into acc and Q was not allowed to vote contrary to them. - Although the principal may bring an action for dmgs or specific perf agst the proxy for non-compliance, this does not mean that the proxy can be assumed to have carried out those instructions, and is able to nevertheless vote agt the instructions of the principal. This undermines the trust of the proxy system, as the principal cannot compel the proxy to vote according to his wishes. 2. A legislative solution may be needed, i.e. process where specific votes are accepted as advanced ballots on specific resos, so proxy votes are first registered prior to the meeting taking place.

Question 34

Minority shareholders’ remedies: Background

Answer 34

1. General rule: Majority SHs should get their way when it comes to corp decision-making, but courts have generally been wary of untrammelled majority power. 2. When there's a stalemate, options are: a. Maintain status quo: Coy’s operations will be paralysed; b. One party can sell out and leave Coy: Only works if there is already mkt for shares. For pte coys, there is no mkt, personal egos get in the way; or c. Corporate divorce: One party required to buy the others’ shares at fair value. Company is liquidated. 3. CA: 2 statutory remedies to deal with abuse of majority power: a. So-called ‘oppression’ action (s216 CA); and b. Winding up (s254(1)(f) or s254(1)(i) CA). 4. Minority SHs' remedies are an exception to rule in Foss v Harbottle (proper P rule for the alleged wrong done is the coy itself). This rule restricts minority SHs from bringing an action because the majority SHs have de facto power to quash the action. Thus, minority SHs have no locus standi to bring a cause of action.

Question 35

Minority shareholders’ remedies: Oppression Action (s216 CA) Statute

Answer 35

1. s216 CA is a personal action: Applicant is prima facie responsible for costs and can receive direct benefits. a. s216(1)(a) CA: Affairs of the Company are exercised in an oppressive manner or in disregard of his interests as member; or b. s216(1)(b) CA: The act unfairly discriminates against or is otherwise prejudicial to him. 2. s216B(2) CA: Action cannot be discontinued or settled without court approval. S216(2) CA: provides a list of orders that a court may make. (a) direct or prohibit any act or cancel or vary any transaction or resolution; (b) regulate the conduct of the affairs of the company in future; (c) authorise civil proceedings to be brought in the name of or on behalf of the Company by such person or persons and on such terms as the Court may direct; (d) provide for the purchase of the shares or debentures of the Company by other members or holders of debentures of the Company or by the Company itself; (e) in the case of a purchase of shares by the Company provide for a reduction accordingly of the Company’s capital; or (f) provide that the Company be wound up.

Question 36

Minority shareholders’ remedies: Oppression Action (s216 CA) Any member can bring a s216 CA relief claim if he lacks the power to stop the allegedly oppressive acts

Answer 36

Ng Kek Wee v Sim City [2014] 4 SLR 723 (SG CA): Where a member is able to remedy any prejudice or discrimination he has suffered through the ordinary powers he possesses by virtue of his position, the conduct of D cannot be said to be unfair to him. If member can personally bring an end to the prejudicial state of affairs, then he would not be entitled to relief under s216 CA.

Question 37

Minority shareholders’ remedies: Oppression Action (s216 CA) “Affairs of the Company” in s216 CA have been interpreted in a practical rather than the narrow legalistic approach

Answer 37

Ng Kek Wee v Sim City [2014] 4 SLR 723 (SG CA): Dir of the Subsidiary Coy was also a SH of the Holding Coy. Dir made unauthorised transfer of shares from Subsidiary Coy to himself. Held (CA): Since the Holding Coy’s sole assets were shares in its wholly owned Subsidiary Coy, the business of the Holding Coy was in practical terms comprised wholly of its Subsidiary Coy’s businesses. Therefore, transfer of shares out of the Subsidiary Coy would affect the Holding Coy by reducing it into an empty shell Coy with Dir enriching himself at the expense of the Holding Coy. On the facts, the commercially unfair conduct in the mgmt of a Subsidiary Coy would be relevant so long and to the extent that such conduct affected or impacted the Holding Coy whose member was the party claiming for relief from oppression. If the affairs of the Subsidiary Company do not affect or impact the Holding Company, then the Shareholders of the Holding Company cannot complain that their interests were prejudiced.

