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Table of Contents
1. Writing an Essay: Lifting the Corporate Veil .............................................................................................................................................4
2. Issue: Consequences of Incorporation/Separate Legal Entity ..................................................................................................................4
Can a company enter into a contract with a member? ................................................................................................................................4
Can a member sell or insure the property that belongs to the company? ...................................................................................................5
If a company suffers a wrong, who is entitled to bring a law suit in respect of that wrong? .......................................................................5
Does the company come to an end when its members die? .......................................................................................................................5
3. Issue: Should the Corporate Veil be lifted? ..............................................................................................................................................6
Fraud ............................................................................................................................................................................................................6
Evasion of Legal Obligation ..........................................................................................................................................................................6
Sham or Façade ............................................................................................................................................................................................7
Alter Ego .......................................................................................................................................................................................................7
Sham & Façade vs. Alter Ego ........................................................................................................................................................................8
Agency ..........................................................................................................................................................................................................8
Groups ..........................................................................................................................................................................................................9
4. Writing an Essay: The Possibility of Changing the Memorandum ..........................................................................................................10
5. Writing an Essay: Possibility of Changing the Articles ............................................................................................................................10
6. Writing an Essay: (Bona Fide Test) Amendment of Articles made by Minority Members .....................................................................11
7. Issue: Can a Minority Member alter the Articles of Association? ..........................................................................................................12
Main idea: When altering the articles, a member must vote bona fide for the company as a whole. ......................................................12
Issue: Can an article be amended to enhance the control of a company? .................................................................................................12
Subjective Test .......................................................................................................................................................................................12
Objective Test ........................................................................................................................................................................................12
8. Writing an Essay: Qua Member Rule ......................................................................................................................................................13
9. Issue: (Qua Member Rule) Can a member enforce a provision not relevant to his membership of the company? ..............................13
Main Idea: A member can only enforce a right if it is within the ordinary rights of his membership. .......................................................13
10. Issue: What are the consequences of not observing the memorandum & articles of association ..................................................13
11. Issue: Is the director allowed to issue shares? .................................................................................................................................14
12. Issue: Is there a variation/cancellation of class rights? ....................................................................................................................14
Dilution of rights due to division of share capital does not amount to a variation of rights. .....................................................................14
13. Issue: How to vary class rights?........................................................................................................................................................15
14. Overview: Modification of Rights Clause .........................................................................................................................................15
15. Issue: Is the modification/variation of class rights clause an entrenching provision? .....................................................................16
Table A Article 4 .........................................................................................................................................................................................16
16. Issue: If the modification clause require a class meeting to approve the proposed modification, how is the shareholder’s rights to
vote being limited? .........................................................................................................................................................................................16
17. Writing an Essay: Determine if a relief can be provided due to a variation/cancellation of class rights .........................................17
18. Issue: What is the protection given to shareholders when a class right is altered? ........................................................................18
19. Issue: Identifying different types of shares. .....................................................................................................................................19
Ordinary Shares ..........................................................................................................................................................................................19
Preference shares .......................................................................................................................................................................................19
Treasury Shares ..........................................................................................................................................................................................19
20. Issue: How to determine if X has a deemed interest in Y arising from control? ..............................................................................20
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21. Issue: How to determine if X has an interest in Y arising from 20% interest? .................................................................................20
22. Issue: Identifying different types of directors. .................................................................................................................................21
Executive Director ......................................................................................................................................................................................21
Non-executive Director ..............................................................................................................................................................................21
Alternate Director ......................................................................................................................................................................................21
Informal/De facto Director .........................................................................................................................................................................21
Shadow Director .........................................................................................................................................................................................21
