Summary:

1. Intro to Co Law
1.1 Separate Legal Entity
1.2 Lifting the Corporate Veil
1.3 Other legal concepts that may achieve the same effect as veil-lifting
1.4 The Incorporation Process
1.5 Promoters

2. The Co’s Constitution

2.1 Altering the Constitution
2.2 Entrenching Provisions (EP) s26A
2.3 Contractual Effect of the Constitution (Qua Member Rule)
2.4 SHs’ Agreements
2.5 Definition (s4)
2.6 Memorandum and Articles of Association (“M&A”)
2.7 The Single-Document Constitution (s 22(1))

3. Shares
3.1 Definition and Related Concepts
3.2 Variation of Class Rights
3.3 Classes of Shares
3.4 Issue and Allotment of Shares
3.5 Ownership of and Interests in Shares
3.6 Transfer of Shares
3.7 Share Capital Structure

4. Management
4.1 The board of Directors & SHs in general meeting
4.2 Board of Directors
4.3 Board Meetings and Resolutions
4.4 Directorship
4.5 Disqualification and debarment
4.6 Vacation of Office and Removal
4.7 Director’s Remuneration and Financial Dealings with the Co
4.8 The Co Secretary
4.9 Division of Powers between Board and General Meeting
4.10 SH Meetings

1
 1: Introduction to Co Law
1.1 Separate Legal Entity

 Salomon v Salomon & Co Ltd [1897] AC 22

o At law, the Co is a separate entity from its SHs
o A contract of transfer of business was valid (In this case, from sole proprietorship to the Co)
o The SHs were not liable for the Co’s Debts
 A Co is capable of suing/being sued, contracting, having perpetual succession and has the power to hold land and assets s 19(5)
 Lee v Lee’s Air Farming Ltd [1961] AC 12
o Lee was the controlling SH, sole director and chief pilot of Lee’s Air Farming Ltd; he was also considered an employee of the Co
o Lee died in an accident; wife wanted to claim insurance which required him to be a Co employee
o The Co was a separate legal entity, even though Lee’s Air Farming Ltd was essentially a ‘one-man entity’
 Macaura v Northern Assurance Co Ltd [1925] AC 619
o Plaintiff was a sole owner of a timber Co. Plaintiff bought fire insurance from defendant for himself, not in the name of the Co. Fire
broke out and destroyed Co’s goods
o Plaintiff could not claim fire insurance from defendant as the Co was a separate legal entity, and contract was for the plaintiff
specifically, not the Co
o A Co holds its own legal assets, not the SHs, thus no SH has the rights over any asset in possession of a Co
 Foss v Harbottle (1843) 2 Hare 461
o When a wrong has been committed to the Co, the proper claimant is the Co itself, not its SHs
 Re Noel Tedman Holdings Pty Ltd [1967] QdR 561
o A change in SHship does not affect the existence of a Co

1.2 Lifting the Corporate Veil

 Lifting/piercing the corporate veil is the process of disregarding the separate personality of the Co if its presence would create substantial injustice
or is used as a means to conceal fraud
 There is currently no common unifying principle in which courts choose to pierce the corporate veil (Australian court in Briggs v James Hardie &
Co Pty Ltd [1989] 16 NSWLR 549)
 Common Law Categories
o Prest v Petrodel Resources Ltd [2013] 3 WLR 1
 Veil was not lifted in this case as the facts were: husband did not deliberately use the Co as a means to avoid obligatory
transactions to his wife, Co was under his name before relations turned sour
 Lifting the veil only allowed as per the concealment or evasion principle
o Concealment Principle
 Re Darby [1911] 1 KB 95
 Used Co’s name to commit a fraud and conceal it
 The Saudi Al Jubail [1987] SGHC 71
 Co in question here did not exist, so was used as a sham/ façade
 Alwie v Tjong Very Sumito [2013] 4 SLR 308
 Veil could be lifted here as the Co was essentially Alwie’s alter ego as there was no distinction between Alwie & the
Co: Alwie was the beneficial owner of the Co’s bank account
 Sun Electric Pte Ltd v Menrva Solutions Pte Ltd [2019] SGCA 51
 Owner deliberately used Menrva to enter into agreement to shield himself from personal liability
 Menrva was the alter ego as it was doing nothing more than carrying on controllers’ business
o Evasion of a Legal Obligation
 Jones v Lipman [1962] 1 WLR 832
 Created a Co to transfer existing obligation to that Co
 The court lifted the veil as the seller had obligations and used the company as a shield.
 Gilford Motor v Horne [1933] Ch 935
 Created a Co to evade employment contract with previous Co
 Discredited Grounds
o Single Economic Entity
 DHB Food Distributors v Tower Hamlets Borough Council [1976]
 Corporate veil may be lifted where parent and subsidiary have complete ‘identity and community of interests’
 May arise where there is (1) Common directors (2) Common ultimate s/h (3) identity of business interests
 Adams v Cape Industries plc [1990] Ch 433 (Sealy & Worthington, pp 66 – 69)
 English courts retreated from the idea of “single economic entity”.
 The court recognised that it is entirely legitimate to use the corporate form to limit future liability.
 Manuchar Steel Hong Kong Limited v Star Pacific Line Pte Ltd [2014] 4 SLR 832
 Single Economic Entity argument is rejected
 Just because two companies are related as a “commercial group”, does not mean that veil can be lifted where
another Co is liable to pay for the other, as one Co may not be under full control of the other
 Lifting the Veil – Statutory Exceptions
o Unlawful dividends (s403 (2)(b) CA)
o Failure to indicate company’s name on certain instruments (s144(2) CA)
o Trading without a director resident in Singapore for > 6 months (s145(10) CA)
o Wrongful trading (s239 IRDA)
 Officer involved in the company’s incurrence of debt without reasonable expectation of ability to repay
o Fraudulent trading (s238 IRDA)
 Business carried on with intent to defraud creditors

2
1.3 Other legal concepts that may achieve the same effect as veil-lifting

 Smith, Stone & Knight Ltd v Birmingham Corporation [1939] 4 All ER 116
o The parent Co was entitled to compensation in respect of a business carried on by a subsidiary on the basis that the subsidiary was in
reality carrying it out on behalf of the parent Co as an agent  where agency can lift the veil, in this case it can
 Chandler v Cape plc [2012] 1 WLR 3111
o In the event a SH or a parent Co may be directly liable in tort of negligence to a third party who has been injured by the subsidiary’s
activities, parent Co could be sued instead
 When a property, though it is registered in subsidiary’s name, is actually held for the benefit of the parent Co in the form of trusts

1.4 The Incorporation Process

 Registration of a Co Name (s 27(1))
o Name cannot be undesirable, identical to another Co, or a reserved name
 Co must have at least one SH (s20A)
 Co must have at least one director (s145(1))

1.5 Promoters
 Promoter is a firm/ person who does the preliminary work related to the formation of a Co
 Promoters owe a fiduciary duty to the Co: legal, ethical relationship of trust to take care of Co’s assets
o Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218
 Promoter bought an asset, and sold it to Co after it formed at double the price

2: The Co’s Constitution

2.1 Altering the Constitution
 General method of alteration
o Unless otherwise provided in this Act, the constitution of a Co may be altered or added to by special resolution s 26(1)
 A special resolution is one that has been passed by a majority of at least 75% of SHs present at meeting, given a 14 days
written notice (for private Co) or 21 days (for public Co) s 184(1)
 However, if agreed by majority of 95% of total voting rights of all the SHs with voting rights at the meeting, a resolution may
be proposed and passed as a special resolution even if written notice is of a period less than required above s 184(2)
o An alteration or addition made to the constitution will become part of the original constitution from the date of the special resolution
(or a specified later date) – s 26(1AA).
 General restrictions on alteration
o An amendment may still be invalidated for the following reasons:
 contrary to a provision of the Act: s 26(1) (e.g. s 39(3) – can’t amend constitution to compel a SH to take more shares)
 alteration is “oppressive” under s 216
 contrary to an entrenching provision
 contrary to a Modification of Rights clause
 purported alteration is not made “bona fide for the benefit of the Co as a whole” (common law constraint)
o To fulfil the bona fide test, alteration has to be done: 1) in good faith; and 2) rationally.

1. Tests is primarily subjective:

- It is for the shareholders (and not for the court) to decide whether alteration was for benefit of
Co B (Shuttleworth v Cox Brothers & Co [1927] 2 KB 9 at 23-24)
- But the court will intervene if no reasonable shareholder shareholders could have reached that
decision

2. The fact that only some members suffer detriment does not render the alteration void. (Allen v
Gold Reefs of West Africa Ltd [1900] 1 Ch 656)

3. But note different categories of alteration (identified in Citco) tested separately

- Category 1: Those affecting the Co as a commercial entity
- Category 2: Others ie those affecting different groups of shareholder differently
 To answer the case, we need to know which category it’s under

 Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656

 Alteration was valid because it benefited the Co as a whole even if it will adversely affect one particular SH
 Even though it may appear discriminatory toward a particular SH, it was not in fact intended to be discriminatory
because it (potentially) affected all holders of fully-paid shares
 So long as the resolution was done bona fide for the benefit of the Co as a whole, restrictions on freedom of a Co to
alter its articles are invalid
 Shuttleworth v Cox Brothers & Co [1927] 2 KB 9 at 23-24
 When deciding a case, it is not for the court to decide the commercial benefits to the Co of altering the articles, but
it was for the reasonable SH to consider what would be beneficial
 Only when there is no reasonable ground for SHs to have reached that decision, or have reached the decision with
good intent but have not considered the matters which they ought to have considered, could their decision be set
aside
 It would be up to the claimant to prove that actual bad faith was involved to invalidate the alteration

3
  Citco Banking Corp NV v Pusser’s Ltd [2007] 2 BCLC 483
 If the alteration of the constitution may have no effect on the Co’s interests but only an adverse impact on the
minority SHs, it depends on the facts of the case if the Co truly benefited or avoided adverse impacts from the
change
 Gambotto v WCP Ltd [1995] 127 ALR (i.e. the Australian test)
 For alterations effecting an expropriation (removal) of rights, benefit to the Co is not a sufficient justification,
expropriation will only be justified if it is to avoid a detriment or harm to the Co, and is a reasonable way of doing so
 However here, courts are not willing to follow this case as it will set the precedence of extending new powers
conferred to minority SHs in future cases

2.2 Entrenching Provisions (EP) s26A

 The purpose of an EP is to make it more difficult to alter rights stated in the Constitution. It is essentially a minority protection tool.
 Alteration of constitution must comply with any relevant EP s26(1A)
 An entrenching provision can be included in the constitution during a Co’s formation or at any time inserted only if all Co SHs agree
 An entrenching provision may be removed or altered only if all Co SHs agree
 Entrenching provisions are provisions where other specified provisions may not be altered in the manner provided by this Act, or may not be
altered except i) by a resolution passed by more than 75% ii) where other specified conditions are met

2.3 Contractual Effect of the Constitution

 The constitution has the effect of creating a “statutory contract” between (i) Co and SHs and (ii) SHs between themselves s39
o Any SH can bring an action against the Co to enforce the constitution and vice versa
o Hickman v Kent or Romney Marsh Sheepbreeders’ Association [1915] 1 Ch 881
 Articles state that any conflicts between SH and association to go through arbitration before court
 SH was bound by article and was prevented to go to court as no arbitration was done
 s 39(1) only relates to rights which affect the SH in his capacity as a SH (SH rights), and not those in personal capacity (outsider
rights)  Qua Member Rule
o Eley v Positive Security Life Assurance Co Ltd (1876) 1 Ex D 88
 A non-SH or an outsider cannot enforce an obligation in the constitution as against the Co. Similar concept to privity
o Rayfield v Hands [1960] Ch1
 One SH may compel another SH to comply with an obligation in the constitution without joining the Co as a party to the
proceedings.
o Qua Member Rule:
 S39(1) only relates to those rights which affect the member in his capacity as a member (“member rights”) and not those in his
personal capacity (“outsider rights”) (Qua Member Rule)
 Provisions that do not affect a SH in his capacity as a SH cannot be enforced by such SH
 Problem is that they can instead use their SH right to compel the Co to enforce its constitution
 A right that was inserted (even if it pertains to non-member rights such as directorship) which is incidental to the person being
a SH of the Co could be construed to be a Qua member right. Thus, anyone outside this right cannot enforce that right
o Criticisms on the Qua Member Rule
 S39(1) does not make a distinction between “membership” and other rights
 Difficulty of applying distinction e.g. management rights
 No SG Case law directly apply tule, though recent case seemed to approve it
 Extrinsic contracts based on or incorporating a term of the constitution
o Swabey v Port Darwin Gold Mining Co (1889)
 While the constitution does not create a contractual relationship with an outsider, it may be enforced by the outsider if it can
be shown to be part of a contract formed apart from the constitution
o What is the effect on such a contract of an alteration of the incorporated clause of the constitution?
 A Co cannot bind itself by contract not to alter its constitution
 Southern Foundaries (1926) Ltd v Shirlaw [1940] AC 701
 It may not justify the breach of an “outsider” contract by amending its constitution so that it cannot perform the
contract

2.4 SHs’ Agreements

 When a Co is set up, the SHs may voluntarily enter into a SHs’ agreement to supplement the constitution to further regulate their relationship
regarding the Co. The parties to such a SHs’ agreement could be all or some of the SHs; and the Co may or may not be a party.
 Legal effects of a SHs’ agreement include:
o it can only be altered by all the contracting parties, rather than by 75% of them as with the Articles.
o it generally does not need to be filed with ACRA, and thus does not become publicly available.
o it is not enforceable by a SH who is not a party to the agreement.
o it cannot be enforced directly against the Co if the latter is not a party (and even if it is a party, the remedy may be limited to damages).
o however, where all the SHs are parties to the agreement, it may have the indirect effect of achieving compliance by the Co.
 A SHs’ agreement is merely a contract that binds the persons who are parties to the agreement. It is more flexible than the constitution as it is not
directly regulated by the Companies Act. However, the scope of such agreement is limited in the sense that it cannot bind the Co and future SHs
(unless they become parties).