Question 38

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) General

Answer 38

1. Generally, the test is that of commercial unfairness. a. BUT, it cannot be gauged in a vacuum. b. Necessary to examine what sort of company is involved and what the legitimate expectations of the members are. 2. P has to establish that he has been treated unfairly, in relation to what members’ legitimate expectations were. a. Expectations may arise from reps made to the member when he joined coy. b. In some cases (family companies etc.), the nature of the coy may create expectations regarding participation in profits and rights to info. ** Most cases deal with pte family companies or a ‘quasi-partnership’ (i.e, a business that is a coy in form but a partnership in reality).

Question 39

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) P must show 3 things

Answer 39

1. What his expectations were; 2. How they arose; and 3. How the majority members have defeated those expectations. Lim Swee Khiang v Borden [2006]: s216 CA examines the conduct of majority SHs to determine whether they have departed from the proper std of commercial fairness and stds of fair dealing and conditions of fair play.

Question 40

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA

Answer 40

1. Establish agreement / understanding; and | 2. Establish commercial unfairness.

Question 41

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 1. Establish agreement / understanding

Answer 41

1. Where there is a written agreement, unfairness cannot be claimed unless there is a breach of the Company’s constitution or SHA. - Acting in accordance with the constitution is fair play. - BUT, a minor breach that doesn't produce unfairness won't support s216 CA; requires ongoing or multiple minor breaches. 2. In SG, there can still be oppression w/o breaching the written agreement bc of informal/implied understanding b/w the SHs. (usually limited to "quasi-partnership" arrangements) [Ebrahimi v Westbourne Galleries [1973] AC 360 / Ng Sing King v PSA International [2005] SGHC 5] [Low Peng Boon v Low Janie [1999] SGCA 8] 3. Notion of legitimate expectations b/w SHs: Can lead to conflict if majority’s assertion of power complies with the written agreement b/w members but conflicts with “legitimate expectations” of the minority members. - Could be bc of informal or implied understandings b/w SHs. - Unilateral understanding insufficient. Parties must have explicitly communicated understanding to each other for legitimate expectation to arise. [Thio Keng Poon v Thio Syn Pyn [2010] SGCA 16 (Family coy)] [Over and Over Ltd v Bonvests Holdings Ltd [2010] SGCA 7 (Incorporated partnerships)]

Question 42

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 1. Establish agreement / understanding - Thio Keng Poon v Thio Syn Pyn [2010] SGCA 16 (Family coy)

Answer 42

Father challenged his removal on several grounds, incl oppression under s216 CA. Central argument of the s216 CA claim was that the share transfer to family members was undertaken based on the informal understanding that he would retain his management positions, which ought to give rise to a “legitimate expectation”. Held: As there was no evidence of such an understanding, the legitimate expectation only existed “in the appellant’s mind” and “there was no way his family members could have known about it”.

Question 43

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 1. Establish agreement / understanding - Over and Over Ltd v Bonvests Holdings Ltd [2010] SGCA 7 (Incorporated partnerships)

Answer 43

Discussions b/w 2 family-controlled coys leading to incorporation of a JVCo were informal and plainly based on mutual trust. No docu records, SHs’ agreement, MnAA etc. There were “certain core understandings” that both families will always be represented on the JVCo’s board, the building cost, profit and losses would be funded acc to shareholding, and D would always consult P’s side on impt decisions relating to mgmt and operations of the JVCo, even if they are minority. Held: “Legitimate expectation” arises out of a fundamental understanding between SHs which formed the basis of their association but was not put into contractual form. This ultimately calls for a textured approach, rather than a technical one. Can take into consideration notions of respect, mutual trust and face in the facts of the situation, and the fact that the nature of a closed coy makes it susceptible to exploitative conduct by majority. ** Legitimate expectations arising from informal understandings usually limited to “a special class of quasi-partnership companies”.