23. De facto Director vs. Shadow Director .............................................................................................................................................21
25. Writing an Essay: Must a Shadow Director Comply with every Rule in Company Law? ..................................................................22
26. Issue: Identifying if X is a director, officer or a secretary. ................................................................................................................22
Director ......................................................................................................................................................................................................22
Secretary ....................................................................................................................................................................................................22
Officer.........................................................................................................................................................................................................22
Receiver and Manager................................................................................................................................................................................22
Liquidator ...................................................................................................................................................................................................22
27. Proving for Independent Directors. .................................................................................................................................................23
How are independent director different from non-executive? ..................................................................................................................23
Who will and how to determine the independence of a director? ............................................................................................................23
28. Issue: When will a director be disqualified? ....................................................................................................................................24
Automatic Disqualification .........................................................................................................................................................................24
Disqualification by Court Order ..................................................................................................................................................................24
29. Issue: Effects of disqualification. ......................................................................................................................................................24
30. Writing an Essay: Determine if loans can be given to directors. ......................................................................................................25
31. Writing an Essay: Determine if loans can be given to persons connected with the directors. ........................................................26
32. Writing an Essay: Determine the disclosure of interest. ..................................................................................................................26
33. Writing an Essay: Determine the compensation for loss of office. ..................................................................................................27
34. Issue: What are the procedural requirements for the appointment of directors? ..........................................................................28
Private Limited Company ...........................................................................................................................................................................28
Public Company ..........................................................................................................................................................................................28
35. Writing an Essay: What is the remuneration that should be provided to directors? .......................................................................28
36. Writing an Essay: Determine validity of proxy’s vote.......................................................................................................................29
37. Issue: What is the voting power that a proxy has? ..........................................................................................................................29
If a member turns up at a meeting himself and votes, the company must accepts his vote and reject that of the proxy’s ......................29
The proxy may vote on a subsequent resolution if his principal does not. (The attendance of the shareholder is not an automatic
revocation of the proxy’s authority.)..........................................................................................................................................................29
The proxy’s is valid if the member does not specify his instructions in the proxy form, even though the proxy’s vote is contrary to his
intentions. ..................................................................................................................................................................................................30
38. Issue: Informal Assent (approval) of Members. ...............................................................................................................................30
39. Types of Meetings ............................................................................................................................................................................30
Annual General Meeting (AGM) .................................................................................................................................................................30
Extraordinary General Meeting (EGM) .......................................................................................................................................................30
Statutory Meetings .....................................................................................................................................................................................31
Class Meetings ............................................................................................................................................................................................31
40. Issue: Meetings of Directors. ...........................................................................................................................................................31
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Regulation of meetings are usually provided for in the articles of association ..........................................................................................31
41. Writing an Essay: Does a procedural irregularities invalidate a meeting? // Was the election/meeting illegal? ............................32
42. Issue: Granting relief under s 216 ....................................................................................................................................................33
The Court will not grant relief just because a member is unhappy at being outvoted by the majority. So long as the decisions were made
honestly and in good faith, the fact that the decisions turn out to be wrong does not entitle a member to apply for relief under s 216. ...33
Majority advancing own interest ...............................................................................................................................................................33
Diversion of company’s business opportunities .........................................................................................................................................33
Disregard of minority’s rights & interests ..................................................................................................................................................33
Improperly excluding a member from management of the company .......................................................................................................33
Expropriation of member’s property..........................................................................................................................................................33
Unfairly refusing to pay dividends ..............................................................................................................................................................33
Denying the minority information ..............................................................................................................................................................33
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1. Writing an Essay: Lifting the Corporate Veil

