Case Update: Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2016] SGCA 17 – shareholders’ derivative action not available when companies in liquidation

Petroships Investment Pte Ltd v Wealthplus Pte Ltd [2016] SGCA 17

Significance: Singapore Court of Appeal holds that shareholders’ derivative actions–whether statutory or common law actions–are not available as regards companies in liquidation.

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Article: Shareholders or members bringing a statutory derivative action on behalf of the company

What can a shareholder or company member do if the company has a claim against a third party but the directors of the company fail, neglect or refuse to commence action to pursue that claim? What if the claim is against the company’s directors for breach of directors’ or fiduciary duties? Or what if the directors are pursuing a legal action on behalf of the company which does more harm than good to the company?

The member can apply to the Singapore Court to commence, defend or discontinue an action on behalf of the company. Under Singapore law, such an action is known as a derivative action. It’s derivative because under common law principles, the claim strictly speaking belongs only to the company (this is the proper plaintiff rule). However, the common law and the Companies Act in Singapore provide for certain rules to allow a member to bring a derivative action on behalf of the company under Singapore law.

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