Question 44

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 1. Establish agreement / understanding - Informal understanding usually limited to "quasi-partnership" arrangements

Answer 44

1. Ebrahimi v Westbourne Galleries [1973] AC 360: General rule - basis of association b/w parties is adequately and exhaustively laid down in Arts of Assoc. Superimposition of equitable considerations (i.e. to classify it as a quasi-partnership) requires something more, which typically may include one, or probably more, of the following elements. 1. Mutual trust and confidence; 2. Understanding; and 3. Restriction on transfer (of one of the SH's shares). * * Pre-emption rights on their own do not carry much weight in establishing quasi-partnership. * * Existence of restricted exit options does not prima facie mean that a quasi-partnership exists. 2. Unlikely for legitimate expectations to arise if there is professional advice and negotiated terms: a. Ng Sing King v PSA International [2005] SGHC 5: Parties dealing at arms’ length had entered into the SH Agreement, which comprehensively laid down the rights of each SH. It was difficult to find that any legitimate expectation apart from the those contained in the agreement were created.

Question 45

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 1. Establish agreement / understanding - "Legitimate expectations" could be based on implied understanding (i.e. nature and commercial purpose of corporate structure)

Answer 45

1. Can exist outside of written agreement but still reflect SH's interest in r/s. 2. Implied understanding that constitution and CA will be complied with to the best of mgmt's abilities: * Low Peng Boon v Low Janie [1999] SGCA 8 (Family Coys): Majority SH-dir caused the coy to pay low dividends to increase coy’s profits. Benefited personally from this bc his annual bonus was based on profits of the coy. Majority-dir was also alleged to have used the coy’s funds for personal expenses. Held: Conduct constituted a clear decision to override the interest of the petitioner and was oppressive towards her and in disregard of her interest in ECPK. Implied understanding between SHs that majority in their capacity as dirs would not use their powers in breach of their duties. 3. Implied understanding that dirs would not use their position to defraud contrary to their duties in statute, common law or equity: * Re Gee Hoe Chan Trading Co Ltd [1991] 2 MLJ 137 (SGHC) (Family Coys): Dirs had been paying themselves dirs’ fees and salaries but not declaring dividends. Biz began as a family biz but as 2 founding members died, 2 factions developed. The minority faction were aggrieved as the majority faction excluded them from directorial positions and voted themselves on the board and paid themselves generous salaries and did not declare any dividends. Held: Coy had to be wound up. Contrasting the substantial benefits the majority had gained from the coy with the nil return for the minority, the majority had acted oppressively or in disregard of the minority’s interests. 4. Implied understanding that quasi-partnerships have a higher std of corp gov: Over and Over: SHs in quasi-partnership have higher yardstick of scrutiny because of the peculiar vulnerability of the minority.

Question 46

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective)

Answer 46

1. Over and Over Ltd v Bonvests Holdings Ltd [2010]: P must demo that the conduct of the Coy “offends the standards of commercial fairness and is deserving of intervention by the courts.” * * Common theme of s216 CA is unfairness. 2. P must demo a breach of written or informal/implied agreement and that the breach prejudiced him: Ng Sing King v PSA International [2005]: Not necessary that a breach of the expectations is tantamount to oppressive conduct. Onus on P to show that the breach prejudiced him in some way and caused detriment/harm. Relevant factors include: a. Whether the breach was deliberate, b. Whether it was a significant breach in disregard of a major expectation, and c. Whether any detriment was caused to the aggrieved SH. 3. Courts do not intervene on mere disagreement (Howard Smith v Ampol Petroleum), or in cases where dirs are acting honestly. 4. Courts generally do not find unfairness due to dilution of minority SH's proportional shareholding (Over & Over Ltd v Bonvests Holdings Ltd [2010]).

Question 47

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - Examples of commercial unfairness?

Answer 47

1. Dominant members advancing own interests; [Lim Swee Khiang v Borden Co (Pte) Ltd [2006] SGCA 33] [Low Peng Boon v Low Janie [1999]] 2. Exclusion from management; 3. Inadequate dividends; and 4. Loss of substratum.