Separate Legal Entity // Corporate Veil

- The law treats a company as being a separate person from its members and those who manage its operations.
- The company can incur and receive obligations and hold property in its own name. The rights it holds and obligations it incurs
are the company’s own and not those of its manager, the people who have invested in it, or its employees.

Lifting the Corporate Veil

- A legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders.

1. State the issue:

The issue here is whether the corporate veil should be lifted.

Note: The issue here should not be phrased with absolute words – you do not make judgement before a discussion.

2. State the legal principle

(A legal principle is a framework, set of rules, procedural steps, or test, often established through precedent in the common law,
through which judgments can be determined in a given legal case.):
The legal principle states that a legal corporation is a separate entity from its owners.

Note: For this chapter, we do not state the statute (An Act to define certain terms and expressions used in written law and to make
provision for the construction, interpretation and publication of written law and for matters connected therewith).

3. Explain and reason out your judgement:

A. Focus on the relevant categories (if there are more than one)
- Omit the irrelevant categories by stating the following:
E.g. Fraud is irrelevant in the context of the case…
OR
B. Show the relevant arguments (insert relevant summary of the case)
- What is the strongest argument?
- State Argument 1
- State Argument 2

Note: If you can prove the argument of a Single Economic Entity, it would be easier to prove for either Alter Ego or Sham or Façade.

4. Conclude your argument:

Yes (No), the corporate veil should (not) be lifted, the (insert the name of the principal/agent/company) is (not) liable.

2. Issue: Consequences of Incorporation/Separate Legal Entity

Can a company enter into a contract with a member?

Lee v Lee Air Farming Ltd
- Lee formed the company, Lee’s Air Farming Ltd. He owned all the shared but 1.
- He was the company’s sole governing director. He was also employed by the company as its chief and only pilot.
- He was killed while flying for the company. His wife made a claim for workmen’s compensation under the NZ Workmen’s
compensation legislation.
- Her entitlement to such compensation depended on whether or not Lee was a worker i.e., a person who has entered into a
contract of service with an employer.
- The Court of Appeal of New Zealand refused to hold that Lee was a worker as they felt that a man could not in effect employ
himself. The Court of Appeal of New Zealand said that “There would exist no power of control and therefore the relationship of
master-servant was not created.”
- However, the Privy Council held that while Lee may have been the controller of the company, Lee and the company were distinct
persons in law, hence Mrs Lee was entitled to compensation.

How to prove?
1. State the issue.
2. State the legal principle.
A legal corporation is a separate entity from its owners. (insert relevant summary of the case)
3. Conclude.
While X is a comptroller and a workmen, these are two legally distinct entities, hence the company can contract with its controlling
participants.
A company can enter into a contract with its members.
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Can a member sell or insure the property that belongs to the company?
Macaura v Northern Assurance Co Ltd
- Macaura owned an estate in Ireland.
- Macaura sold all the timber on the estate to a company, Irish Canadian Sawmills Ltd ‘IRISH CANADIAN’.
- All the shares in Irish Canadian were owned by Macaura or by his nominees.
- Macaura was also a substantial creditor of Irish Canadian.
- Macaura insured the timber he sold to Irish Canadian in his own name.
- The timber were destroyed.
- The Court supported the insurance company when they refused to pay.
- It was held that when Macaura sold the timber to the company, he gave up his interest in it – he had no interest that he could
insure.
- Therefore, the insurance was void for want of an insurable interest, and the insurance company was not obliged to pay.

How to prove?
1. State the issue.
2. State the legal principle.
A legal corporation is a separate entity from its owners. (insert relevant summary of the case)
3. Conclude.
In this case, the property of a company is its own, not that of its members. Even if a person owns all the shares in the company
(plausible through nominee shareholdings), he does not own the company’s property, nor does he have any legal or equitable
interest therein.
A company cannot sell or insure a property owned by the company.

If a company suffers a wrong, who is entitled to bring a law suit in respect of that wrong?
Foss v Harbottle
- Two shareholders in the Victoria Park Company brought an action against the company’s directors and some other persons.
- They alleged that the property of the company had been misapplied or improperly used.
- The Court held that the injury complained of was an injury to the company.
- In law, the company and its members were not the same.
- Therefore, the members could not maintain such a suit – it was for the company to sue.

How to prove?
1. State the issue.
2. State the legal principle.
A legal corporation is a separate entity from its owners. (insert relevant summary of the case)
3. State the reason.
Since the company is separate from its members, the members are not liable to be sued in respect of a breach of the company’s
obligations – if a company breaches ids contracts or incurs legal liabilities, the company must be sued. The members may not be
sued in the alternative since they are not, in law, responsible for the company’s acts.
4. Conclude.
If a company commit a wrong act, the members are not entitled to be sued for liability.

Does the company come to an end when its members die?

