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In almost all companies, there are multiple shareholders, and of those shareholders, there is likely a majority and a minority. In an ideal but unrealistic setting, all shareholders share the same vision and are in full agreement on all issues of the Company. Whatever the unanimous decision may be, the company would stand or fall as one.
In reality, there are invariably disagreements, differing points of view, or even diametrically opposed factions of shareholders. Where minority shareholders may find themselves outvoted constantly, this would be a natural consequence of holding less shares in the company if the shareholders’ meetings and resolutions voted on are carried out in accordance with the procedural requirements of the company and/or the votes are cast in good faith and in the best interests of the company.
However, there are certainly instances where minority shareholders are unfairly prejudiced by the controlling majority shareholders of the company and/or discriminated against in the process. This is known as Minority Oppression and in such cases, minority shareholders are granted protection against oppression under Section 216 of the Companies Act (Cap. 50) of Singapore.
Minority shareholders are shareholders who hold less than 50% of the voting shares in a company. They do not have control of the company, whether this is legal control (due to their weaker voting position) or direct or indirect control (where they are able to influence the majority shareholders despite their lesser shares). Put simply, despite their right to vote, minority shareholders hold little real power in the Company as they can easily be outvoted.
Under Section 216 of the Companies Act, minority oppression occurs when the majority conducts the affairs of the company in a way that is in unfair disregard to the interests of the minority, or unfairly discriminates against or prejudices the minority.
The underlying principle here is that of commercial unfairness as pronounced by the Singapore Court of Appeal in Over & Over Ltd v. Bonvests Holdings Ltd [2010] SGCA 7. However, one would also need to generally show that the alleged wrong was a personal wrong committed against the minority shareholder and not a corporate wrong done to the company. Examples of oppression would be where the majority pays dividends to themselves but not the minority or when the majority deliberately withholds information from the minority. Further examples of acts that constitute oppression are as follows:
It is important to note that shareholders consisting of 50% of the company’s share may also claim minority oppression so long as they prove that they did not have the power to stop the oppressive act or participate in major-decision making process of the company as laid down in Ascend Field Pte Ltd v. Tee Wee Sien [2020] SGCA 14.
The following remedies are provided to the victims of minority shareholders under Section 216 (2) of the act:
At the end of the day, the law under the Companies Act and the remedies available seeks to ensure that the affairs of a company is conducted in a fair and transparent manner without discriminating against or causing prejudice to the legal rights of the minority shareholders and by extension, the best interests of the company. If you are a minority shareholder and you find yourself being oppressed by the company’s majority shareholder, it is important to seek legal advice and act quickly as delay may be considered as acquiescence and / or may result in difficulty obtaining certain remedies such as injunctive relief.
If you require any assistance, you may contact:
© 2022 Titanium Law Chambers. All Rights Reserved.