Question 48

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - Examples of commercial unfairness - Dominant members advancing own interests

Answer 48

1. Majority SHs (who are also dirs) use their power to divert corporate assets and/or opps to themselves or interested parties. These tend to constitute breaches of common law, fiduciary and statutory duties of dirs. But note that breach of duty not sufficient or necessary for claim to succeed under s216 CA, must have UNFAIRNESS. 2. Lim Swee Khiang v Borden Co (Pte) Ltd [2006] SGCA 33: SHs in quasi-partnerships have a duty to disclose conflicts of interests and refrain from voting on the same. 3. Low Peng Boon v Low Janie [1999]: The SH-dir used Coy funds to pay for his personal travelling expenses and this was held to be oppressive conduct. ** There has to be a visible departure from stds of fair dealing. Breach of agreement is not necessarily oppressive (must be unfair to succeed).

Question 49

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - Examples of commercial unfairness - Exclusion from management

Answer 49

Where SH has a legitimate expectation (i.e. an understanding which exists b/w all parties) of being involved in the mgmt of a company, to exclude her, even if done entirely in acc with the constitution, may on its own amount to unjust conduct justifying the court’s intervention under s216 CA.

Question 50

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - Examples of commercial unfairness - Inadequate dividends

Answer 50

1. Normally, SH has no right to compel coy to issue dividends as it is a biz decision of the dirs. 2. Can only do so if dividends were issued unfairly (i.e. to majority SHs only). 3. Re Gee Hoe Chan Trading [1991] 2 MLJ 137 (SGHC): Minority SHs were aggrieved because the majority excluded the minority from Dir positions, and voted themselves onto the board and paid themselves generous salaries, and did not affect any declaration of dividends. 4. Low Peng Boon v Low Janie: Where Ds gave low dividends so that the profits will be high and that would be used to pay Ds bonus which was dependent on the profits of the Co.

Question 51

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - Examples of commercial unfairness - Loss of substratum

Answer 51

Where business objective for which company was formed cannot be met. Usually proceeded with a winding up. [Chua Kien How v Goodwealth Trading Pte Ltd [1992] SGCA 29 (CA)]

Question 52

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) 2 Stage test for determining application of s216 CA: 2. Establish commercial unfairness (Test is objective) - To avoid commercial unfairness

Answer 52

Commercial unfairness can be avoided by offer to purchase shares: 1. O’Neil v Phillips [1999] UKHL 24: A “fair offer” may prevent unfair conduct under s216 CA, and will be considered to be fair if it includes the following terms:- a. fair value without minority discount; b. If fair value not agreed, will be determined by a competent expert; c. Both parties have equal access to relevant Co’s info re value of the shares and equal opp to make submission to the expert; and d. If offer is not provided in a reasonably timely manner after legal process has been commenced, then reasonable amount for legal costs provided in the offer.

Question 53

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Situations in which s216 CA applies

Answer 53

1. Classification of the decided cases into ‘family companies’ and ‘incorporated partnerships’ in no way implies that these are the only situations in which relief under s216 CA may be obtained. 2. Each case must be approached on its own merits. Much depends on the remedy sought. E.g. if remedy is to prevent the majority from persistently breaching the constitution, the threshold for relief is likely to be lower than if a winding up or buy-out is sought. 3. Generally easier to obtain an oppression remedy where the company is closely held than when it is listed on a stock ex. This is bc minority members of listed companies can sell out if they do not agree with the direction the company is taking. This is much more difficult in a company w/o a stock ex listing. Moreover, normally understood in the case of listed companies that minority members do not have a right of participation in management.

Question 54

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Comparison between family companies and quasi-partnerships

Answer 54

Chow Kwok Ching v Chow Kwok Chi [2008] SGHC 100: Companies could be considered akin to quasi-partnerships because of their private domestic nature and inherent assumption in the setting up of the Companies that SHs and Dirs, as descendants of the patriarch, would work in concert to enhance the family fortune and perpetuate its legacy. Not all family Companies would automatically be analogous to quasi-partnerships. Only where the family interest was closely related to the raison d’etre of the Company, would mutual trust and confidence be as important as in a quasi-partnership.

