Derivative actions in Singapore: mundanely non-Asian, intriguingly non-American and at the forefront of the commonwealth

• Main Authors: WEE, Meng Seng, PUCHNIAK, Dan W.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2012
• Subjects: Asian Studies; Business Organizations Law
• Online Access: https://ink.library.smu.edu.sg/sol_research/3952; https://search.library.smu.edu.sg/discovery/fulldisplay?docid=alma99577088502601&context=L&vid=65SMU_INST:SMU_NUI&lang=en&search_scope=Everything&adaptor=Local%20Search%20Engine&tab=Everything&query=any,contains,The%20Derivative%20Action%20in%20Asia:%20A%20Comparative%20and%20Functional%20Approach&offset=0
• Institution: Singapore Management University

For readers looking for Asian exceptionalism, this chapter will disappoint. The current rise of shareholder litigation in Singapore lends little support to the tired trope of the reluctant Asian litigant. Familial bonds and face-saving settlements appear to play no more of a role in Singapore than they do in the West in preventing shareholder litigation in closely held family companies or potentially embarrassing disputes. The monolithic view of Singapore as a paternalistic Asian nanny state that discourages the individual enforcement of shareholder rights also rings hollow in the face of the evolution of its derivative action and other shareholder remedies. Indeed, with a view to bolstering the private enforcement of directors’ duties and strengthening individual minority shareholder rights, Singapore’s parliament implemented a statutory derivative action, and its courts expanded the scope of its oppression remedy, long before most other Western common law countries. In short, although ‘Asian culture’ undoubtedly plays some role in Singapore society, there is little evidence that it has had a meaningful impact on the evolution or use of its derivative action or other minority shareholder remedies. What the Singapore story lacks in Asian exceptionalism, it more than makes up for in its Commonwealth heritage and economic pragmatism. The evolution of the derivative action in Singapore has closely tracked developments in other leading Western common law countries. From the time of Singapore’s independence, court acceptance of the infamously nebulous English rule in Foss v. Harbottle substantially limited the ability of minority shareholders to make use of the common-law-based derivative action. Following the trend in leading Western common law countries, Singapore’s courts allowed for the expansion of the oppression remedy to deter corporate controllers from abusing their power and to provide a remedy for minority shareholders who suffered such abuse – an economically pragmatic solution in light of the legal lacuna created by the rule in Foss. In a similar vein, the decision of Singapore’s parliament in 1993 to model the statutory derivative action on the equivalent provision in the Canadian Business Corporations Act exemplifies the continuing and definitive role of Singapore’s Commonwealth heritage on the development of its shareholder remedies. It also exemplifies Singapore’s economically pragmatic approach of trying to stay on the cutting edge of shareholder rights in the common law world, as it implemented the statutory derivative action long before most other Western common law countries.