Minority Shareholder Oppression in Singapore

Understanding Minority Oppression Under Singapore’s Companies Act (Section 216)

Minority oppression arises when those in control of a company engage in conduct that unfairly prejudices minority shareholders, limiting their ability to participate in company decisions or protect their interests. This issue is particularly relevant in private companies, where minority shareholders may find it difficult to sell their shares and exit the company.

In Singapore, Section 216 of the Companies Act (Cap. 50) provides minority shareholders with legal recourse against oppressive, unfair, or prejudicial actions by the majority. In this article, we explain the scope of Section 216, the grounds for making a claim, and the remedies available. We will also review relevant case law to illustrate how the courts handle claims of minority oppression.

Grounds for Minority Oppression Claims

Under Section 216 of the Companies Act, the courts assess claims of minority oppression based on four key grounds:

• Oppression: Acts that unfairly dominate or harm minority shareholders by using corporate power to their detriment.
• Disregard of a shareholder’s interests: Situations where the majority or those in control completely ignore the rights or interests of the minority shareholder, preventing them from participating in the company’s affairs.
• Unfair discrimination: This occurs when a shareholder is singled out for unfavourable treatment compared to others, often involving issues such as dividend payments, decision-making, or access to information.
• Prejudice: Broadly refers to any conduct that is unjustly detrimental to a shareholder’s interests, either financially or operationally.

These grounds provide the framework through which courts evaluate whether a minority shareholder has been unfairly treated or denied their rights.

Eligibility for Minority Oppression Claims

Under Section 216 of the Companies Act, both minority and equal shareholders can file a claim. The key factor is not the percentage of shares held but whether the shareholder had the power to prevent the oppressive actions.

In cases where a shareholder holds 50% of the company’s shares but lacks control over the company’s affairs, they may still qualify for a minority oppression claim. The court focuses on the shareholder’s inability to influence decisions, such as removing directors or blocking resolutions.

1. For instance, in Ascend Field Pte Ltd v Tee Wee Sien [2020] SGCA 14, the court ruled that an equal shareholder could bring a minority oppression claim because they lacked the necessary voting power to remove the oppressor or participate meaningfully in decision-making.
2. In another case, Wei Fengpin v Low Tuck Loong Raymond [2021] SGHC 90, the court found that minority oppression occurred when the defendants withheld key company information, failed to call for Annual General Meetings (AGMs), and diverted corporate opportunities for their own benefit. The lack of transparency and exclusion from decision-making were central to the court’s finding.
3. The landmark case Over & Over v Bonvests Holdings Ltd [2010] SGCA 7 further reinforced that a single act, like issuing new shares to dilute a minority’s shareholding, could constitute oppression if it is commercially unfair. In this case, the court emphasised that the cumulative effect of unfair acts must be considered when deciding if oppression occurred.

Acts That Constitute Minority Oppression

Minority oppression can take various forms, and the courts look for acts that unfairly disadvantage or harm a shareholder. Some common examples include:

• Misappropriation of company funds: Using company resources for personal gain or diverting funds without proper approval.
• Withholding company information: Failing to provide minority shareholders with access to essential information, such as financial reports, meeting minutes, or corporate records.
• Diluting share value: Issuing new shares or taking other actions that deliberately reduce the value of a minority shareholder’s holdings.
• Excluding shareholders from management: Removing or sidelining a shareholder from their role in managing the company or decision-making processes without valid justification.
• Diverting business opportunities: When the majority shareholders take opportunities that should belong to the company and direct them to entities they control, depriving the company (and minority shareholders) of potential profits.
• Unfairly distributing dividends: Paying dividends to certain shareholders while deliberately excluding others, particularly minority shareholders.

Case Studies

1. The case of Low Peng Boon v Low Janie [2022] SGHC 67 saw the court ruling in favour of the minority shareholder, finding that the majority’s actions—diverting funds for personal use and excluding the minority shareholder from corporate decision-making—were oppressive.
2. In Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd [2018] SGHC 23, exclusion from management and financial misconduct led the court to rule that such behaviour amounted to oppression.
3. Suying Design Pte Ltd v Ng Kian Huan Edmund [2020] SGCA 32 demonstrates how diverting business opportunities away from the company to entities controlled by the majority was considered oppressive. The court held that this deliberate action unfairly sidelined the minority shareholders, breaching their legitimate expectations.