Question 55

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Family companies

Answer 55

1. Re Gee Hoe Chan Trading Co Ltd [1991]: Non-declaration of dividends was their way of punishing the petitioners for having questioned the manner in which the co. was managed and for even thinking of withdrawing from it. In appropriate circumstances, the non-payment of dividend amounted to “oppression” or “disregard” under s216 CA. 2. Low Peng Boon v Low Janie [1999]: Rift in family meant that it would no longer be feasible for the biz to continue. Having built up the group, LPB was mistaken that he was entitled to treat the Company as if it belonged to him because he owed fiduciary duties and must take into account the interest of minority shareholders.

Question 56

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Incorporated partnerships - Lim Swee Khiang v Borden Co (Pte) Ltd [2006] SGCA 33

Answer 56

Borden was a quasi-partnership started by 6 founding families. Its founders had intended that each family would be represented on the BOD by a family member. As were minority SHs, and alleged that the majority SHs had oppressed or disregarded their interests. The 4th R removed A’s exec powers at an EGM, replacing him w 8th and 5th Rs. 4th R set up a Co to manufacture and distribute Borden’s product (medicated oil) in Indo (“PTE”). While Borden authorised PTE to use “Eagle Brand” trade mark in exchange for royalties, royalties were not collected. The new exec managers didn’t take steps to terminate the licence given to PTE or attempt to collect unpaid royalty. PTE expanded into overseas mkts in direct competition with Borden, but the majority took no action to object to PTE registering the Eagle Brand medicated oil in UAE and Yemen. When PTE commenced an action in MY to nullify Borden’s trademark, despite Borden having the upper hand, the majority paid US$900k to PTE as settlement. Held: 1. Conduct of majority SH had departed from the proper std of commercial fairness. Instead of protecting and promoting Borden’s commercial interest, as was their duty as dirs and SHs, Rs acted in a manner that furthered the commercial interests of PTE in disregard of the commercial interests of Borden 2. Conflict of interest was prima facie evidence that they had preferred the interests of PTE over Borden. They should have refrained from voting and disclosed their conflict of interest. 3. Nothing to suggest A should’ve been removed from his post; the decision made within such a short time suggested a pre-conceived plan to get rid of A as the Exec Dir for reasons which had nothing to do with any failure to advance the interests of Borden. Unfairly discriminated agst A and being kept entirely out of Borden’s affairs after his removal was oppressive to him. 4. BUT, winding up was not appropriate in this scenario. Court ordered buyout.

Question 57

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Incorporated partnerships - Over and Over Ltd v Bonvests Holdings Ltd [2010]

Answer 57

Either a course of conduct or even a single act could theoretically amount to oppression. Although majority SHs may be within his strict legal rights, the manner in which he exploits his legal rights may nevertheless call for the court’s intervention. Conduct can be unfair without being unlawful. There wasn’t a single isolated act or episode of minority oppression, but rather a deliberate course of conduct that steadily grew in brazenness with the passage of time.

Question 58

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Incorporated partnerships - Thio Syn Kym Wendy v Thio Syn Pyn [2017] SGHC 169 (affirmed by CA in [2018] SGCA 46)

Answer 58

Whether an act constitutes oppression is, in the final analysis, a fact-specific inquiry. The court must, in each case, examine the r/s b/w the specific parties and how they have dealt with each other in the past in order to determine whether their conduct constitutes commercial unfairness.

Question 59

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Incorporated partnerships - Teo Chong Nghee Patrick v Han Cheng Fong [2014] SGCA 29

Answer 59

1. Doctrine of legitimate expectations was developed in the context of a r/s of trust and mutual confidence such that equity intervened to suspend the otherwise oppressive exercise of legal rights. On the facts, this was not the nature of the parties’ r/s. 2. CA also observed that it was questionable whether it was open for Dr Han to claim dmgs for losses suffered for a breach of legitimate expectations. a. Doctrine of legitimate expectations developed in the context of an action for minority oppression or for a just and equitable winding up of a company. b. While s216(2) CA gave the court a very wide power to “make such order as it thinks fit”, it was doubtful whether the court had the power under this provision to order dmgs for a breach of legitimate expectations. It was not clear that there was a general right to compensation for loss resulting from oppression.