Re Noel Tedman Holdings Pte Ltd
- The company had only two shareholders, a husband and wife.
- The shareholders were also the only directors of the company.
- Both died and only one infant child survived.
- Even though all the shareholders and directors were dead, the company still existed.
- There were no directors even though the articles required the approval of the directors before shares could be transferred under
the will of the deceased member.
- The appointment of the new directors has to be voted in by the members.
- The Court held that the personal representatives of the deceased members to appointed the directors so that these new directors
could assent to the transfer of the shares of the beneficiary.

How to prove?
1. State the issue.
2. State the legal principle.
A legal corporation is a separate entity from its owners. (insert relevant summary of the case)
3. Conclude.
The company does not come to an end when its members dies. A company is assumed to have perpetual succession. This means that
the company is a continuing entity in law with its own identity regardless of changes in its membership. It continues in existence,
unchanged, even if its original members die, sell their shares to others, or otherwise cease to participate as shareholders. The
company continues in existence until it is deregistered under the statutory procedure set out in the Companies Act
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3. Issue: Should the Corporate Veil be lifted?

Fraud
Re Darby [1911]
- Darby was an undischarged bankrupt with several convictions for fraud.
- He and another undischarged bankrupt incorporated a company in the Channel Islands called City of London Investment
Corporation Ltd (‘City’).
- This company promotes a company in England called Welsh Slate Quarries Ltd (‘Quarries’).
- City sold a quarrying license to Quarries at an inflated price.
- Quarries went into liquidation and the liquidator sought to make Darby liable to account for the profit as the promoter.
- Darby’s defence: In law, he and City were different persons.
- The Court refused to be blinded by the reality of the situation and held Darby liable.

How to prove? (It is not easy to prove for fraud.)

1. Was there an intention to mislead?
2. Carelessness is not included.
3. Show why they want to cheat.

Alternatively, to prove the fraud, it is essential to show:

1. Company was used to evade legal obligations.
2. Company was used to commit fraud.
3. Company was used to circumvent the law or to hide the true state of affairs from the court.
4. Company was only existent for formal purposes and does not reflect reality.