2.5 Definition (s4)

 The constitution includes all that relates to the unique features and internal workings of the Co that are not governed by the Act.
 Those who set up or invest in the Co are usually free to decide or agree upon the Co’s internal (and formal) operating structure
 For companies incorporated before the beginning of 2016, the constitution is made up of two documents – the Memorandum of Association
(“Memorandum”) and Articles of Association (“Articles”).

4
  The 2014 Act replaced the Memorandum and Articles with a single-document constitution. However, this change is applicable only to companies
incorporated from 2016 onwards.

2.6 Memorandum and Articles of Association (“M&A”)

 The Memorandum defines the Co’s “external” and fundamental features. Thus, a Co was required, under the Act, to state its name, capital
structure and nature of SH’s liability in its Memorandum.
 The Articles, on the other hand, set out the Co’s “internal regulations”. Generally, the Co is free (subject only to any restrictions in the Act) to
make such internal regulations as it deems fit.
 Memorandum was traditionally the more fundamental of the two documents. This meant that where there is a conflict between the terms of the
Memorandum and the Articles, the terms of the Memorandum would prevail.
 A Co’s internal regulations were set out in its Articles. For companies formed before 2016, a “default” set of Articles was found in Table A. A Co
could choose to adopt all or any part of Table A as its Articles. More commonly, however, companies would exclude Table A and adopt their own
Articles (although these typically followed the Table A template fairly closely). However, if a Co did not register its own Articles, then the Act
would presume that it had adopted Table A as its Articles.

2.7 The Single-Document Constitution (s 22(1))

 The constitution of every Co shall comply with such requirements as may be prescribed, shall be dated and shall state, in addition to other
requirements
o the name of the Co
o if the Co is a Co limited by shares, that the liability of the SHs is limited
o the full names, addresses and occupations of the subscribers to the constitution of the Co
o that such subscribers are desirous of being formed into a Co in pursuance of the constitution and (where the Co is to have a share
capital) respectively agree to take the number of shares in the capital of the Co set out opposite their respective names
 Objects Clause
o A Co is no longer required to state its objects in the constitution. However, it may choose to include such clauses and other limitations
of its power and capacity in its constitution.
 Internal Regulations
o how shares are to be issued, allotted and transferred
o how board and SH meetings are to be organized and conducted
o how directors are to be appointed and removed
o what powers are conferred upon directors
o how profits are to be distributed and/or capitalized
o how surplus assets are to be distributed in the event of winding up.

3: Shares
3.1 Definition and Related Concepts
 A share represents an interest in a Co which confers rights and imposes obligations on the holder.
o Rights:
 To participate on the terms of the constitution while company is a going concern
 To participate in the assets on winding up
o Obligations:
 To contribute up to the issue price of the share
 To comply with the constitution
 A share is a form of movable and intangible property. (s 121)
 Categories of shares
o Fully paid-up shares (shares that have been fully paid for by SHs)
o Partly paid-up shares (shares that have only paid some of the market value of the shares)
o Uncalled capital (issued shares that the Co has not yet requested payment of yet)
 SHs in the overall corporate structure
o SHs are the last in the line to claim the Co’s assets during liquidation
o SHs are entitled to participate, following to the terms of the constitution, while the Co is a going concern.
o SHs are obliged to contribute up to the agreed issue price of the share.
o SHs usually have the following rights:
 right to observance of constitution
 right to restrain Co from committing ultra vires (beyond one’s legal authority) acts
 right to access certain information and records
 right to be treated fairly (s 216)
 right to attend and speak at general meetings
 right to vote (if share is conferred with voting rights under the constitution)
 One-share-one-vote is the default rule s 64(1)
o However, this may be negated, altered, or added to by the constitution for public companies: (s 64(3))
 The holder of a non-voting share will still have one vote in a general meeting to vote on the following (s 64(4))
o a resolution for voluntary liquidation;
o a resolution to vary the rights attached to that share.
 North-West Transportation v Beatty (1887) 12 App Cas 589 (PC)
 SHs do not owe any fiduciary duties to the Co when exercising vote
 When directors vote, they can vote in capacity of SHs (directors with shares can vote for personal interest even if
they stand to gain from the vote)
 However, it does not mean that there are no other limitations on the right to vote
 the requirement to act bona fide in the interests of the Co (for amendment of constitution)
 s 216 (remedy for oppression)

5
3.2 Variation of Class Rights
 Any proposed changes to the constitution regarding class rights requires the consent of SHs of that class. Legal issue is to see if change to
constitution was allowed
 Determine if there is a class right – Rights which attaches only to a particular class of shares will be a class right
o Cumbrian Newspapers Group Ltd v Cumberland Herald [1986] 2 All ER 816
 Various rights given to a named SH in the Articles (e.g. to appoint a director) were held to be class rights , even though the Co
only had one class of share (ordinary shares).
 The named SH had “class rights” (as though he were a separate class by himself) and so would need to consent to their
variation under the Modification of Rights Clause contained in the constitution.
 Here, the definition of having class rights depends on whether a single SH has rights which are not available to others
o Re Holders Investment Trust (1971)
 A class-meeting vote on the resolution to modify a class right must be exercised for the (predominant) purpose of benefitting
the class as a whole.
 Determine if there is a variation of class rights -Must be variation of legal rights (any rights bound by CA or constitution)
o The issue of preference shares (A) ranking equally with existing preference shares (B) shall be deemed to be a variation of the rights
attached to B UNLESS issue of A was authorized by terms during issuance of B or by the constitution at the time B was issued (s 74(6))
 Determine if there is a Modification of Rights Clause (“MoR clause”) included in the Co’s Constitution
o For any change with regards to class rights, it must first be approved in a special resolution in a general meeting to alter constitution,
and later approved by class meeting to comply with MoR
o If there is no MoR clause, the Co may vary class rights by simply amending the clauses conferring class rights in the constitution.
o A typical example of an MoR clause is Regulation 8 of the Model Constitution
 8(1) [Modification of class rights] If at any time the share capital is divided into different classes of shares, the rights attached
to any class (unless otherwise provided by the terms of issue of the shares of that class) may be varied with:
 the consent in writing of the holders of 75% of the issued shares of that class; or
 the sanction of a special resolution passed at a separate general meeting of the holders of the shares of the class.
o Re Holders Investment Trust [1971] 2 All ER 289
 When SHs vote in a class meeting, they must have regard to the interests of the class as a whole
 Their vote to prevent an alteration was ineffective as the majority SHs voted in their own interests without taking into
consideration what was best for the class as a whole
o If an aggrieved minority SH who has been outvoted by the majority in a class meeting, and has at least 5% of the total number of shares
of that class, may apply to the Court to have the variation/ abrogation cancelled, and if any such application is made, the variation/
abrogation will not take effect until confirmed by the Court (s 74(1))
 The Court may, if satisfied by the case shown by the applicant that the variation/ abrogation would unfairly prejudice the SHs
of the class, disallow the variation/abrogation (or confirm it if unsatisfied by the case) and the decision of the Court is final s
74(4)
o The alteration of any provision in the constitution which affects or relates to how class rights may be varied/ abrogated shall be deemed
to be a variation/ abrogation of those class rights (s 74(7))

3.3 Classes of Shares

 Ordinary Shares
o Is rarely defined expressly but may be understood as the residual class of shares with the following rights
 right to share equally in dividends (if declared)
 right to vote at general meetings
 right to a return of capital (pro rata share in surplus assets) on a winding up (after all other claimants have been paid)
 Preference Shares
o Types of preference shares
 Voting & non-voting shares
 Cumulative & non-cumulative shares (cumulative dividends payable if missed in the past)
 Participating & non-participating shares (additional benefit of participating in profits of the Co)
 Convertible shares (can be converted into ordinary shares at some agreed terms and conditions)
 Redeemable shares (has maturity date where capital is repaid by Co and dividends stop)
o Preference shares usually carry some form of preferential rights
 priority right to dividends, usually of a fixed amount
 priority in return of fixed capital if the Co is wound up
 sometimes, the right to be converted to ordinary shares upon satisfaction of certain conditions
o Where there is no express distinction between the rights of different classes, the law presumes that all SHs rank equally
o The rights attached to preference shares are set out in the Co’s constitution (s 75)
 A public Co may only issue different classes of shares if (s 64A(1))
o the issue of different classes of shares is provided for in its constitution
o the rights attached to each class of shares are set out in the constitution.
 A public Co may issue shares with special, limited, conditional or no voting rights (s 64A(2))
o However, such shares may only be issued with the approval of a special resolution (s 64A(3))

3.4 Issue and Allotment of Shares

 There are two ways in which a person may acquire shares in a Co: 1) the allotment and issue of shares by the Co; or 2) a transfer of shares
o Procedural Requirements for Issue

6
  Co directors may not issue new shares unless the Co in general meeting has approved such issue (s 161(1)). However, s 161(2)
and (3) also make it clear that general approval may be given for each year, so it is not necessary to seek SHs’ approval for
recurring issues within that year.
 In addition, the constitution typically requires board of directors’ approval for the issue of new shares.
 With the approval of the general meeting and the board, the Co may then issue the new shares. A new SH “subscribes for” the
new shares and pays up (or promises to pay up) in cash or for consideration other than cash, before the shares are actually
allotted to him.
 Until 2016, details of subscribers of new shares must be entered in the Register of SHs which was maintained by the Co itself.
Under the 2014 Act, this function has now been reassigned to ACRA, which maintains an electronic Register of SHs (“EROM”)
for each private Co.
 The above does not apply to listed public Co shares, which are recorded under a different system known as the
Central Depositary (or CDP) system. Share certificates are not issued.
 Consideration for Issue of Shares
o The consideration for purchase of shares from the Co may take the form of either cash or non-cash consideration. For the latter, there is
generally no requirement that such consideration be adequate, see Re Wragg Ltd [1897] 1 Ch 796.
o A Co may, however, issue shares for no consideration (s 68)

3.5 Ownership of and Interests in Shares

 Legal and beneficial interests
o Legal interest relates to the formal interest in (or title to) the property, while beneficial interest relates to the actual benefit of the
property
o The legal owner of a share is the person who is registered in the Co’s Register of SHs (a.k.a. the share register) in respect of that share.
o A person may own both the legal and equitable interests in a share, or he may own either the legal or beneficial interest in a share. For
example, if Ms X decides to purchase 100 shares in Co Y, but she does so indirectly through a nominee, then the nominee will be the
legal owner, while Ms X is the beneficial owner of those shares.
o A Co is not required to distinguish whether a registered SH (legal owner) is also a beneficial owner of the shares, but can get the court to
change the name on the share register s 195(4)
 “Deemed interests in shares”
o When the Companies Act refers to persons who owns shares, it can include persons who have partial/ contingent interest in the share.
For example, if X contracts to buy Y’s shares at some future date, X will be regarded as having an interest in those shares even though X
has yet to complete the purchase.
o Some circumstances where a person is regarded as having an interest in shares are set out in (s 7)
 right or control over the right to dispose of shares – s 7(1A) & (1B)
 beneficial interests in shares s 7(2)
 contract of purchase s 7(6)(a)
 right to transfer (e.g. under a will) s 7(6)(b)
 option to purchase s 7(6)(c)
 right to exercise or control rights attached thereto s 7(6)(d)
 interests held via intermediate companies s 7(4), s 7(4A)
o But s 7 excludes:
 interests in unit trusts s 7(3)
 interests of a bare trustee s 7(9)(a)
 interests of banks/financial institutions held by way of security s 7(9)(b)
 interest held by reason of an office s 7(9)(c)
 shares bought back by Co s 7(9) (ca)
 prescribed interests s 7(9)(d)
o “Deemed interests” in shares via intermediate companies
 Where a corporate is deemed by this section to have an interest in a share and 1) the corporate/its directors are obliged to
follow X’s orders OR 2) X has a controlling interest in the body corporate, X has an interest in that share s 7(4)
 Where a corporate is deemed by this section to have an interest in a share and 1) X is ;2) associates of X are; OR 3) X and
associates are entitled to exercise/ control the exercise of at least 20% of the voting power in the corporate, X has an interest
in that share s 7(4A)
 A is an associate of B if A is 1) a subsidiary of B; OR 2) A (person or corporate) is under obligation (formal/informal)
to act in accordance with B’s directions s 7(5)