Remedies for Minority Oppression in Singapore

Under Section 216(2) of the Companies Act, the court has broad powers to provide remedies if minority oppression is proven. The goal is to rectify the unfair treatment of the minority shareholder. Some of the remedies include:

• Directing or prohibiting specific acts: The court may order that certain oppressive actions be stopped or prevent a proposed action from taking place.
• Regulating the company’s future conduct: The court can impose rules on how the company should be run in the future, ensuring that the oppressive behaviour is corrected.
• Authorising civil proceedings: The court may allow legal actions to be brought on behalf of the company against those responsible for the oppression.
• Ordering the purchase of shares: One of the most common remedies is requiring the majority shareholders to buy out the shares of the minority at a fair market value. Alternatively, the company itself may be ordered to purchase the shares.
• Reduction of the company’s capital: If the company is purchasing the shares, the court may order a reduction of the company’s capital to facilitate the buyout.
• Winding up the company: In extreme cases, the court may order that the company be wound up if it finds that the oppressive conduct makes it impossible for the company to continue functioning in a fair manner.

Court’s Decisions Over The Years for Minority Shareholder Oppression in Singapore

Over & Over v Bonvests Holdings Ltd [2010] SGCA 7

The court ordered that the majority shareholders purchase the minority’s shares at fair market value, as the ongoing oppression made it untenable for the minority to remain involved in the company.

Lim Swee Khiang v Borden Co (Pte) Ltd [2006] SGCA 3

The Court of Appeal ordered a buyout of the minority shareholder’s shares, as the majority’s exclusion of the minority from key company decisions amounted to oppressive conduct.

Ng Kek Wee v Sim City Technology Ltd [2014] SGHC 17

The High Court ordered the winding up of the company due to severe financial misconduct by the majority, which rendered continued operations unviable.

Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd [2021] SGHC 177

In this case, the court imposed strict conditions on a buyout to ensure a fair market valuation, after the majority attempted to manipulate the valuation of the minority’s shares.

Minority Oppression in Quasi-Partnership Companies

In companies that operate like quasi-partnerships, where there is a high level of trust and informal agreements between shareholders, claims of minority oppression often centre around breaches of mutual trust. These types of companies typically have no formal shareholder agreements, and decisions are based on personal relationships and unwritten expectations.

The courts in Singapore place significant weight on the legitimate expectations of shareholders in quasi-partnerships. If these expectations are breached, such as by excluding a shareholder from management or denying them participation in key business decisions, the courts may find that minority oppression has occurred.

1. In Over & Over v Bonvests Holdings Ltd [2010] SGCA 7, the court found that the company was structured like a quasi-partnership, and the majority shareholder’s actions—including the issuance of new shares—undermined the mutual trust and confidence expected in such arrangements.
2. Similarly, in Chiam Heng Luan v Chiam Heng Hsien [2007] SGHC 165, the court ruled that excluding a shareholder from management in a family-run business, which operated as a quasi-partnership, constituted oppressive conduct. The breach of trust and expectations formed the foundation of the court’s ruling.

Steps to Take if You Suspect Minority Oppression

If you believe you have been subjected to minority oppression, take strategic steps early to protect your rights and strengthen your position in any potential legal action. Here are the key steps:

• Gather evidence: Compile all relevant documents, such as financial statements, emails, meeting minutes, and any other records that may support your claim of oppression. Document instances where you were excluded from management decisions or denied access to important information.
• Seek legal advice early: Consult a civil litigation lawyer at the earliest opportunity to assess whether your circumstances meet the legal threshold for minority oppression under Section 216 and guide you on the best course of action.
• Avoid rash actions: Refrain from making threats or taking actions that could weaken your case. For example, resigning from the company or cutting off communication may be seen as undermining your own position. Always seek advice before making any significant moves.
• Consider negotiations: In some cases, mediation or negotiations with the majority shareholders may resolve the issue without the need for litigation. However, this should be done under legal guidance to ensure your rights are protected.
• File a claim under Section 216: If negotiations fail, you can file a claim for minority oppression in the Singapore courts under Section 216 of the Companies Act. Your civil lawyer will help prepare the necessary legal documents and represent your interests in court.

Farallon Law’s Experience with Minority Oppression Cases

At Farallon Law Corporation, we have extensive experience handling minority oppression claims under Section 216 of the Companies Act. Our firm has successfully represented both minority shareholders and majority shareholders involved in complex corporate disputes, ensuring that our clients’ interests are protected.

We have been instructed on several minority oppression cases:

• Claim by a minority shareholder against the majority for oppression in relation to a construction company in the West Coast area of Singapore. The matter was successfully settled before proceedings commenced.
• Claim by a minority shareholder against the majority for oppression in relation to a construction company in the North area of Singapore. The matter is still ongoing in the Singapore High Court.
• Claim by a majority shareholder against the minority for oppressive acts conducted against him in relation to a logistics company in the Changi area of Singapore.

Speak to us to learn more about how we can help you.