Evasion of Legal Obligation

(Make sure to tackle all 3 elements: Existing, Legal & Obligation.)
Jones v Lipman [1962]
- Lipman agreed to sell a house to Jones.
- Lipman changed his mind.
- To avoid having to transfer the house, Lipman set up a company called Alamed Ltd and transferred the house to it.
- Alamed Ltd was wholly owned and controlled by Lipman.
- Lipman’s lawyers then wrote to Jones’ lawyers offering to pay for damages for the breach of contract.
- Jones sought an order of specific performance. (A court order requiring a party in breach (or threatening to be breach) of a binding
contract to perform their obligations under the contract. It is a special remedy that is awarded by the court when no other remedy
(such as damages) will adequately compensate the other party.)
- The defence was raised that Alamed Ltd was not a party against whom specific performance could be ordered.
- Russell J declined to accept this. He stated that Alamed Ltd was a “creature of Lipman’s, a device and a sham, a mask which he
holds before his face in an attempt to avoid the eye of equity.”
Hoffman-La Roche & Co AG v Sieczko [1968]
- Hoffman were the registered holders of a patent for a drug – diazepam.
- They alleged that their patent had been infringed by InterContinental Pharmaceuticals (Bletchley) Ltd (ICP) where Siecezko was
the director and the moving spirit.
- An action was brought against them by the plaintiffs.
- They gave an undertaking not to supply any substances containing diazepam pending the hearing of the action.
- However, such substances were supplied to two medical practitioners.
- Hoffman sought to have ICP and Sieczko committed for contempt of court. (Contempt of court, often referred to simply as
"contempt", is the offense of being disobedient to or disrespectful toward a court of law and its officers in the form of behaviour
that opposes or defies the authority, justice, and dignity of the court.)
- The defence was that the drugs were not supplied by ICP, but by ICP (Eire) Ltd; an Irish company within the same group.
- It was held that ICP (Eire) was part of ICP as the entire group was run as one business from the London office of ICP.
- The Court felt that notwithstanding the notional separateness of ICP (Eire) Ltd and ICP, there had been a flagrant breach of the
undertaking by ICP and Sieczko.
Gilford Motor Co v Horne [1933]
- Horne was formerly the managing director of the plaintiff company.
- He promised not to solicit customers of the company after the termination of his employment.
- However, when he left the plaintiff’s employment, he set up JM Horne & Co Ltd, where he solicited the plaintiff’s customers.
- The court granted an injunction (an authoritative warning or order) against both Horne and his company, having held that he had
breached his covenant (agree by lease, deed, or other legal contract).
How to prove?
1. Show that the legal obligation is existing.
Here, we conclude that the legal obligation is existing as the parties involved are still bounded by a contractual obligation.
2. Explain what/how the part is evading from the legal obligation.
In this case, the party avoids his legal obligation by creating a legal vehicle to circumvent his obligations that he has to X (plaintiff).
3. Conclude.
Hence, we can conclude that the corporate veil should be lifted.
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Sham or Façade
Under general law, where the corporate form is being used as a device, façade or sham to avoid an existing legal duty or to perpetuate
a fraud; where the company is acting as the agent or partner of its controller; or where a particular law shows and intention that the
corporate veil should be disregarded in applying it. In this case, the courts may pierce the corporate veil and disregard the separate legal
personality of the company in limited circumstances. A person is not permitted to commit a wrong through a company that the person
controls then assert that it is the company, and not its controller, that is to bear responsibility for the wrong.
The Saudi Al Jubail Admiralty in Rem No 399 of 1984
- In this case, two companies Cargo Carries Ltd (‘CCC’) and Omega Ship Co Ltd (‘OSC’) were both controlled by one Orri. The plaintiff
arrested the ship ‘The Saudi Al Jubail’ in a sister action. The ship was owned by OSC but the plaintiff had entered into a charter
party with CCC.
- Orri used CCC as a smokescreen to Charter the Fidelity (faithfulness to a person, cause, or belief, demonstrated by continuing
loyalty and support).
- CCC Ltd did not actually exist.
- OSC Ltd was also used as a façade to purchase The Saudi Al Jubail.
- It seemed as if OSC Ltd had purchased The Saudi Al Jubail, however, the money for the purchase came from Orri.
- Clearly, Orri ran a group of companies as a front to run the respective activities he had in mind.
- He did not keep the companies separate from one another or from his own personal affairs.
- It was therefore concluded that Orri was the beneficial owner of Saudi, notwithstanding that it was nominally owned by OSC Ltd.
WinLine (UK) v Masterpart (Singapore) and Donald & McCarthy Ptd Ltd [1999]
- Masterpart and Donald & McCarthy Ptd Ltd (D&M) were at all material times run as a single corporate entity, and must therefore
be jointly liable for the breach of contract.
- Masterpart and D&M had different directors and shareholders.
- Masterpart had two sole directors and shareholders, both of whom were employees of D&M.
- Masterpart had a separate registered address from D&M, but did not have a separate office.
- Masterpart had no staff apart from its directors, and had no independent facsimile machine (fax machine) or telephone number.
- Masterpart used D&M's address and facsimile numbers for its correspondence.
- Masterpart maintained its own bank accounts, although there was never much money or activity in the accounts.

How to prove?
1. Show that the companies were a smokescreen by pointing out the companies used for tokenistic intentions.
2. Show how the tokenistic companies are related to the parent company.
3. Conclude.
We can conclude that the companies are related as X and Y shares the same board of directors / same profits / funded by the same
group of shareholders.

Held: A transaction would be considered a ‘sham’ if the acts done or documents executed by the parties were intended by them to give
an appearance of creating legal rights and obligations different from the actual rights and obligations intended. All parties must have a
common intention that the acts or documents are not intended to create the legal rights and obligations which they gave the appearance
of creating.

