SINGAPORE Trends and Developments Contributed by: Mark Lee and Sarah Yeo, WMH Law Corporation
Introduction With the growing sophistication of investors and the deepening complexity of a fragmented corporate world, shareholders are no longer content with mere passive participation in the corporations they invest in. Shareholders are now increasingly seeking to “arm” themselves and reserve (or carve out) roles within a company that used to be traditionally reserved for directors. Shareholders now also seek to influence positive agendas within the company to dictate policy, corporate governance and operational decisions. This short article summarises some of the pertinent rights, sources of such rights and tools/remedies available to shareholders in Singapore. Locus Standi – Beneficial Shareholders Beware At the outset, a threshold question sometimes over- looked is – whom should or can be recognised as shareholders and be conferred corresponding rights and standing as a shareholder and/or under the Com- panies Act (Cap. 50) (“the Act”). For instance, increas- ingly, issues with equitable or beneficial interests in shares have generated much difficultly. In Tanoto Sau Ian v USP Group Ltd [2023] SGHC 106, the Singapore High Court found that beneficial share- holders could not requisition an extraordinary general meeting under Section 176 (1) of the Act as they are “… not ‘members’ for the purposes of s 176 (1).” Per- sons who agree to be members have to have their names entered into the company’s register of mem- bers “in order to qualify as members”. Amongst other observations, the High Court in Tanoto Sau Ian v USP Group Ltd [2023] SGHC 106 noted that in Singapore, an “intentional step [was] taken not to enfranchise indirect investors in the way done in the UK Companies Act 2006” and that Singapore adopts “a multiple proxies regime”. That said, it appeared that the High Court deemed the applicant in that case to have the locus standi to bring a derivative action under Section 216A of the Act. In a separate instance, in Marten, Joseph Matthew and another v AIQ Pte Ltd (in liquidation) and others [2023] SGHC 361, the Singapore High Court took the view that a beneficial owner of shares (not being a registered member of the company and unless the
exception in Section 216 (7) of the Act applies) would not have the locus standi to bring a claim in oppres- sion because “… trusts (whether express, implied or constructive) are not recognised under the Companies Act by virtue of s 195 (4)….”Beneficial shareholders ought to also note that a company is not bound to recognise a trust and must be mindful that model/tem- plate company constitutions in Singapore may include a non-recognition clause on such terms or similar terms – ie, “…[The company] shall not be bound by or recognise any… interest in the nature of a trust… in any share… except an absolute right thereto in the person for the time being registered as the owners thereof…”. Such clauses do not per se prohibit a trust or make it invalid but merely state that the company shall not be bound to recognise a trust ( Forest Fibers Inc v K K Asia Environmental Pte Ltd and another and another suit [2018] SGHC 195). Company’s Constitution and Shareholders’ Agreement A company’s constitution and the shareholders agree- ment (if any) between parties are typically the first ports of call when deciphering the rights and stand- ing of a shareholder. In Singapore, to incorporate a company, parties must, at its very inception, prepare and file that company’s constitution (formerly known as the memorandum and articles of association) – ie, a document that sets out the basic structure by which a company is organ- ised. Notwithstanding a company’s constitution being a major source of a shareholder’s rights, it is often neglected by parties who adopt a template constitu- tion for the sake of expediency and/or neglect to even consider the need for a shareholders’ agreement. A shareholders’ agreement and a company’s consti- tution are enforced independently of each other and comprise distinct legal relationships (see Corporate Law, Second Edition, SAL Academy Publishing 2024). The Singapore High Court in BTY v BUA and other matters [2018] SGHC 213 makes clear the founda- tional differences between a shareholders’ agreement and a company’s constitution. A shareholders’ agree-
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