3.6 Transfer of Shares

 A SH may decide to sell or give away his shares and is implemented by way of a “transfer”.
 A complete transfer (of unlisted shares) will involve (at least) three basic steps:-
o the transferor and transferee execute a share transfer form;
o the transferee lodges the form with the Co;
o if all is in order, the transferee will be registered as a new SH of the Co in the Register of SHs, and will receive a new share certificate.
 In the case of private companies, with effect from 2016 the registration at step 3 above is effected by ACRA in the EROM, after being electronically
notified by the Co of the details of the intended transfer. Share certificates will continue to be issued by the Co.
o As with issues of new shares, the above does not apply to listed public Co shares, which are recorded and transferred under the CDP
system. Share certificates are not issued.
 Restrictions on transfer
o The transfer of shares in a private Co must be restricted in some way s 18(1)
 If a Co wishes to refuse a transfer, they must do so within 30 days of lodged transfer s 129(1)
 If in breach, the Co and all officers in default may be fined up to $1000 and default penalty
 Co is obliged to give reasons for the refusal to register s 129(3) (notice of refusal)
 Once reasons are given, a court may review the reasons to decide if they are sufficient
7
  Reasons are insufficient if directors act in bad faith or for an improper purpose in refusing to consent to the transfer.
o If there are pre-emptive rights, the Co must first offer new issued shares to these SHs before offering to the general public. If this is not
done, and there is already a buyer from GP, contract to buy shares will be void

3.7 Share Capital Structure

 As of 2006, shares of a Co have no par or nominal value (62A)
o Now, the focus on shares is the total consideration paid for issue of shares, there is no more concept of premium/discounts to par value

4: Management
4.1 The board of Directors & SHs in general meeting
 The power to manage a Co is vested in the board of directors, and SHs may not interfere with the board’s decisions except where they are
empowered to do so by the Act or the Co’s constitution

4.2 Board of Directors

 The term "director" includes: s 4(1)
o any person occupying the position of director of a corporation by whatever name called (de facto)
o a person whose directions or instructions the directors or the majority of the directors of a corporation are accustomed to act (shadow)
o an alternate or substitute director
 Directors can be divided into two groups: those who are duly appointed by the Co and those who are deemed to be directors by law.
 The shadow and de facto directors are not formally appointed by the Co but are deemed as directors by law.
 Re Hydrodam (Corby) Ltd [1994] BCLC 180
o Directors may be of three kinds: de jure directors, those who have been validly appointed to the office; de facto directors, directors who
assume to act as directors without having been appointed validly or at all; and shadow directors who are persons whose directions or
instructions the directors of the Co are accustomed to act
 Secretary of State for Trade and Industry v. Deverell [2000] 2 WLR 907 at 920:
o In the case of a person who owns all the shares in a Co but chooses to operate it through a board of directors. From time to time the
owner, gives directions to the board what to do but takes no part in the management of the Co himself.
o Issue here is not whether the shadow director “lurks in the shadows”, rather if he has real influence over the affairs of the Co
 If directors act on advice given to them by X in a professional capacity, X is not deemed as a person whose directions/instructions the directors of
a Co are obliged to follow, thus is not a shadow director s 4(2)
 Heap Huat Rubber Co Sdn Bhd v Kong Choot Sian [2004] SGCA 12
o If a person is a shadow or de facto director of a Co, it does not mean that she has to fulfil all the legal responsibilities imposed on a
director. Whether compliance is required must be determined by reference to the particular context in which the issue arose.
o The court held that a shadow director did not have to obtain SHs’ approval of his remuneration, even though the Co’s constitution
imposed such a requirement or other formal procedures in Act or constitution
 Directors vs. other Officers
o A director is the person who takes part in managing important business affairs, while officers oversee daily aspects of a business.
Officers are also directly involved in the daily management affairs of the business.

4.3 Board Meetings and Resolutions

 The Co can decide the minimum requirements and how meetings are run in its constitution.
 The chairman of the board is the person who presides over the meeting.
 A formal decision made by the board is called a “board resolution”. Except where the constitution requires otherwise, a resolution is passed by a
simple majority of votes (50% votes plus 1)
 In practice, directors are often very busy business-people or executives. Hence, not all board decisions are made at board meetings. Instead,
many resolutions are approved by written circulation (see, eg, Art 90 TA; Reg 93 MC). This saves time and facilitates quick decision-making.
 The effect of irregularities in a board meeting (eg, failure to meet minimum quorum): see s 392.
o A proceeding here is not invalidated by reason of any procedural irregularity unless the Court is of the opinion that the irregularity has
caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be
invalid.

4.4 Directorship
 Types of Directors
o Executive/Non-executive director (with or without daily management responsibilities)
o Nominee director (acts in accordance to X’s wishes as their nominee)
o Alternate director (appointed to attend a board meeting if principal director is unable to attend)
o Independent director (listed companies – to look after interests of minority SHs as guardians)
o Governing director (some small private companies)
 Appointment
o A director may be appointed by ordinary resolution of the SHs, unless the Co’s constitution provides otherwise. s 149B
o It is usual for the constitution to provide that a director may be also appointed by the board, typically to fill a vacancy created by death
or resignation of a director.
o Cannot appoint more than one director per resolution unless a prior meeting with no vote against it s 150(1)
 Qualification
o Every Co shall have at least one director who is ordinarily resident in Singapore and, where the Co only has one SH, that sole director
may also be the sole SH of the Co s 145(1)
o No person other than a natural person of full age and capacity shall be a director of a Co s 145(2)

4.5 Disqualification and debarment

8
  Where a person is disqualified from acting as a director, she must not allow herself to be appointed as a director or otherwise take part in the
management of a Co.
 There are 3 types of disqualification:
o Automatic – a person who is automatically disqualified once the disqualifying event (e.g. bankruptcy, criminal convictions) occurs.
o By Court order – the court may disqualify a person from acting as a director. Such orders will only be made upon the application of the
Minister or the Official Receiver, and only if certain conditions are satisfied.
o Debarment order – from the 2014 Act that differs from a normal disqualification order in two ways:
 the order is issued by ACRA rather than the court.
 the order does not disqualify the person from acting as a director of all companies but only from new appointments.
 Grounds for Disqualification and Debarment of Directors
o Bankruptcy (Automatic) s 148
 Until discharged from bankruptcy or leave granted by court or written permission given by Official Assignee
o Co wound for insolvency while person was a director or within 3 years of ceasing to be director and his conduct renders him unfit to be
a director (Court Order) s 149
 Up to 5 years, and may apply to court for early discharge
o Person was a director of a Co wound up by court on ground that it has been used for purposes against national security or interests
(Court Order) s 149A
 Up to 3 years from date of winding up order
o Person is convicted of an offence involving fraud or dishonesty under the Securities and Futures Act (“SFA”) for market misconduct; or
person is subject to civil penalty for market misconduct under the SFA (Automatic) s 154 (1)
 Up to 5 years, if sent to prison for offence, then for 5 years after release from prison, may apply to court for early discharge
o Person convicted of offence under s 157 (as to duty and liability of officers), s 339 (liability where proper accounts not kept) or offence
related to formation/management of a Co (Court Order) s 154 (2)
 Up to 5 years, if sent to prison for offence, then for 5 years after release from prison, may apply to court for early discharge
o Person has persistently defaulted on filing documents with the Registrar (persistent default is proven if person convicted of an offence
under s 13 or a 399 CA for three times within 5 years) (Automatic) s 155
 5 years from the date of last offence, may apply to court for early discharge
o A person who was a director of Co A that has been struck off under s 344; and was a director of two other companies that have been
struck off under s 344 (defunct Co) within 5 years before Co A was struck off
 5 years from the time Co A was struck off, may apply for early discharge
o Registrar satisfied that a person has defaulted on filing obligations under the Act (Debarment Order) s 155B
 Order bars a person from acting as director or secretary of another Co, but does not affect existing appointments, duration is
at Registrar’s discretion and may suspend or cancel order if default is rectified
o Person subject to be disqualified under ss 34, 35 and 36 of Limited Liability Partnerships Act (Automatic) s 155C
 Same duration as that application to the disqualification order under the LLP Act, may apply to court for early release
 Effects of Disqualification
o It is an offence if a disqualified person breaches the disqualification order and continues to act as a director or take part in a Co’s
management.
o However, it does not mean that her acts are completely void. On the contrary, her acts are likely to be valid and binding on the Co
especially if these acts affect third parties.

4.6 Vacation of Office and Removal

 For public companies, the removal of a director will require SHs’ approval by an ordinary resolution. The director concerned must also be given
special notice s 152(1)
 For private companies, unless otherwise in constitution, director may be removed by ordinary resolution passed at general meeting s 152(9)

4.7 Director’s Remuneration and Financial Dealings with the Co

 A Co shall not at any meeting provide or improve emoluments for a director of a Co unless the provision is approved by a resolution that is not
related to other matters and any resolution passed in breach of this section shall be void s 169(1)
o Emoluments relates to any forms of benefit that is conferred to him in capacity as director s 169(2)
 Compensating Directors for Loss of Office
o s 168 restricts the Co’s ability to compensate a director for loss of office. This is to prevent a director from entrenching herself by making
it very expensive for the Co to terminate her office.
o For the purposes of this provision, the restriction applies whether the director loses office as a director or as an officer of the Co.
o Grinsted v Britannia Brands (Holdings ) Pte Ltd [1996] 1 SLR(R) 743.
 Compensation for loss of office must be distinguished from payment for past services. The latter is not caught by s 168
o A Co may compensate a director for loss of office provided that payment s 168(5)
 Is made pursuant to an agreement between director and Co as consideration for director’s employment
 does not exceed the director’s total emoluments in the previous year; and
 particulars of the payment have been disclosed to the Co’s SHs and approved by them in a General Meeting
 is in the form of damages for breach of contract
 is done in respect of past services (pensions, retiring allowance)
 For the purposes of s 161(1)(a) a Co makes a restricted transaction if it:
o makes a loan or quasi-loan to a director of a Co or related companies s 162(1)(a)
o enters into any guarantee or provides any security in connection with a loan or quasi-loan made to a relevant director by any other
person s 162(1)(b)
o enters into a credit transaction as creditor for the benefit of a relevant director s 162(1)(c)
o enters into any guarantee or provides any security in connection with a credit transaction entered into by any person for the benefit of a
relevant director s 162(1)(d)
o takes part in an arrangement under which s 162(1)(e)
 another person enters into a transaction that, if it had been entered into by the Co, would have been a restricted transaction