Alter Ego
When the court finds a corporation lacks a separate identity from an individual or corporate shareholder, resulting in injustice to the
corporation’s debtors. (Essentially, it means that the company’s controller is its alter ego or where the company is acting as the agent
or partner of the controller.)
Whether the corporate veil should be pierced because the controllers are a company’s alter ego depends on whether or not the
company is carrying on the business of its controllers. Strong evidence of this would be where the controllers do not make any distinction
between the company and themselves in relation to the business being carried on.
Adams c Cape Industries plc [1990]
- The case was about whether a claimant could enforce a US judgement against a US subsidiary against the parent company in the
UK (Cape).
- The underlying dispute was about mesothelioma/asbestos compensation (A type of legal action that allows
mesothelioma/asbestos patients and their families to obtain compensation for illnesses related to asbestos exposure. 3 types of
claims: personal injury claims, wrongful death claims and trust fund claims.)
- The case turns on the issue of lifting the corporate veil.
- The court was more reluctant to grant the lifting of corporate veil because DHN (refer to case under Group) was a case concerning
statutory interpretation and that Cape have enough control over its US subsidiary.
- It was held that “Our law, for better or worse, recognises the creation of subsidiary companies, which though in one sense the
creatures of their parent companies will nevertheless under the general law fall to be treated as separate entities with all the
rights and liabilities which would normally be attached to separate legal entities.”
Alwie Handoyo v Tjong Very Sumito and another and another appeal
- Defendant: Alwie Handoyo ; Plaintiffs: Tjong Very Sumito and another and another appeal
- The plaintiffs had contracted to sell a sum of shares to one of the defendants.
- As part of the transaction, a large portion of the purchase price was paid to two companies, Aventi and OAFL, in the form of cash
and shares.
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- However, the plaintiffs then claimed that Tjong, one of the plaintiffs, should have received the purchase sum instead, and brought
an action for unjust enrichment and conversion.
- The Court of Appeal held that the parties in reality intended for Aventi and OAFL to receive the payments as third parties
beneficiaries, thus disposing of the claim entirely.
- The Court further considered the parties’ submissions and found that an unjust enrichment claim could not stand where a plaintiff
and a third party entered into a contract to confer a benefit on the defendant.
- To permit a plaintiff’s unjust enrichment claim would undermine the contract and the contractual allocation of risk between the
plaintiff and the third party.
- The conversion claim also could not stand as the plaintiffs did not have a right to immediate possession of the shares which
formed part of the purchase price.
- Although the claim ultimately failed, the Court of Appeal accepted the plaintiff’s submission that Alwie was the alter ego of OAFL.
It held that the corporate veil was rightly lifted as Alwie controlled OAFL and made no distinction between himself and the
company.

How to prove?
1. State the Legal Principle.
A legal corporation is a separate entity from its owner.
2. Explain how the company is an extension of the controller.
a. Show that there was no proper separation of funds and accounts between the company and its controller.
b. Show that there is a high degree to which the controller controlled the business of the company.
In this case, it is evident that the company is an extension of the controller as there is an overlap in…
3. Conclude.
Hence, we conclude that the corporate veil should be lifted, and X is liable for y.

Note: The mere fact that one is a controlling shareholder without more is insufficient to support a finding that one is the alter ego of
the company.

Sham & Façade vs. Alter Ego

Sham & Façade
1. Prove that it is a smokescreen – point out that the company has no substance
2. Prove that the intention of setting up the subsidiary company is deviant
Alter Ego
1. Prove that the controller is using the company as an extension to do his business.

Note: Singapore Courts are more supportive of the view held in Adams v Case. This is emphasized in the case of The Andres Bonifacio
where it was held that it is acceptable for companies to set up subsidiaries so as to limit their liabilities, but evading existing legal
obligation would be prohibited.