Question 60

Minority shareholders’ remedies: Oppression Action (s216 CA) Test for Oppressive Acts (Commercial Unfairness) Incorporated partnerships - Ho Yew Kong v Sakae Holdings Ltd [2018] SGCA 33

Answer 60

Laid down analytical framework to ascertain whether oppression claim is pursued under s216 CA is an abuse of process: 1. Injury (i) What is the real injury that P seeks to vindicate? (ii) Is that injury distinct from the injury to the company and does it amount to commercial unfairness against P? 2. Remedy (i) What is the essential remedy that is being sought and is it a remedy that meaningfully vindicates the real injury that P has suffered? (ii) Is it a remedy that can only be obtained under s216 CA?

Question 61

Minority shareholders’ remedies: Oppression Action (s216 CA) Remedies for Oppressive Action - General

Answer 61

1. Each case and remedy must be approached on its own merits: a remedy to prevent the majority from persistently breaching the constitution would have a lower threshold of relief that if a winding-up or buy out is sought. Can grant either a buy out under s216(2)(d) CA or winding up under s216(2)(f) CA. 2. Court has wide jurisdiction under s216(2) CA to “make such order as it thinks fit”. In theory, court could regulate the conduct of the company’s affairs in future. In practice, this is unfeasible, and anything short of a clean break will not resolve the issue.

Question 62

Minority shareholders’ remedies: Oppression Action (s216 CA) Remedies for Oppressive Action - For Buyout

Answer 62

1. Where one party has to buyout the other party’s shares for fair value. If there was no residual goodwill or trust left b/w parties, it would not be right for P’s shareholding to remain tied to the company in a “broken and bitter relationship” or regulate the future conduct of the company’s affairs. 2. Valuation of shares normally determined at date of buyout order or date of initiation of s216 CA proceedings. Courts should take into consideration: a. Should not value the shares at a minority discount to reflect that they lack control. BUT, may be reduced if A does not come with “clean hands” or her conduct partially justifies the prejudicial conduct. b. Whether petitioner was voluntarily severing connection with company or forced out.

Question 63

Minority shareholders’ remedies: Oppression Action (s216 CA) Remedies for Oppressive Action - For Winding Up

Answer 63

1. Occurs if majority cannot buyout minority's shares or if company has been severely mismanaged and SHs do not wish to purchase minority shares at fair market value. 2. BUT, the presentation of a winding-up petition effectively chokes off a company’s credit. May trigger an event of default in loan documentation which would justify lenders demanding immediate repayment.

Question 64

Minority shareholders’ remedies: Corporate Divorce General

Answer 64

1. Can also have an application for just and equitable winding up under ss124, 125(1)(f) and (i) IRDA. P may plead that Ds have acted unfairly towards members, and this is a question of fact. Goes beyond unfairness to members. Can be used to cover matters such as deadlock in management and loss of substratum. Court may, in lieu of winding up, order a buyout (under s125(3) IRDA). 2. Factors contributing to just and equitable winding up include: a. Irretrievable breakdown in company/quasi-partnership; and b. Loss of substratum

Question 65

Minority shareholders’ remedies: Corporate Divorce Ebrahimi v Westbourne Galleries Ltd [1973] 1 AC 360 (HL) [accepted as good law in SG] [Imposition of equitable considerations]

Answer 65

A and N were partners. A pte Co was formed to take the business over, with A and N as 1st dirs. Under the Articles of Association, the Co in general meeting had express power to remove dir by ordinary reso. Later, N's son G was made a dir; N and G’s combined shareholdings constituted a majority vote in general meetings. No dividends were paid, the sums being distributed b/w the dirs. Following disagreement between A and N and G, an ordinary reso was passed removing A as dir. Held: Enabled the court to subject the exercise of legal rights to equitable considerations of a personal character arising b/w individuals, which might make it inequitable to insist on legal rights or to exercise them in a particular way. Notion of fairness is the touchstone by which to decide whether the court should grant relief under s254(1)(i) CA (objective test). Imposition of equitable considerations tends to require: 1. Association formed on basis of personal r/s, involving mutual confidence; 2. Agreement or understanding that all parties shall participate in conduct of business; and 3. Restriction on transfer of member's interest in company.