9
 under paragraph (a), (b), (c), (d) or (f); AND
 that person, in pursuance of the arrangement, obtains a benefit from the Co or a related Co
o arranges the assignment to the Co, or assumption by the Co, of any rights, obligations or liabilities under a transaction that, if it had
been entered into by the Co, would have been a restricted transaction under paragraphs (a) to (e). s 162(1)(f)
o “credit transaction” is where the Co supplies goods/services/land on deferred payment terms such as hire-purchases/conditional
sales/leases s 162(11)
o “quasi-loan” is where the Co makes a payment for the benefit of the director or connected Co on the terms that the director or Co will
reimburse the Co later s 162(11)
o s 162(3) expressly states that the restrictions do not apply if payment was made for the benefit of a relevant director:
 to meet expenditure incurred by him for the purposes of the Co or for the purpose of enabling him to properly perform his
duties as an officer of the Co;
 for the purpose of purchasing or otherwise acquiring a home to be occupied by the director, except that not more than one
such restricted transaction may be outstanding at any time;
 where the Co has at a general meeting approved of a scheme for the making of such transaction to or for the benefit of
employees of the Co and the restricted transaction is in accordance with that scheme; or
 in the ordinary course of business of a Co whose ordinary business includes the lending of money or the giving of guarantees
in connection with loans, quasi-loans or credit transactions made or entered into by other persons if the activities of that Co
are regulated by any written law relating to banking, finance companies or insurance or are subject to supervision by the
Monetary Authority of Singapore.
o For s 162(3)(a) and (b), the Co’s approval in general meeting must be obtained s 162(4).
o The prohibition extends to loans to a director’s family SHs s 162(8)
o Any director who authorizes the making of a restricted transaction shall be guilty is liable on conviction to a fine not exceeding $20,000
or to imprisonment for a term not exceeding 2 years s 162(6)
o Nothing in this section will prevent the Co from recovering the amount of any loan, quasi-loan, credit transaction or arrangement or
amount for which it becomes liable under any guarantee entered into or in respect of any security given contrary to this section s 162(7)
 Restricted Transactions Benefitting Companies Connected with Directors s 163
o s 163 is an extension of s 162 and prevents a Co from entering into restricted transaction with another Co that is “connected with” one
or more of the Co’s directors
o Co A is connected with the directors of Co B if any director or directors of Co B are together interested in 20% or more of the voting
power of Co A.
 interests in voting power is equivalent to interests in shares as defined in s 7 [s 163(3D)(b) & (c)]
 Directors’ interests include interests of her family SHs s 163(5)
 The restrictions also apply also in the case of directors’ connected companies incorporated outside Singapore s 163(2)
o Exceptions when the restrictions in s 163 do not apply if:
 the Co is an exempt private Co;
 the SHs have given prior approval in general meeting at which the interested directors and family SHs abstain from voting: s
163(1), (3A), (3C);
 the transactions are carried out: a) between related companies; or b) by regulated financial institutions s 163(4);
 the Co provides funds to help a director defend legal proceedings in accordance with s 163A;
 the Co provides loans to help a director meet expenditure in defending herself in an investigation by regulatory authority in
accordance with s 163B.
o Nothing in this section will prevent the recovery of the amount of any loan, quasi-loan, credit transaction or arrangement or the
enforcement of any guarantee or security whether made or given by the Co or any other person s 163(6)
o Any director who authorizes the making of a restricted transaction shall be guilty is liable on conviction to a fine not exceeding $20,000
or to imprisonment for a term not exceeding 2 years s 163(7)

4.8 The Co Secretary

 Every Co shall have one or more secretaries each of whom shall be a natural person who has his principal or only place of residence in Singapore
and who is not debarred under section 155B from acting as secretary of the Co s 171(1)
 It shall be the duty of the directors of a Co to take all reasonable steps to secure that each secretary of the Co is a person who appears to them to
have the requisite knowledge and experience to discharge the functions of secretary of the Co s 171(1A)
 A public Co is required to appoint only secretaries who: a) on 15 May 1987 held the office of secretary in that Co and continued to hold that office
on 15 May 2003; or b) satisfies such requirements relating to experience, professional and academic requirements and SHship of professional
associations, as may be prescribed s 171(1AA).
 A secretary is considered an officer of the Co s 4

4.9 Division of Powers between Board and General Meeting

 The business of a Co shall be managed by, or under the supervision of, the directors and s 157A(1)
 The directors may exercise all the powers of a Co except any power that this Act or the constitution of the Co require the Co to exercise in general
meeting s 157A(2)
o This section permits the SHs in general meeting to be given specific management powers in the constitution.
o This section is the default rule for division of powers, subject to contrary provisions in the constitution
o Chan Siew Lee Jannie v TYC Investment Pte [2015] 5 SLR 409 (CA)
 General Meeting has implied “reserve” powers to act in limited circumstances where necessary such as where the board is
unable to act due to deadlock and the deadlock cannot be resolved any other way

4.10 SH Meetings
 Every public Co that is a limited Co and has a share capital shall, within a period of not less than one month and not more than 3 months after the
date at which it is entitled to commence business, hold a general meeting of the SHs of the Co to be called the “statutory meeting” s 174(1)
 A general meeting of every Co to be called the “annual general meeting” must, in addition to any other meeting, be held after the end of each
financial year within: a) 4 months in the case of a public Co that is listed; or b) 6 months in the case of any other Co s 175

10
 o Directors must lay the financial statements of the Co s 201
o Co shall appoint accounting entities to be auditors of the Co until the next AGM s 205(2)
o Directors shall not exercise powers to issue shares unless approved at general meetings s 161 (listed companies)
o Private companies need not hold AGMS
 Extraordinary General Meetings are any general meeting other than an AGM
o Where two or more SHs holding not less than 10% of the total number of issued shares of the Co (excluding treasury shares) or, if the Co
has not a share capital, not less than 5% in number of the SHs of the Co or such lesser number as is provided by the constitution may call
a meeting of the Co s 177(1)
o Directors have to convene an EGM should SHs of no less than 10% of total paid up shares request for an EGM, s 176(1)
o The Court may convene an EGM if required s 182
 Ordinary and special resolutions
o Ordinary resolutions require a simple majority (50%+ 1) and 14 day notice
o Special resolutions require a super majority (75%) and 21 day notice
 All meetings require a minimum of 2 SHs (quorum) attending for it to be valid, unless otherwise stated in the Constitution
 Private and unlisted public companies may obtain SH decisions via written resolutions (no physical meetings) except for special meeting, s 184A(1)
 Re Duomatic Ltd [1969] 2 Ch 365
o Unanimous consent rule: if all SHs agree to a decision, it will be effective even if there is no general meeting or formal resolution.
 Procedural Irregularities s 392
o Irregularities is with regards to absence of quorum or lack of notice at meetings s 392(1)
o A proceeding under this Act is not invalidated by reason of any procedural irregularity unless the Court is of the opinion that the
irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the
proceeding to be invalid. S 392(2)

11
 5: Director’s Duties
Director’s Duties
 Directors owe duties under common law or statutory law (CA), which may overlap
 Breach of duty may result in penalty under both common law and statutory law if it falls under overlapping category
Duties at Common Law
 The director is said to stand in a “fiduciary” position vis-à-vis the Co. This means that she owes certain fiduciary duties to the Co.
o “A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise
to a relationship of trust and confidence.
o He must 1) act in good faith, 2) not make a profit out of his trust, 3) not place himself in a position of conflict of interest, 4) may not act
for his own or another’s benefit without informed consent of his principal
 Who are the duties owed to
o Percival v Wright [1902]
 Directors owe duties of loyalty to the Co, not to individual SHs
o Coleman v Myers [1977]
 Owing fiduciary duties to Co does not stop them from owing these duties to SH as well where there is an agency relationship,
or there is a special factual relationship giving rise to fiduciary duty
 Duty to Act in Good Faith in the Co’s Interests (“Duty of Good Faith”)
o Re Smith and Fawcett Ltd [1942]
 Directors must exercise their discretion bona fide in what they consider (not what court considers) is in the interest of the Co,
and not for any collateral purpose
o Intraco v Multipak [1995]
 Objective element is where the Court determines whether an honest and intelligent man in the position of the directors,
taking an objective view, could reasonably have concluded that the transactions were in the interests of the Co
 The subjective element is that the Court will be slow to interfere with commercial decisions honestly made, but on hindsight
financially detrimental to the Co
o What are the interests of the Co
 Interest of the Co includes interests of the employees and SHs s 159(a)
 Tong Tien See Construction Pte Ltd v Tong Tien See [2001]
 Directors do not owe duties to creditors except where Co is insolvent or near-insolvent
 Intraco v Multi-Pak [1995]
 Generally, directors of group Cos must have separate regard for the interests of each Co, except where the group
interests are consistent with Co’s interests
 Duty to Act for Proper Purposes
o Howard Smith Ltd v Ampol Petroleum Ltd [1974]
 Directors must exercise their fiduciary powers for the purposes for which they are conferred (objective test)
 Director issued new shares claiming to raise capital for purchase, but was doing so to dilute a hostile takeover bid by another
Co. This exercise if issuing shares is not for proper purposes
 Proper purpose is interpreted by what was stated the constitution , compared to actual purpose
 Duty to Avoid Conflict of Interest and Duty (“Duty of Loyalty”)
o Bray v Ford [1896]
 It is a fundamental principle that a person in a fiduciary position is not allowed to put himself in a position where his interest
and duty conflict
o No-conflict rule
 A director must not place themselves in a position of conflict between their duties and interests
 If a transaction is made between a director and the Co (self-dealing), it is voidable at the instance of the Co, unless validated
by full disclosure and consent by SHs
 North-West Transportation Co Ltd v Beatty [1887]
o A general meeting has the power to ratify the transaction
 Any director directly or indirectly interested in a transaction with the Co must declare his interests at a meeting of
directors of the Co or send a written notice about it s 156(1)
 Co cannot give emoluments (payments) to directors unless it is approved by resolution s 169
 Conflict of duties
 Directors may hold multiple directorships and act as director for rival Co but must disclose it s156(5)
 Any director who holds any office or possess any property where duty or interest may arise and directly or indirectly
conflict with the duties or interests as a director must declare as such at a meeting of directors or send a written
notice about it s156(6)
 Scottish Co-operative Wholesale Society v Meyer [1959]
o As a nominee director, duties are owed to both Cos. There is no hierarchy of interests even if the
nominator has placed you as a director in another Co. You cannot subordinate the interest of the new Co
in favour of your nominator
o Nominee directors may seek board’s approval for disclosing information to nominator s 158
 Directors should not bind themselves by contract so that they are prevented from exercising independent judgment
o No profit rule
 A director must not profit from their position or from the use of corporate property, opportunities or information with Co
consent. Breach may be liable to account for any loss of profit from the breach
 An officer or agent of a Co shall not make improper use of his position as an officer or agent of the Co or any information
acquired by virtue of his position as an officer or agent of the Co to gain, directly or indirectly, an advantage for himself or for
any other person or to cause detriment to the Co s 157(2)
 A breach of s 157(2) may lead to both civil (damages for loss of profit) and penal consequence (fine and jail) s 157(3)
 Cook v Deeks [1916]
 Director must not divert business opportunity to himself as business opportunity is Co’s property

12
  Held that it was a breach and could not be ratified (as the directors were a majority)
 Regal (Hastings) v Gulliver [1942]
 The Co could not complete a transaction, so directors contributed 60% of the capital required. SHs sued as their
consent was not sought
 A director cannot profit from an opportunity which came to him in his capacity as director, without prior disclosure
to and approval of Co
 Liability arises even if Co could not itself have used the opportunity and director’s good faith is irrelevant
 IDC v Cooley [1972]
 Director was working for Co, but was approached by another Co that only wanted to work with him, and not the Co
 He subsequently left the Co to pursue the project and Co sued
 He is not liable as this opportunity did not arise from his position as director, but from a private capacity, and Co
would not have gotten the project even if he had declared to the Co
 Canadian Aero Service Ltd v O’Malley [1973]
 Directors were unhappy with the situation in the Co and decided to leave. Subsequently created another Co
together, and later got a project where proprietary work was done during their directorship
 The directors owed fiduciary duty after leaving the Co as the diverted opportunity is mature
 Peso Silver Mines Ltd v Cropper [1966]
 Opportunity was considered and rejected by Co. Later on, director was approached by the other investors to pursue
opportunity. He also declared this to the Co and was later asked to resign
 Held that the director was not acting in his capacity as a director but as an individual SH of the public
 Duties of Care, Skill & Diligence (“Duty of Care”)
o A director has to exercise reasonable care, skill and diligence when managing the affairs of the Co
o This is not a fiduciary duty as carelessness and disloyalty are distinct concepts. A careless or negligent act may not have been disloyal
 A fiduciary breach has harsher consequence of damages for profits while breach of duty of care usually has damages for loss
o Lim Weng Kee v PP [2002]
 Modern standard of care and diligence is objective. The minimum standard is determined by reference to his position, not his
personal capacity
 The standards differ based on types of decision made and size and business of the Co
 This standard would not be lowered to accommodate any inadequacies in individual’s knowledge or experience
 But, standard would be raised if he had possessed some special knowledge of expertise
o A director may rely on reports, statements, financial data and other information prepared or supplied by: s 157C
 An employee the director believes on reasonable grounds to be reliable and competent in related matters s 157C(a)
 a professional advisor or expert in related matters which the director believes on reasonable grounds to be within person’s
professional or expert competence s 157C(b)
 any other director or committee of directors upon which the director did not serve in related matters within that other
director’s or committee’s authority s 157C(c)
 can only be done if director (a) acts in good faith (b) makes proper inquiry; and (c) has no knowledge that reliance is
unwarranted s 156C(2)
 The court does not look at the merits of the director’s decision, but at the process of decision making and what steps a
reasonable person in that position would take in making the decision
o Directors must continue to learn about and understand the Co’s business and must exercise due supervision over delegated
responsibilities
 Civil remedies for breach:
o For breach of fiduciary duty where:
 Co enters contract, it may be barred
 Director obtains profit, profit may be accounted by Co
 Director gets possession of property, Co gets constructive trust (possession) of the property
 Co suffers loss, equitable compensation for damages
 Breach is continuing, injunction is given (court order to stop)
o For breach of duty of care, and Co suffers loss, only equitable compensation for damages are awarded
 Ratification and approval
o A general meeting may ratify (forgive) a breach after full disclosure by director, and director can vote as a SH
o Constitution may allow the board to consent in SH’s place
Statutory Duties
 The contents in s 157 almost wholly overlaps with common-law duties. Thus a breach in common-law duty will also breach s 157
o A director shall at all times act honestly and use reasonable diligence in the discharge of the duties of his office s 157(1)
o S 157(2) reinforces the no-profit-rule in common law
o S 157(3) sets a criminal (breach of statute) and civil (breach of common-law duty) liability
 Directors must lay before the Co at its AGM the true and fair financial statements for the financial year s 201
o A director who does not take sufficient steps to ensure that the accounts comply with the requirements of the Companies Act will
commit an offence under s 204
Exemption/Indemnity and Judicial Relief
 Co cannot enter into an agreement to exempt officers from liability for negligence, breach of duty or breach of trust s 172(1)
o Agreements includes those in the constitution
 Co may not indemnify its officers against such liability s 172(2)
 Exceptions are that:
o A Co may purchase insurance policies to protect its officers against liability s 172A
o A Co may indemnify an officer against liabilities owed to third parties except for (a) any criminal fine or penalty to regulatory authorities;
and (b) any liability incurred in unsuccessfully defending a criminal or civil suit or application for relief s 172B
 If in any proceedings for negligence, default, breach of duty or breach of trust against a person where he is liable but that he has acted honestly
and reasonably and that, having regard to all the circumstances of the case including those connected with his appointment, he ought fairly to be