Agency
Smith, Stone & Knight Ltd v Birmingham Corporation [1939]
- The agency relationship here is implicit rather than expressly created.
- Birmingham carried on business as waste paper merchants in premises belonging to Smith.
- Birmingham was a subsidiary of Smith which held 497 out of 502 shares.
- Birmingham Corporation acquired the premises.
- Under the relevant legislation, an owner-occupier was entitled to compensation, but a mere tenant was not entitled to
compensation.
- Smith put in a claim for compensation but Birmingham refused to grant it as Birmingham claimed that Smith was a separate entity
from them.
- There was no agreement of any kind made between the companies, nor was anything done to transfer beneficial ownership of
the business to the company.
- The waste company had no staff, the books were maintained by Smith and Birmingham never declared dividends – their profits
were treated as part of Smith’s profits.
- Atkinson held that it was well settled that the mere fact that a person owns all the shares in a particular company does not make
the business carried on by that company his business.
How to prove?
1. Show that the company running the business is so grossly capitalised that it could not run the business independently.
E.g., Show that a company has no office, staff or assets.
The court may draw an inference that it is acting as an agent or nominee for its controller when it enters into a contract.
OR
1. Show that there was an intention (explicit/implicit) between the company and its alleged agent.

Note: The intention of the company and its alleged agent is crucial since a relationship of agency can only arise out of the consent or
agreement of the principal and the agent – the absence of such consent or agreement is fatal to a claim based on agency.
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Groups
DHN Food Distributors Ltd c Tower Hamlets London Borough Council [1976]
- The case was about whether a company can claim compensation from the council for acquisition of land where DHN can run its
business with two other subsidiaries.
- The council refused to compensate because DHN was not the owner of the land (but owned by DHN’s subsidiary)
- The Court of Appeal held for DHN.

How to prove for Single Economic Entity?

1. Show that there was functional unity among the companies within the group through:
a. Unity of ownership
b. Unity of control
If it can be shown that the group is managed as a functional whole, the lifting of the veil may occur.

This can be done by assessing it with the following criteria:

1. Directors/Board of Management
2. Shareholders
3. Profits POV is broad – As long as I share the same profits. I am considered to be within the single economic entity.
4. Liability POV is not as broad – Just because I am liable, it does not mean that I fall within the same single economic entity.
5. What are the proprietary interests between the different groups?

After that, assess the following:

1. Was there an abuse of the corporate form?
2. Explain and Reason why this is an (not) abuse of the corporate form.
3. Link it back to the context of the industry which the company is in.
4. Conclude.
There is no abuse in the corporate form as the supply of defective products was not intentional / the series of events happens
within a reasonable scope in the context of an X industry. Therefore, the corporate veil should not be lifted.
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4. Writing an Essay: The Possibility of Changing the Memorandum

Q: Advice X if it is legal to change the memorandum.

1. State the Issue

The issue seeks to consider whether X has the rights to alter the memorandum.

Note: The issue here should not be phrased in absolute words – you do not make the judgement before a discussion.

2. Apply the relevant case law / statute

**The memorandum can only be altered when a special resolution is passed (75% votes).
A. Was the company formed before 1st April 2004 or after 1st April 2004?
i. Before 1st April 2004:
You can only change the following:
- The company’s name (s 28)
- To convert from an unlimited company to a limited company and vice versa (s 30)
- To change from a public company to a private company and vice versa (s 31)
- To alter the objects clauses (s 33)

ii. After 1st April 2004:

You can change the articles only if ALL the members agree.
The company was formed on (insert date), and 100% of the members agreed to change…

B. Apply s 26A of the Company Act: A company can amend any provision in its memorandum that is not affected by ‘an
entrenching provision’.
i. State S 26A:
The provision of the Act relating to the alteration of the memorandum of a company are subject to any entrenching
provision in the memorandum.

ii. Are there any ENTRENCHING provisions?

X is an entrenched provision as it falls within the definition of s 26A as it stipulates that other provisions…
- May not be altered; or
- May be altered only where more than the minimum percentage of votes necessary to pass a special resolution
(75%) or some other condition is met.

Note: An entrenching provision can only be removed or altered if all the members of the company agree. The members cannot pass a
special resolution (75%) to delete the entrenching provision, as the Act provides that an entrenching provision may be altered or
removed only with the unanimous consent of all the members.

3. Conclude.

5. Writing an Essay: Possibility of Changing the Articles

Q: Advice X if it is legal to change the articles.

1. State the issue.

The issue seeks to consider whether the member has the rights to alter the articles.

Note: The issue here should not be phrased in absolute words – you do not make the judgement before a discussion.

