Qn: What legislation / statute in Singapore addresses the issue oppressive conduct committed against a shareholder?

A: Section 216 of the Companies Act (Cap. 50) directly addresses the issue of oppressive conduct against a shareholder or debenture holder of a company and the relevant remedies available to such an aggrieved party. That said, the issue of shareholder oppression forms part of a deeper conversation of shareholder engagement, directors’ liabilities / board accountability and corporate governance.

Qn: Who exactly are protected against oppression?

A: Any shareholder who lacks the power to stop the allegedly oppressive acts. The express language of Section 216 of the Companies Act (Cap.50) does not preclude a majority shareholder from bringing an oppression claim.

QN: What interests exactly are meant to be protected?

A: A shareholder may only seek to vindicate a wrong or loss suffered personally by him or her. Where a wrong is in reality alleged to have been done to a company (ie a corporate wrong) the proper plaintiff is prima facie the company itself.

QN: What amounts to oppression or oppressive conduct?

A: The individual shareholder sues in his/her own right to protect his/her interests as a shareholder of the company but the conduct complained of must relate to the affairs of the company. 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 conditions of fair play which a shareholder is entitled to expect”.

QN: What remedies are available to an aggrieved shareholder?

A: Section 216(2) of the Companies Act (Cap. 50) provides a list of such remedies if oppression is proven, including but not limited to:-

  1. direct or prohibit any act or cancel or vary any transaction or resolution;
  2. making an order for a share buy-out;
  3. provide that the company be wound up.

QN: How should one approach the issue of shareholder oppression?

A: It would benefit a shareholder to make the relevant financial and intellectual investments early in the day with an adequately drafted shareholders agreement and to regularly exercise his / her rights of oversight over the company through the voting mechanism at shareholders’ meetings. Whilst the mechanisms of an oppression claim (section 216) and derivative action (section 216A) are always open to shareholders, the insistence on robust corporate governance structures would be the key to a longer-term alignment of interests between the owners and the management of a company.

About

“Snapshots” by Mark Lee Chambers Law Corporation (“ML Chambers”) is a series of executive summaries curated to provide readers with quick, easy-to-read (Q&A format) snapshots of legal developments of the day and topics of interest.

Mark Lee Chambers Law Corporation is a boutique litigation and arbitration firm specialized in high stakes complex litigation with a particular focus in corporate law, joint ventures, shareholder and boardroom related matters.

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