13
excused for the negligence, default or breach the court may relieve him either wholly or partly from his liability on such terms as the court thinks
fit s 391

14
 6: SH Remedies I: Enforcement of Corporate Rights
Derivative action (common law)
 Derivative actions are claims brought by SHs on behalf of Co against the directors
 Foss v Harbottle (1843) 2 Hare 461
o Limits the ability to bring derivative action against the Co
 The Co is the proper plaintiff to bring an action in respect of a corporate wrong (wrong done to the Co).
 An individual SH cannot sue if the wrong is one which could be adopted by a simple majority of the SHs.
o This avoids multiplicity of suits if all SHs sue individually
o A director who has committed a wrong against the Co may seek its forgiveness by making full and frank disclosure of all material facts.
If the SHs decide (by an ordinary resolution) to forgive the wrong, the director’s misconduct would have been ratified.
 When the rule in Foss v Harbottle Does Not Apply, thus SH can bring about derivative action
o where a personal right of the SH is infringed (not a wrong done to the Co)
 Personal actions (common law) where SH’s own rights infringed
 If a wrong done to Co coexists with a wrong done to the SH, it gives them a personal right against the wrongdoer
 Johnson v Gore-Wood [2002]
 SH cannot claim loss suffered in the reduction of share value if loss reflects loss suffered by Co
o ultra vires / illegal transactions (majority cannot ratify an act that Co has no power to enter into)
o a required special procedure is not followed
o Fraud on the minority
 SH may bring derivative action in his own name against the wrongdoers, preliminary hearing required to obtain permission
from the court. Only upon approval will the trial of the main issue follow.
 Applies when a Co suffers a wrong/injury and the wrongdoers are in control such that Co is prevented from seeking redress
 Burland v Earle [1902]
 The term “fraud” covers where the majority are endeavouring directly or indirectly to appropriate to themselves
money, property or advantages which belong to the Co
 The Ratifiability test
 It is difficult to determine the difference of what acts are ratifiable and what is not
 If a wrong is ratified or ratifiable (may be forgiven by ordinary resolution), it is a complete bar to a derivative action
 Wrongdoer may vote as SH to ratify wrong
 A wrong is not ratifiable where wrongdoer is misappropriating Co property to himself: Cook v Deeks [1916]
 Mere negligence is not “fraud” and is ratifiable by the Co: Pavlides v Jensen [1956]
 Any wrong committed by a director, followed by an attempt to stifle the Co’s ability to obtain redress may amount
to fraud: Sinwa SS (HK) Co Ltd v Morten Innhaug [2010] 4 SLR 1
 An approach is to determine if: 1) majority obtained some benefit, 2) at the expense of the Co, and 3) that the
majority used their controlling power to prevent an action
 Wrongdoer Control
 Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) (1980)
o Control includes an overall absolute majority of votes made up of those likely to be cast by the delinquent
himself plus those voting with him as a result of influence or apathy
o Generally more than 50% of voting rights considered control
 Other Possible Limitations
o Smith v Croft (No. 2) (1988)
 It was held that even if the elements of fraud and wrongdoer control have been made out, the minority SH may not have the
right to bring a derivative action if a majority of the independent SHs did not want the action to proceed.
o A SH’s right to bring a derivative action for fraud on the minority depends on the court’s discretion. The court may not give permission if
it takes the view that, it is not in the interests of justice to do so. Such as when the claimant does not himself come with “clean hands”
 Problems with the Common-Law Derivative Action
o Uncertainty as regards the concept of “fraud”
o SHs’ lack of information
o Commitment of resources by SHs for benefit which goes to Co
o Uncertainty as regards the strength of case which must be established before derivative action permitted
Derivative Action (Statutory Law)
 s 216A: Derivative or representative actions
o Complainants may be 1) any SH of Co; 2) the Minister, if Co under investigations; and 3) in the discretion of the Court, is a proper person
to make an application under this section s 216A (1)
o Complainant may apply to Court for leave to bring an action/arbitration or intervene in an action on behalf of the Co s 216A (2)
o No action/arbitration or intervention of such may be made unless the Court is satisfied that: s 216A (3)
 Complainant has given 14 days’ notice to the directors of the Co of his intention to apply to Court
 The complainant is acting in good faith
 It is prima facie in the interests of the Co that the action or arbitration be brought/prosecuted/defended/discontinued
 Strength of case against defendant, cost/benefit and alternative remedies
o Complainant can establish to the satisfaction of the Court that it is not expedient to give notice as required s 216A (4)
o The Court may make such orders as it thinks fit in the interests of justice including but not limited to: s 216A (5)
 An order authorizing the complainant or any other person to control the conduct of the action or arbitration
 An order giving directions for the conduct of the action or arbitration by the authorized person
 An order require the Co to pay reasonable legal fees/disbursements incurred by complainant related to action/arbitration
 s 216B: if the SH’s evidence is not decisive, court may discontinue action under s 216A
o Evidence of approval by the SHs of Co for alleged breach of right or duty owed to Co shall not cause the action under s 216A to be
dismissed, and this evidence may be considered by the Court s 216B (1)
o No action under s 216A can be dismissed/stayed/discontinued/settled without the Courts’ approval as it thinks fit and if approved, the
Court may order any party to the application/action to give notice to the complainant if it substantially affects them s 216B (2)

15
 o The Court may order the Co to pay the complainant interim costs, including legal fees and disbursements, but the complainant may be
accountable for such costs upon final disposition of the action/application s 216B (3)

7: SH Remedies II: Oppression & Just and Equitable Winding Up

Oppression
 Oppression of Minority s 216
o Any SH or holder of a debenture of a Co or, in the case of a declared Co under Part IX, the Minister may apply to the Court for an order
under this section on the ground that: s 216 (1)
 that the conduct of the Co or the powers of the directors are being exercised in a manner oppressive to one or more of the
SHs or in disregard of the interests of the SHs s 216 (1)(a)
 that some act of the Co or resolution of the SHs has been passed or is proposed which unfairly discriminates against or is
otherwise prejudicial to one or more of the SHs or holders of debentures s 216 (1)(b)
 4 alternative grounds – oppressive conduct, disregard of SH’s interests, unfair discrimination & prejudicial conduct
o Re Kong Thai Sawmill [1978]
 Oppression is not a mere disagreement between majority and minority on policy/management decisions
 There must be a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a SH is
entitled to expect. The focus here is on “commercial unfairness”
 Legal rights and legitimate expectations
o Unfairness may arise where minority’s legal rights or legitimate expectations not fulfilled
o Legitimate expectations
 Legitimate expectations covers the understanding between SH as appearing in the constitution, or anything more which may
not have been captured in the constitution
o O’Niell v Phillips [1999]
 The court emphasized a contractual approach where legitimately expectations must be grounded in a mutual understanding
between SH as to how the Co would be run. It is not necessary for this understanding to be set out in a formal contract
 A SH has no right to exit at will from a Co having the character of a quasi-partnership, unless there is specific provision
allowing him to exit
o Thio Keng Poon v Thio Syn Pyn [2010] SGCA 16
 Must have proof of the alleged understanding, and that it must not contradict any express agreement between the parties
 Legitimate expectations from Quasi partnerships
o Ebrahimi v Westbourne Galleries [1973]
 Quasi-partnerships are built on the basis of mutual trust/confidence and there is an agreement that all the SH who so wish will
participate in the conduct of the Co
o Lim Swee Khiang v Borden Co (Pte) Ltd [2006]
 In a Quasi-partnership, the court will insist upon a high standard of corporate governance that must be observed by the
majority SH in relation to minority SH. (if there is a QPC, there is a higher basis for legitimate expectation)
 List of potential oppression cases
o Scottish Co-operative Wholesale Society ltd v Meyer [1959] AC 324
 Majority advancing own interests, rather than protecting the interests of the Co
o Re Harmer [1958]
 Disregarding minority’s rights & interests
 Majority got into a contract with a supplier that was owned by the majority SH
o Re Bright Pine Mills Pty Ltd [1969]
 Diverting Co property to self
o Tullio v Maoro [1994]
 Exclusion from management
o Dafen Tinplate v Llanelly Steel [1907]
 Expropriation of SH’s property: Altered the articles to force purchase shares from any SH
 If directors did this, would be a breach of duty, but if SHs, it is oppression (however serious negligent management can be
construed as oppression
 Other Relevant Principles
o Domination & control
 Tong Keng Meng v Inno-Pac Holdings Ltd [2001] 3 SLR(R) 311
 A majority SH may bring a s216 application should they find themselves in a vulnerable position, for example if they
had surrendered some aspect of their rights of control by agreement with the other SHs or had given specific veto
powers to the minority
 Minority who garner sufficient support from other SHs to block a resolution may be in a position of domination and
control
 Ng Kek Wee v Sim City Technology Ltd [2014] 4 SLR 723
 A plaintiff who was entitled to take control of the Co was not eligible for relief under s 216.
 The issue is not whether the claimant is a minority SH, but whether he lacks the power to stop the allegedly
oppressive acts
o Oppression must arise from the conduct of the Co’s affairs
 However, commercially unfair conduct in the management of a subsidiary is relevant to the extent that such conduct affected
or impacted the holding Co: Ng Kek Wee v Sim City Technology Ltd
o Petitioner must have been prejudiced qua SH
 However, in the s 216 context, the SH’s rights are not restricted to his strict constitutional and statutory rights, but will extend
to his “legitimate expectations” as a SH.
o Continuing state of affairs vs. single act?
 Over & Over v Bonvests Holdings Ltd [2010]
 A single act could amount to oppression, it does not have to be a continuous state of affairs

