SINGAPORE Trends and Developments Contributed by: Mark Lee and Sarah Yeo, WMH Law Corporation
acts.” More specifically, it was accepted that “the mis- chief which [Section 216] was intended to cure, viz. the abuse of power to the prejudice of shareholders who lack the power to stop that abuse.”What con- stitutes “oppressive”/”unfair” conduct? Section 216 provides a remedy for a wrong suffered in the share- holder’s personal capacity. The individual shareholder sues in his/her own right to protect his/her interests as a shareholder of the company. Of course, the conduct complained of must relate to the affairs of the com- pany. Whilst the local courts used to rely on four differ- ent tests to establish “oppression” – ie, (i) oppression; (ii) disregard of interests; (iii) unfair discrimination; and (iv) prejudice, Lim Kok Wah and others v Lim Boh Yong and others and other matters [2015] 5 SLR 307 has explained that “There is… little utility in reading the four limbs disjunctively and attempting to draw a distinction between each limb.”The litmus test of “commercial unfairness” involves a consideration of whether there has been a “visible departure from the standards of fair dealing and a violation of the condi- tions of fair play which a shareholder is entitled to expect”. Where the issue of such possible remedies available to an aggrieved shareholder is concerned, the Sin- gapore Court of Appeal in Liew Kit Fah and others v Koh Keng Chew and others [2019] SGCA 78 made equally clear that: “20 It is clear, therefore, that the court’s powers under s 216 (2) are only enlivened where the court is satisfied that minority oppression under s 216 (1) has been established. The correctness of this view is further buttressed by the fact that the court’s order under s 216 (2) is to be made ‘with a view to bringing to an end or remedying the matters complained of’. There is, however, no complaint to bring to an end or remedy if the court is not satisfied, in the first place, that a case of minority oppression under s 216 (1) has been established.”Consequently, therefore, whether there was a “continuing state of oppression” would be relevant in the courts determining the appropriate remedy/relief to grant in any given circumstances. As a result, it has been made clear that “notwithstanding s 216 (2) of the Act conferring [on] the Court an exten- sive discretion to ‘make such order as it thinks fit’, this discretion must necessarily be exercised judiciously:
… any order granted must be made with a view to bringing an end to or remedying the matters com- plained of... The purpose of s 216 is to relieve minority oppression, not to proscribe majority rule. It is for that reason that in most cases, the only practical mecha- nism to end minority oppression is a corporate divorce where one party buys the other out” ( Ong Heng Chuan v Ong Teck Chuan [2021] SGCA 46). Derivative Action – Section 216A of the Act In a claim for minority oppression (under Section 216 of the Act), a shareholder is seeking to right a per- sonal wrong that has been inflicted against him/her qua shareholder. In turn, in that scenario, such rem- edies sought are meant to address a personal wrong suffered by the shareholder. In this instance, we touch on Section 216A of the Act, which provides shareholders the ability to (i) overcome an unwilling/uncooperative board of directors; (ii) step into the shoes of the company; and (iii) right a cor- porate wrong committed against the company (not a wrong suffered in the shareholder’s personal capac- ity). A common scenario is where the shareholders feel that the company ought to take a certain errant direc- tor to task but the board (ie, a “rogue” board) refuses to do so. Significantly, the Court of Appeal also help- fully summarised the purpose of Section 216A: “The derivative action… is one that avails a minor- ity shareholder who is dissatisfied by the refusal of the board to act in the interests of the company. Its primary rationale is that it enables a party – who is aggrieved by the fact that those in control of the com- pany are unwilling to act – to initiate the necessary legal action.”The need for Section 216A of the Act is premised on the principle that “in an action for a wrong alleged to have been done to a company (ie, a corporate wrong) the proper plaintiff is prima facie the company itself” – ie, the proper plaintiff rule ( Ng Kek Wee v Sim City Technology Ltd [2014] SGCA 47). Section 216A clearly sets forth certain “pre-requisites” that have to be satisfied before a statutory derivative action may be commenced ( Petroships Investment
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