Question 66

Minority shareholders’ remedies: Corporate Divorce Chua Kien How v Goodwealth Trading Pte Ltd [1992] SGCA 29 (CA) [Deadlock]

Answer 66

Winding up due to loss of substratum. P was able to frustrate every move of Chua to exercise either his casting vote or his majority shareholding. Chua was unable to exercise his powers as a majority SH to break the deadlock bc he could not, until the matter had been tried in court, indisputably say that the 76,800 shares were his. Similarly, the casting vote would have been inconsistent with the petitioner’s allegation, if proved, that he and Chua had joint control. Deadlock: If the only 2 dirs of a Co cannot agree with each other, and neither can overrule the other, there is a deadlock which, if it occurred in a partnership, justifies the court winding up.

Question 67

Minority shareholders’ remedies: Corporate Divorce Chua Kien How v Goodwealth Trading Pte Ltd [1992] SGCA 29 (CA)

Answer 67

Winding up due to loss of substratum. P was able to frustrate every move of Chua to exercise either his casting vote or his majority shareholding. Chua was unable to exercise his powers as a majority SH to break the deadlock bc he could not, until the matter had been tried in court, indisputably say that the 76,800 shares were his. Similarly, the casting vote would have been inconsistent with the petitioner’s allegation, if proved, that he and Chua had joint control. Deadlock: If the only 2 dirs of a Co cannot agree with each other, and neither can overrule the other, there is a deadlock which, if it occurred in a partnership, justifies the court winding up.

Question 68

Minority shareholders’ remedies: Corporate Divorce Chow Kwok Chuen v Chow Kwok Chi [2008] SGCA 37 [Deadlock]

Answer 68

Actual deadlock because the r/s had deteriorated to a 3-way impasse and the management of the Companies was at a stalemate. Always note that recourse to winding up should not be made readily available to minority on grounds of disagreements with majority. On the facts, this was due to an irretrievable breakdown and management deadlock.

Question 69

Minority shareholders’ remedies: Corporate Divorce Ting Shwu Ping v Scanone Pte Ltd [2016] SGCA 65 [s216 CA vs s125 IRDA]

Answer 69

1. Test for ordering a winding up under s125(1)(f) or (i) IRDA must be met before the remedy under s125(3) IRDA may be granted. 2. CA clarified that in principle, the key qn when applying s125(3) is whether it would in all circumstances be more equitable to allow a buy-out, even though the Court has determined that the applicant is entitled to a winding up remedy. 3. Includes relevant considerations such as whether Coy is still viable, and a comparison of the consequences for the parties in the event of a winding up as opposed to a buy-out. 4. Significantly, CA also considered r/s b/w the s124 IRDA and s216 CA (oppression). a. If applicant brings a winding up petition with the primary objective of obtaining a s125(3) remedy despite having recourse to a buy-out remedy under s216, CA held that there may be basis for inferring that the winding up application was preferred because the applicant wished to harass, vex or pressure the coy with the consequences that attend the presentation of a winding up application. b. In such a situation, the Court may find that the winding up petition was motivated by a collateral purpose and that it amounts to an abuse of process.

Question 70

Minority shareholders’ remedies: Corporate Divorce Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd [2018] SGCA 11 [Should exit on fair terms than wind up; exceptions to this]

Answer 70

If a party had an option of exiting a 'quasi-partnership' r/s that had irretrievably broken down and was able to do so on fair terms, this option should be adopted instead of the winding up of the joint venture company, unless certain exceptions apply. Exceptions are: (a) the disaffected SH had a legitimate expectation that he was entitled to have his shares valued in some other way; (b) there was relevant bad faith or impropriety in the respondents’ conduct which had affected the value of the shares; or (c) the articles provided an arbitrary or artificial method of valuation.