16
  The appellant was forced to a rights issue (single act) by the majority where value of the Co was plummeted to pay
off a debt to the bank
 Court Orders – s 216(2)
o If on such application the Court is of the opinion that either of such grounds is established the Court may make such order as it thinks fit
and, without prejudice to the generality of the foregoing, the order may: s 216 (2)
 direct or prohibit any act or cancel or vary any transaction or resolution; s 216 (2)(a) (injunction/directive relief)
 regulate the conduct of the affairs of the Co in future; s 216 (2)(b) (regulation of corporate affairs)
 authorize civil proceedings to be brought in the name of or on behalf of the Co by such person or persons and on such terms
as the Court may direct; s 216 (2)(c) (commence proceedings)
 provide for the purchase of the shares or debentures of the Co by other SHs or holders of debentures of the Co or by the Co
itself; s 216 (2)(d) (buy-out)
 provide that the Co be wound up. s 216 (2)(f) (winding up)
o Teo Chong Nghee Patrick v Han Cheng Fong [2014] 3 SLR 595
 Award of damages is purely a remedy for tort, breach of statutory duty or breach of contract, not for oppression
 s 216 Oppression Remedy & Derivative Actions under s 216A
o Derivative actions are brought when the directors have a breach of director’s duties. The remedy is for the Co
o Oppression is brought when SH’s rights are affected. The remedy is for personal benefit
o Ho Yew Kong v Sakae Holdings Ltd [2018] 2 SLR 333
 Corporate wrongs, which are wrongs committed against the Co rather than its SHs is remedied by derivative action. Personal
wrongs, which are wrongs committed against the SHs are remedied by oppression remedies
 Issue that there are overlaps between the 2 wrongs and difficult to make the distinction in practice
o Kumagai Gumi Co Ltd v Zenecon Pte Ltd (1995)
 A petition under s216 is not defeated just because the appropriate remedy is to order the defendants to make restitution to
the Co, instead of the SH
Winding-Up on the Just and Equitable Ground (“J&E WU”)
 The law on winding-up of companies is due to move from the Companies Act into the new Insolvency, Restructuring and Dissolution Act 2018
(“IRDA”) during the course of 2020. However, there is no change to the substance of the rules on J&E WU.
 Circumstances where the Co may be wound up by court S125 IRDA
o The Court may order the winding up of a Co if it is of the opinion that it is just and equitable for the Co to be wound up S125(1)(i)
o Instead to make an order for winding up in S125(1)(i), Court may make an order for the interest in shares of one or more SHs to be
purchased by the Co or one or more other SHs, if it is of the opinion that it is just and equitable to do so s125(3) (Buyout)
 Sim Yong Kim v Evenstar [2006] 3 SLR 827
o The Quasi-partnership was based on the understanding that association would continue only as long as appellant remained a willing
party. As the Co was used to expand its association with other companies, this was no longer true, thus it was held to be wound-up
o The Co’s solvency does not matter here, the decision is one based on fairness
o The Court gave the order for the dispute to be resolved within a month through a buyout as the Co was still a viable business. However,
if it were not resolved, Co would be wound up.
 Ting Shwu Ping v Autopack Pte Ltd [2016]
o Appellant tried to exit Co with buyout request, but was unhappy with the price offered. Went to Court to request for J&E WU or buyout
o Court held that there is no right in SG to exit at will: provision is not here to allow abusive process (of asking for higher price in shares)
o If there is an option for the disaffected SH to exit on fair terms (e.g. pre-emption clause or other exit mechanisms), it would be unlikely
that J&E WU would be granted
o The existence of a share buy-out procedure in a Co’s constitution does not automatically bar the court from granting a J&E WU.
 However, it does have a significant impact on the court’s analysis of whether “sufficient cause” has been demonstrated to
justify a winding up, and on whether the application was brought with a collateral purpose so as to amount to an abuse of
process.
 Instances where petition for J&E WU has succeeded
o Loss of substratum (Co no longer able to carry out the main object which it was formed to achieve)
 Ma Wai Fong Kathryn v Trillion Investment Pte Ltd [2019]
 It is unfair to lock any SH into a Co which is no longer carrying out the business it was incorporated to do through no
fault of the parties. Any SH (not just founding) can petition for a J&E WU
 A loss of substratum may be argued in cases where a Co is effectively dormant at the time of the application and its
finances are poor such that the Co is no longer viable, as there is no reasonable prospect that the Co will achieve its
substratum
o The Court may order the winding up of a Co if s125(1)
 The directors have acted in the affairs of the Co in their own interests rather than the interests of the SHs as a whole or in any
other manner which appears to be unfair or unjust to other SHs s125(1)(a)
 The Co is being used for an unlawful purpose or for purposes prejudicial to public peace, welfare or good order in Sg s125(1)
(n)
o Loss of trust and confidence/breach of promise Sim Yong Kim v Evenstar [2006] 3 SLR 827
o Exclusion from management in breach of an understanding
o Deadlock in management (through no fault of any party, just unable to come to a decision)
 Perennial (Capitol) Pte Ltd v Capitol Investment Holdings Pte Ltd [2018]
 In the event of a deadlock, Court will assess the unfairness of SH’s inability to exit from the Co, rather than the
deadlock itself. There was an exit mechanism here, so no J&E WU available
o Oppression or unfair prejudice
 Conduct that would justify a remedy under s 216
 However, where a buy-out remedy under s216 is available, a J&E WU petition brought with the intention to obtain a buy-out
remedy under s153(3), the Court may, depending on the facts, infer that the petition was motivated by a collateral purpose,
which is an abuse of the court’s process

17
 8: Corporate Contracting
Issues of corporate contracting
 Does the Co itself possess the legal capacity to enter into the particular transaction?
 Where the Co is acting through an agent, is the agent authorised to act?
Capacity of the Co
 Objects and Powers
o Before 2004, Objects will be stated in the Constitution where the Co could not do anything not permitted by the objects stated
o Capacity and powers of Co s23 (added in 2004)
 Subject to the provisions of this Act and any other written law and its constitution, a Co has: s23(1)
 full capacity to carry on or undertake any business or activity, do any act or enter into any transaction s23(1)(a)
 For the purposes of paragraph (a), full rights, powers and privileges
 Thus, it is no longer required for a Co to set out its objectives in the constitution
 The (mostly defunct) Ultra Vires (beyond capacity) Doctrine
o An ultra vires act means an act that is beyond the capacity of the Co. Such acts were void, and not capable of ratification, at common
law – now modified by s 25
 An act done by Co is not invalid by reason that the act was done beyond the capacity of the Co s 25(1)
 Protects counterparties as contract will still be held as a valid contract even without capacity to enter
 But, lack of capacity or power may be asserted or relied upon only in: s 25(2)
 Proceedings against Co by any SH to restrain the doing the ultra vires act s 25(2)(a)
 Proceedings against Co officers for breach of duty s 25(2)(b)
 Any unauthorized act restrained in proceedings under s 25(2)(a) is being or to be performed, pursuant to any contract where
the Co is a party, the Court may, if all contracting parties are involved in the proceedings, and if the Court considers it to be
just and equitable, set aside and restrain the performance of the contract, and may allow the parties compensation for the
loss or damage sustained by either party, but anticipated profits shall not be awarded. S 25(3)
Authority of the Co’s Agents
 A contract may be entered into on behalf of a Co by its board of directors or by any appointed agent, whose acts through the law of agency
count as acts of the Co. Thus the agent would be able to bind the Co to a contract without board approval.
 Types of authority
o Actual authority (grant of power to an agent by the principal)
 Express authority (power conferred orally or in writing)
 Implied authority
 Incidental to the express authority conferred
 Customary for the particular position to which the agent is appointed (usual authority)
o Managing director: do such things necessary for normal running of Co’s business
o Other executive directors: do such things necessary for discharge of his employment obligations
o Non-executive directors: no authority unless specifically authorised
o Co secretary: act in connection with Co’s administrative affairs
 SPP Ltd v Chew Beng Gim [1993] 3 SLR(R) 17
o Co allowed director to run the Co in the way he did and had acquiesced in this
o Implied authority can arise as a result of acquiescence (conduct recognizing the existence of a transaction
and intended to permit the transaction to be carried into effect)
o Apparent (or ostensible) authority
 This occurs when the Co led the counterparty to a contract to believe, through some representation (whether by words or
conduct) that the agent was duly authorised to act on the principal’s behalf in relation to the matter.
 In establishing apparent authority, a representation must be:
 to the effect that the agent is actually authorised to enter the contract in question;
 made by, or on behalf of, the principal/Co; and
 which the counterparty relied on when entering the contract.
 however, the principal/Co will not be bound if the counterparty had notice of the agent’s lack of actual authority. As such
notice undermines the counterparty’s ability to rely on the agent’s represented authority. Types of notice of lack of authority:
 actual notice
 constructive notice (constructive or deemed notice of the absence of authority)
o although a person does not actually know a fact, the law considers that he ought to know that fact and
therefore treats him as knowing it
 Historically, constructive notice arises where:
o the circumstances of the transaction raise a suspicion as to adequacy of the agent’s authority, and thus the
counterparty reasonably ought to have made further enquiries about it but did not do so
o there was a constitutional restriction on the agent’s authority, the counterparty was deemed to know of
the restriction
 Effect on authority of constitutional restrictions
o An applicable constitutional restriction obviously limits an agent’s actual authority. It will limit his apparent authority if, and only if, the
counterparty has notice of the restriction. In this connection, 3 sub-issues need to be considered:
 does entry into the contract breach a relevant constitutional restriction?
 Substantive (“the board shall not approve a contract of such-and-such kind”)
 Procedural (the board meeting which purported to approve the contract was not correctly convened in accordance
with the constitution)
 does the counterparty know, or have constructive knowledge, of the restriction?
 Ernest v Nicholls (1856) (now overridden)
o All persons dealing with a Co were deemed to have knowledge of the contents of its constitution as it was
publicly available for inspection, to verify the Co’s ability to enter the contract

18
  Singapore abolished this type of constructive knowledge in s 25A, Accordingly, in general, a counterparty is now
affected by notice of a constitutional restriction only if he has actual knowledge of it
 Notwithstanding anything in the constitution of a Co, a person is not affected by or deemed to have notice of the
constitution or document of the Co merely because: s 25A
o The constitution or document is registered by the Registrar s 25A(a)
o The constitution or document is available for inspection at the registered office of the Co s 25A(b)
 even if so, is there any rule which “cures” the defect in apparent authority?
 Even where the counterparty does have notice of a restriction, he will often still be able to enforce the contract
against the Co via the application of s 25B. Prior to the introduction of that section, there was a similar common-law
rule known as the “indoor management rule”.
o In favour of a person dealing with a Co in good faith, the power of the directors to bind the Co, or
authorise others to do so, shall be deemed to be free of any limitation under the Co’s constitution s 25B(1)
o For the purposes of subsection (1), a person dealing with a Co: s 25(2)
 Is not bound to enquire any limitation on the powers of directors to bind the Co or authorise
others to do so s 25(2)(a); and
 Is presumed to have acted in good faith unless proven otherwise s 25(2)(b)
o The limitations on directors’ powers under the Co’s constitution include limitations deriving: s 25(3)
 From a resolution of the Co or of any class of SH s 25(3)(a); or
 From any agreement between the SH of the Co or of any class of SH s 25(3)(b)
o This section shall not affect any right of a SH of the Co to bring proceedings to restrain the doing of an
action that is beyond the powers of the directors, but no such proceedings shall lie in respect of an act to
be done in fulfilment of a legal obligation arising from a previous act of the Co s 25(4)
o This section shall not affect any liability incurred by the directors or any other person by reason of the
directors exceeding their powers s 25(5)
 As an exception to s 25B, s 25C restricts the ability of counterparties who are the Co’s “insiders” (viz. directors and
their “connected persons”) to benefit from s 25B.
o Where a Co transacts with (b)(i) a director or (b)(ii) a person connected with any such director, the
transaction is voidable at the instance of the Co s 25C(3)
o Whether or not it is avoided, the director who authorised the transaction is liable: s 25C(4)
 To account to the Co, any gain he made directly or indirectly through the transaction s 25C(4)(a)
 To indemnify the Co any loss or damage from the transaction s 25C(4)(b)
o The transaction ceases to be voidable if: s 25C(5)
 Restitution of money or asset which is the subject matter of the transaction is no longer possible
s 25C(5)(a)
 The Co is indemnified for loss or damage from transaction s 25C(5)(b)
 Rights acquired by a person who is not party to the transaction would be affected by the
avoidance s 25C(5)(c)
 The transaction is affirmed by the Co s 25C(5)(d)
 Indoor Management Rule
o Royal British Bank v Turquand (1856)
 A counterparty dealing with a Co may assume that matters of internal management and
procedure required by the constitution have been duly complied with, in the absence of his
knowing circumstances or facts which should put him on inquiry.
o However, a counterparty cannot benefit from the IM Rule where he knows, actually or constructively (by
being put on enquiry), that the constitutional restriction has not been complied with.
o In determining the authority of an agent
 Does A have actual authority to enter contract?
 If yes, contract is binding
 If no, does A have apparent authority?
o If no, contract is not binding on Co
o If yes, was counterparty put on enquiry as to A’s lack of authority?
 If yes, contract is not binding on Co
 If no, does counterparty know of any constitutional limitations on authority?
 If no, contract is binding on Co
 If yes, does s 25B or IM rule apply?
o If yes, contract is binding
o If no, contract is not binding
Ratification of agent’s acts
 The Co may choose to ratify any transaction even if it was entered into by an agent without actual authority to do so at the time
 Ratification may be express or implied from conduct
Formalities of execution of contracts
 Written contracts can be physically executed on behalf of a Co by 2 methods: (i) signature by an agent (who is authorised as discussed above), or
(ii) by sealing (not mandatory for most types of contract)
 Now, having a seal is now optional. A Co without a seal is now able to execute a deed by the signatures of 2 directors or 1 director and the
secretary s 41B.
Pre-incorporation Contracts
 Any contract entered onto by a Co prior to its incorporation by any person on behalf of a Co may be ratified by the Co after its formation s 41(1)
o However, if it doesn’t, signatory is personally liable s 41(2)

19
 9: Capital Maintenance and Reduction
Issues of capital maintenance
 There is a concern toward creditors and minority SH if SHs could freely recover investments from the Co
 However, SHs have a legitimate right to be allowed to reap the return on their investments from time to time.
Capital Maintenance Rule
 A Co is generally prohibited from returning capital and assets to SHs whilst the Co is a going concern except (i) in the form of dividends or (ii) in
accordance with procedures permitted under the Companies Act.
 Unless an exception applies, a Co may not: (i) cancel its shares (which could lead to the repayment of the assets corresponding to those shares), or
(ii) return (i.e. repay) to SHs any assets representing capital, even without a cancellation of shares.
Share Buy-Backs
 The general rule is that a Co is prohibited from purchasing its own shares (otherwise known as a share repurchase or buy-back).
 Except as otherwise expressly provided by this Act, a Co shall not: s 76(1A)
o (a) Whether directly or indirectly in anyway: (i) acquire shares in the Co; or (ii) purport to acquire shares in a holding Co or ultimate
holding Co of the Co
o (b) lend money on security of: (i) its own shares; or (ii) its holding Co’s shares
o s 76(1A)(a)(ii) has the same implication as s 21(1) which prevents a subsidiary from being a SH of its holding Co
 Effects of contravention:
o Co officer may be guilty of offence, s 76(5)
 may be liable to compensate Co or other persons who suffer loss, s 76(6)
o Transaction is void, s 76A(1)(a)
 Exceptions to the general prohibition – buy-backs under ss 76B – 76G
o Reasons for effecting share buy-backs:
 to facilitate fund-raising by small businesses
 to return excess liquidity to SHs
 enhance earnings per share
 provide ‘signals’ on market value
o Off-Market Equal Access: s 76C
 an offer to buy the same percentage of shares from all SHs of the same class on the same terms
o Selective Off-Market Acquisition: s 76D
 purchase from specified SHs pursuant to an agreement approved by the Co by way of special resolution
o Contingent Purchase Contract: s 76DA
 a contract under which a Co does not agree to purchase shares outright but only upon the occurrence of certain contingent
events
o Market Acquisition: s 76E
 where the Co repurchases its own shares from the market. This method is only appropriate for companies whose shares are
listed on the stock exchange.
 The Co will typically seek a mandate (approval) from its SHs to enable it to buy back in the market on an ongoing basis.
 Safeguards for creditors and SHs
o For creditors:
 A Co may only repurchase its own shares if the Co is solvent, s 76F(1)
 If a Co purchases its own shares at a time when it is not solvent, then the purchase of shares is not lawful s 76(F)(2)
 Every director or manager of a Co who approves or authorises, the purchase or acquisition of the Co’s own shares or the
release of obligations, knowing that the Co is not solvent shall, without prejudice to any other liability, be guilty of an offence
and shall be liable on conviction to a fine not exceeding $100,000 or to imprisonment for a term not exceeding 3 years s
76F(3)
o Against abuse or manipulation by Co
 Must be authorised by Articles
 SHs’ approval (type of resolution depends on buy-back method)
 Buy-back is subject to a maximum of 20% of issued share capital in any period between 2 consecutive AGMs (SGX limit: 10%)
 Disclosure
Treasury Shares
 A Co that purchases its own shares may decide either to cancel the shares that have been bought back, or to keep these shares as treasury shares.
 If a Co should decide to cancel the shares bought back, the Co will, by the total amount of share buyback: s 76G
o Reduce the amount of its share capital where the shares were purchased or acquired out of the capital of the Co s 76G(1)(a)
o Reduce the amount of its profits where the shares were purchased or acquired out of the profits of the Co; s 76G(1)(b) or
o Reduce the amount of share capital and profits proportionately if the shares were purchased or acquired through both s 76G(1)(c)
 The Co shall be the SH holding the treasury shares s 76H(2)
 Treasury shares shall not at any time exceed 10% of the total number of shares at the Co s 76I
 Treasury shares have no rights attached to it; thus Co may not exercise any voting rights and nor claim dividends s 76J(2) & (3)
 Where shares held by a private Co as treasury shares, the Co may at any time: (a)sell shares for cash; (b) transfer shares pursuant to share
schemes; (c) transfer shares as consideration for acquisition of shares or assets of another Co or person; (d) cancel shares; or (e) sell, transfer or
use the shares for purposes prescribed by the Minister s 76K
Redemption of Redeemable Preference Shares (“RPS”) s 70
 Co may issue preference shares, if authorised by the constitution, which may be redeemed in a manner provided by the constitution s 70(1)
 Shares shall not be redeemed unless they are fully paid up s 70(3)
 Shares shall not be redeemed out of capital unless: (a) all directors have made a solvency statement; and (b) the Co has lodged a copy of the
statement with the Registrar s 70(4)
Authorised Capital Reduction
 Two ways for authorised capital reduction
o The traditional method is where a limited Co reduces its share capital by a special resolution of SHs and with the approval of the High
Court (ss 78G – 78I). The court’s role is to ensure that creditors are not prejudiced by the capital reduction.

20
  Only possible if 1) not prohibited by constitution; 2) approved by special resolution; and 3) approved by court
 Court will only approve if the creditors consented to the reduction or has security on debt

o A new alternative procedure for such reductions has been available (s 78B for private companies, and s 78C for public companies) under
which a Co which meets a solvency test does not need court approval to reduce its capital.
 May only do so by way of special resolution (75%) and the Co meets solvency requirements
 A Co may reduce its share capital and do all or any of the following: s 78A(1)
o Extinguish or reduce liability on any of its shares in respect of share capital not paid up s 78A(1)(a)
o Cancel any paid up share capital which is lost or unrepresented by available assets s 78A(1)(b)
o Return to SHs any paid-up share capital which is more than it needs s 78A(1)(c)
 Transactions which are exempt from the rules applicable to reductions of capital:
o s 71(1)(e) (cancellation of shares not taken up, or forfeited)
o ss 76B to 76G (share buy-backs)
o s 76K(4) cancellation of Treasury shares
Financial Assistance for Acquisition of Own Shares – ss 76(1) & 76A
 Financial assistance potentially leads to Co’s assets replaced with things of less value, discrimination between SH or manipulation of share price
 A public Co or a Co whose holding Co or ultimate holding Co is a public Co shall not directly nor indirectly give financial assistance for: s 76(1)
o The acquisition by any person, whether before or at the same time as giving of financial assistance, of: (i) shares in the Co; or (ii) shares
in a holding Co or ultimate holding Co s 76(1)(a); or
o The proposed acquisition by any person of: (i) shares in the Co; or (ii) shares in a holding Co or ultimate holding Co s 76(1)(b)
 Financial assistance includes the provision of a loan, guarantee, security, release of an obligation or the release of a debt or otherwise s 76(2)
o Belmont Finance Corporation v Williams Furniture Ltd [1980]
 “or otherwise” includes Co buying acquirer’s assets for the purpose of giving the acquirer funds to purchase shares in Co
o Multi-Pak v Intraco [1995]
 Transaction for acquiring shares was not entered for substantial purpose of helping the acquirer to purchase shares, but for
bona-fide commercial reasons such as helping the acquired Co through financial difficulty
 But this view criticized in Wu Yang Construction [2007]: just because assistance is given bona fide, does not mean it falls
outside of the ban on financial assistance
o Chaston v SWP plc [2002]
 “or otherwise” includes Co’s payments of costs incurred in relation to acquisition of shares
o PP v Lew Syn Pau [2006]
 Important consideration is whether the Co’s assets are used or put at risk in connection with acquisition of its shares
 Financial may be direct or indirect: as long as a party indirectly benefits from the assistance, it is considered financial assistance
 Other requirements to fall within the financial assistance ban:
o The financial assistance must be a substantial purpose of the transaction, though it need not be the sole purpose s 76(3)
 Looks at immediate purpose of the transaction of assets
o A Co will be held to have given financial assistance if it was aware that it will assist the acquiring of shares of the Co s 76(4)
 Financial assistance is allowed if:
o It amounts to 10% or less of Co’s paid-up equity s 76(9A)
 Co received fair value in connection to assistance s 76(9A)(b)
 Board of directors pass a resolution to confirm that assistance is in the best interests of the Co and terms are fair s 76(9A)(c)
 All directors make a solvency statement s 76(9A)(e)
o Financial Assistance by SHs’ unanimous approval s 76(9B)
 Board of directors pass a resolution to confirm that assistance is in the best interests of the Co and terms are fair s 76(9B)(a)
 All directors make a solvency statement s 76(9B)(c)
 Approved by all SHs s 76(9B)(e)
o Financial Assistance not causing material prejudice: (i) the interest of the Co or its SH; or (ii) the Co’s ability to pay creditors s 76(9BA)(a)
 Board resolution passed to confirm, with full reasons, that the terms of the assistance are fair and reasonable s 76(9BA)(b)
o Financial Assistance by Special Resolution s 76(10)
 Co’s approval by special resolution
 The Co is a listed holding Co or ultimate holding Co’s approval by special resolution
 Disclosure of intention and reasons for giving financial assistance
 board statement as to effect on Co of giving the assistance
 SHs, debenture holders & creditors may object to the proposed transaction in court
 but special resolution and court approval do not relieve director from his duty under s 157 and other fiduciary duties in
connection with the giving of the financial assistance s 76(15).
o Any distributions done in a lawful manner s 76(8)
o Loans or other forms of money by banks and financial institutions s 76(9)(a)
o Employee share option scheme s 76(9)(b)
o Share buy-backs under ss 76B to 76G s 76(9)(c)
 Consequences of Contravention of Section 76
o Criminal liability for officers – but not Co s 76(5)
o Voidability of contract (and related contracts) s 76A(2) & (3)
o Liability to compensate persons who suffered loss s 76A(4) & (5)
o Possible common-law consequences: breach of director’s duties (by misapplication of Co assets)
Solvency Test
 A Co is solvent if (a) no ground where it is unable to pay its debts; (b) able to pay debts within 12 months; and (c) value of assets is more than
liabilities s 7A(1) (a & b are cash-flow tests, c is balance sheet test)
Dividends
 Distribution may only be made out of profits s 403(1)
o Availability of profits determined at the time of declaration
21
  dividends may be declared out of current revenue profits even if the Co’s accumulated losses exceed such revenue profits
o Mode of payment: in cash, in scrip (i.e. bonus issue) or in kind
 Final dividends create a debt upon declaration, interim dividends may be revoked at anytime
 Officers will be guilty of criminal offence, and are liable to creditors for the amount due s 403(2)
10: Debt Finance and Security
Debentures
 A debenture is a document creating or acknowledging a debt (includes most loans)
 A convertible loan is one where it may be converted into shares or equity. Non-convertible loans do not allow such arrangements
 Statutory Rights of Debenture Holders
o right to restrain an ultra vires act (where debenture is secured by floating charge) s 25(2)
o notice of general meeting for the change of objects s 33(3)
o right to seek remedies for oppression s 216(1)
Security for Loans
 Security can arise on a loan via: 1) agreement between parties; 2) operation of law; or 3) a third party guarantee
 Types of Security
o Proprietary security is that where collateral is provided as an interest in property, personal security is where the person is personally
liable for providing security
o Consensual security refers to security which is created through the parties’ consent or agreement. Non-consensual security, arises by
operation of law
o Legal security is developed by the common law (i.e. legal mortgage, pledge and common law lien), equitable security (i.e. equitable
mortgage, fixed or floating charge, equitable lien).

Co Charges
 A charge is an interest created in and over an asset(s) by its owner (chargor) to secure the performance of his obligation to another party (chargee)
 Fixed charges
o A charge created over a specific or identified asset(s) which restricts the owner of the property from dealing with it (selling or
transferring it) without the chargee’s consent.
o Some transactions have a sale and buy-back arrangement which is practically similar to fixed charge mechanisms, thus courts have to
determine if the transaction was a genuine sale and buy-back or disguised as a secured loan
 Seah Eng Lim v The P&O Banking Corp Ltd [1933] SSLR 236
 The price at which the asset (shares) were bought and sold bore no relation to the prevailing market price, thus it
was deemed to be a form of security for loan repayment rather than a sale and buy-back
 Floating charge
o An equitable charge which is not specific to any particular asset but “floats” over a group of assets until “crystallisation” occurs, when it
“settles” on the assets at that time and becomes a fixed equitable charge
o The chargor is allowed to deal with (e.g. buy/sell) the charged assets, even though they are collateral, in the ordinary course of business,
until a default event occurs
o The benefits is that inventory and receivables can be used as security and still be traded along in course of business
o Crystallisation events may be liquidation, appointment of receiver, another creditor enforces possession of assets, cessation of business
or any other event specified in debenture
 To distinguish between fixed and floating charges, the test is to see if the chargor has the liberty to deal with the asset before default
o National Westminster Bank plc v Spectrum Plus Limited [2005]
 In a floating charge, the asset is not appropriated as security for payment of debt until crystallisation. In the meantime, the
chargor is left free to use the charged asset and to remove it from security
 Creation of security interests
o Legal mortgage: by transfer/written assignment/charge by deed
o Equitable mortgage: by agreement in writing
o Floating charge: depends on the interpretation on agreement, but may include letters of hypothecation (charge of certain assets
without transferring the tile or possession of the assets to the chargee), book debts (receivables) or retention of title clause (seller
retains ownership of goods until payment of price)
o Pledge: creditor must get possession of an asset
o Negative pledge clause: prohibits the chargor from creating further security over the same assets, except with chargee’s consent
o Transaction which appear not be security are sometimes re-characterised as security by courts
 Registration of charges
o Filed with ACRA within 30 days, giving constructive notice to 3rd parties of existence of charge
o If not registered, charge is void against liquidator and any secured creditor s 131(1)
o But voidness of unregistered charge does not affect underlying obligation s 131(2)
o Registrar’s certificate is conclusive evidence that the requirements of registration have been complied with s 133(2)
o Wilson v Kelland [1910]
 Registration gives constructive notice to the world of the existence of the charge
 Priorities between creditors
o Priority issues generally arise where there are two or more charges over the same asset
o Where the collateral is insufficient to discharge debts owed to the chargees, and in the event of Co’s liquidation:
 Secured creditor before unsecured creditor
 Legal security ranks before equitable security (time does not matter), as long as holder of legal security was bona fide and
without notice
 Between equitable charges, first in time prevails
 Fixed charges before floating charge even if floating charge was created first except:
 Floating charge has negative pledge clause and fixed chargee was aware of it
 Unregistered charge loses priority

22
23
 11: Corporate Insolvency
Receivership
 Receivership arises when a secured creditor exercises the right under its debenture to enforce its security interest upon default by the Co
 The receiver is a person who will take possession of the collateral and apply the income or sale proceeds to pay off the debt owed to the creditor.
o Receivers can be appointed by the secured creditor or under general law by the High Court
o Role is not to liquidate the Co or attempt to revive it: his main function is to recover his appointor’s debt from the secured assets
o Unless appointed as both receiver and manager under a floating charge, he has no power to manage the Co
 Receiver’s duties and liabilities (is an agent of the Co, not the secured creditor)
o Duty is to not place himself in a position of conflict, and owes a duty of care and diligence; primary duty is to debenture-holder
o Agency effects on Principal (Co)
 Principal is liable for debts that Receiver incurs or his negligence
 Receiver is entitled to be indemnified and remunerated by the Principal
o Liability for contracts
 Receiver is personally liable for debts incurred by him but is indemnified out of Co’s assets, only if debts are necessary for
carrying on Co’s business
Liquidation/Winding-up
 Is the process by which Co’s business is terminated and legal entity is dissolved
 Involves the collection and realisation of Co’s Assets, discharge of liabilities and distribution of any net surplus according to the constitution
o To be done in an orderly and fair manner, on a pari passu basis (all on equal footing)
 Types of winding-up
o compulsory liquidation (“CL” by the court)
 due to insolvency or J&E winding-up
 Test for insolvency
 A Co shall be deemed to be unable to pay its debts if: s 125(2) IRDA
o (a) A creditor is owed a sum exceeding $15,000 then due and has served on the Co a written demand for
the payment, and the Co has for 3 weeks thereafter neglected to pay the sum or secure it for the creditor
o (b) process issued on order of any court in favour of a creditor of the Co is returned unsatisfied
o (c) is proved to the satisfaction of the Court that the Co is unable to pay for its debts
 BNP Paribas v Jurong Shipyard Pte Ltd [2009]
o Court will reject petition if the Co genuinely disputes its liability on petitioner’s debt or has a higher
counterclaim against petitioner
 Date of commencement of winding up is on filing of petition to wind-up s 126 IRDA
 Stay of all legal proceedings against the Co ss 129, 133(1) IRDA *
 Dispositions (sales/gifts) of Co assets are void s 130(1) IRDA *
 Avoidance of uncompleted executions & attachments (process of enforcing court judgment) 133(2) IRDA *
 Co must cease carrying on its business except if in the liquidator’s opinion is beneficial for winding up s 144(1) IRDA
 Transfers of Co’s shares are void s 130(1) IRDA *
 Must notify that the Co is in liquidation s 194 IRDA
o * unless with court’s consent
o voluntary liquidation
 SH’s voluntary liquidation (“MVL”)
 a solvent Co, but was SH-driven to liquidate
 A Co may be wound up voluntarily by special resolution s 160(1)(b) IRDA
 Directors must declare that the Co is solvent, and any debt is payable within 12 months of winding up s 163 IRDA
 creditor’s voluntary liquidation (“CVL”),
 an insolvent Co, but was creditor-driven to liquidate
 This type of winding-up is initiated by Co’s management through a special resolution. It is resorted to when it is
unable or unwilling to give a declaration of solvency, giving creditors more control of liquidation process
 Date of commencement of winding up is on the date of winding up resolution s 161(6) IRDA
 Stay of all legal proceedings against the Co ss 170(2) IRDA *
 Avoidance of uncompleted executions & attachments (process of enforcing court judgment) 170(1) IRDA *
 Co must cease carrying on its business except if in the liquidator’s opinion is beneficial for winding up s 162(1) IRDA
 Transfers of Co’s shares are void s 162(3) IRDA *
 Must notify that the Co is in liquidation s 194 IRDA
o * unless with court’s consent
Liquidator
 Liquidator is a licensed insolvency practitioner: public/chartered accounted or solicitor, not an undischarged bankrupt, fit and proper person (no
fraud/dishonesty) and must give security for appointment s 47 -48 IRDA
 Appointment is either by Court or creditors, depending on type of winding-up
o After appointment, director’s powers cease
o Actions requiring approval of court or creditor’s committee include: carrying on business (to facilitate winding up), compromising with
creditors, paying off a class of creditors in full or bringing/defending lawsuits
o Unilateral powers: sell Co’s property, raising money on security of Co’s assets and appointing agents
Avoidance of Pre-Liquidation Transactions
 These rules allow certain pre-liquidation transactions which were entered into by an insolvent Co to later be challenged by the liquidator and
reversed by the court. Done if: the transaction improperly reduced the Co’s net assets, or it favoured one unsecured creditor over others
 Transactions at an undervalue s 224 IRDA
o Co entered into a transaction at an undervalue where it is a gift by the Co or no consideration given to the Co or consideration is
significantly inadequate s 224(3) IRDA
o Transaction must have occurred at “a relevant time” s 226 IRDA
 transaction occurred within a “look-back” period (3 years) before commencement of the liquidation, and
24
  Co must either be insolvent or became so as a result of transaction (presumed insolvent if transaction was with a connected
person of the Co)
o Court will not make an order if transaction was done in good faith for carrying on business or there were reasonable grounds that
transaction would benefit Co s 224(4)
 Unfair Preferences s 225 IRDA
o where a Co has given an unfair preference to some only of its creditors
o Transactions amounting to unfair preferences
 placing an existing creditor/guarantor in a more advantageous position should the Co be liquidated s 225(3) IRDA; and
 Co was influenced by the desire to so benefit the creditor/guarantor s 225(4) IRDA
 such “desire” is presumed where the creditor/guarantor is a “connected person” of the Co s 225(5) IRDA
 the onus is on the creditor/guarantor to disprove such desire
o Preference transaction must have occurred at the ‘relevant time’
 transaction occurred within a “look-back” period (1 year for others, 2 years for connected persons) before commencement of
the liquidation
 Invalidation of Floating Charge Given for Past Value s 229 IRDA
o general effect is to make void a floating charge which was created by the Co:
o within the relevant “look-back” period before the commencement of winding-up; (12 months, or 2 years for a connected person); and
o at a time when the Co was insolvent (unless the charge is given to a connected person); but
o except to the extent of the total value given (new advances) to the Co, at or after the creation of the charge.
 a person is connected with the Co if person is a director or his associate or associate of the Co s 217(2)(a) IRDA
Actions against Culpable Officers
 Wrongful trading s 239 IRDA
o Co when insolvent, incurred debts without reasonable prospect of meeting in full
o Court may order the officer who knew or ought to have known to be personally liable for all or any debts of Co
 Fraudulent trading s 238 IRDA
o Co carried on business with intent to defraud creditors, person knowingly a party to the fraud may be personally liable for Co debts
 Misfeasance (wrongful exercise of authority) summons against directors s 240 IRDA
o For pre-liquidation of director’s duties
 Order of disqualification as a director s 149 CA
o Where Co has gone into insolvent liquidation and person was director at time of or within 3 year period before, conduct makes him
unfit to be a director or initiated by Minister or Official Receiver
Quantification of Liabilities
 Proof of Debts: unsecured creditor must “prove” (claim) for his debt in the liquidation s 218
o Debts here has a broad meaning: it includes any form of payment such as claims for damages
o Claims for future and contingent debts will be given a present value (and estimated if necessary)
o Liquidator decides but if the claim is disputed, creditor may appeal to the court.
o Secured creditors need only proved for any unsecured portion of debt
o Where creditor and Co have mutual debts, these must be set off against each other, and only the net balance can be claimed
Priority of Payments s 203 IRDA
 Upon liquidation, the Co’s assets will be used to discharge its liabilities broadly in the following order:
o Secured Creditors (to the extent of their security)
 Exceptions: floating chargee loses priority to some preferential creditors if insufficient funds to pay latter s 203(6) IRDA
o Preferential Creditors
o Unsecured Creditors (on pari passu basis)
o Any residual assets, to SHs.
Dissolution
 Once the liquidation is complete, the Co is dissolved, and the Co ceases to exist as a legal person s 149(1)
Debt Restructuring Generally
 Is an alternative to liquidation, and preferable as Co is not dissolved, and assets not sold at lower prices
 When a Co is in financial distress, they have a few restructuring options
o Informal restructuring
 Negotiate a contractual compromise or settlement with it creditors
 But must obtain the agreement of every creditor and dissenting creditors may be able to de-rail the process by pursuing
individual action against the Co
o Judicial Management
 Appointing a judicial manager to run the Co temporarily, by resolution of a creditor’s meeting or application to court s 90 IRDA
 Court will give order if it is satisfied that the Co is likely unable to pay for debts s 91(1) IRDA
 This establishes a moratorium (period of time where creditors not allowed to enforce rights against the Co) s 95 IRDA
 Upon establishment of judicial management, receivers vacate office and applications for winding-up dismissed s 96(1) IRDA
 Judicial manager will use the time to propose restructuring plans or effect a less rushed sale of assets before liquidation
o Scheme of Arrangement
 Proposal to adjust creditor’s rights to restructure their debts against near-insolvent Co s 210 CA
 The benefit is that it enables a Co to propose a compromise of debts that would bind all creditors without requiring the
approval of all the creditors, and moratorium on creditor action still present
 Other important advantages are that a scheme may be attempted (i) even before the Co becomes insolvent, and (ii) by the
existing management (unless the Co is already in JM), (iii) can be used to restructure equity of Co as well
 Basic procedure under s 210 CA:
 a moratorium can be sought from the High Court to provide the Co with a breathing space to organise a scheme;
 the Co holds a court-ordered meeting (or meetings) for creditors
 the scheme proposal needs to be approved:
 by a simple majority in number (of the creditors) representing 75% in value (of the total debt outstanding), and
25
 then by the High Court, essentially on the ground that it is fair and reasonable
 filing of court order with ACRA

26