2. Apply the relevant case law / statute + Explanation & reasoning of your judgement.
To alter the articles: only through passing of a special resolution + bona fide + entrenching provision

- Are there any special resolutions?

75% votes are cast by members present (in person or by proxy) and voting

- Do you need to use the bona fide test?

The Bona Fide test (The duty to act without intention to deceive & in the interest of the company) is used only when the
minority member challenges the special resolution.

- Are there any Entrenching Provisions?

S 26: The entrenching provisions can only be altered or removed if all the members agree.

3. Conclude.
 11

6. Writing an Essay: (Bona Fide Test) Amendment of Articles made by Minority Members

1. State the issue.

The issue seeks to consider whether the amendment of articles is done in the interest of the company.

Note: The issue here should not be phrased in absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle from Allen v Gold Reefs of West Africa Ltd states that the amendment of articles should be done bona fide to
the company as a whole.

3. Apply the relevant case law and statute. Explain and reason out your judgement / Prove and show the intention here.
The subjective/objective bona fide test from (state relevant case law) will be used to determine the validity of the amendment.

Subjective: You don’t care about what others think, you only care about one party e.g., the majority shareholder.
Objective: You look at the entire group from the perspective of an outsider.
**As long as the majority believed that it is for the benefit of the company, use the subjective test.
The objective test is not preferred. We usually use the subjective test to prevent the court from intervening too much.

To prove and show the intention:

- In deciding whether the amendment are bona fide, assess the intention here
- State whether the intention is good/bad
- Explain how the intention is good/bad
o By evaluating with the following criteria:
 Context of the company / company’s industry
 The following action which have been done

How to prove?
A. Show that there is good faith.
We can conclude that x’s actions were genuine and were done in the interest of the company as … (explain) …
OR
B. Show that there is no bad faith, therefore there is good faith and the transaction is bona fide.
We can conclude that x’s actions were not deviant and malicious as it does not … (explain) …
Hence, we can conclude that the transaction was bona fide as there is no evidence of bad faith.

Determine if it is subjected to s 37(1). s 37(1) is subjected to s 26A:

- Was the memorandum inserted before 1st April 2004?
- If yes, only a unanimous resolution can alter a provision in the articles or the memorandum.
- Was the memorandum inserted after 1st April 2004?
- If yes, it is an entrenching provision.
- Only a unanimous resolution can later a provision in the articles or the memorandum.
- All members must comply with the conditions.
- s 26A(3): Members can only alter or remove the entrenched articles via a special resolution (at least 75% votes)
- Are there any entrenching provision in the articles?
- If there are, it is subjected to s 26A(4).
- s 26A(4): it can only be altered by a majority greater than 75% or where other specified conditions are met.

4. Conclude.
Since it is evident that the amendment of the articles are (not) bona fide to the company as a whole, the articles should therefore
(not) be amended.
 12

7. Issue: Can a Minority Member alter the Articles of Association?

Main idea: When altering the articles, a member must vote bona fide for the company as a whole.
Principle: Allen v Gold Reefs of Wes Africa Ltd
- A member must vote bona fide for the company as a whole.
- The directors in Allen anticipated some difficulty in recovering arrears of call from a shareholder who had died insolvent.
- They procured (persuaded) an amendment of the articles to extend the company’s lien (a claim or legal right against assets that
are typically used as collateral to satisfy a debt) from partly paid-up shares in respect of the debt which that insolvent shareholder
owed.
- The Court held that the amendment was valid as it was done in good faith to protect the interest of the company.

Issue: Can an article be amended to enhance the control of a company?

Subjective Test
1. Principle: Citco Banking Corporation NV v Pusser’s Ltd [2007]
- The company passed a special resolution to enhance the control of the shares held by the direct (75%).
- Before this, it only has A shares and each share carried 1 vote.
- It was also resolved that 200,000 of the A shares held by Pusser’s chairman, T, be converted into B shares (which held 50 votes
each instead of 1).
- Citco was the only shareholder who dissented (hold or express opinions that are at variance with those commonly or officially
held).
- According to the minutes of the general meeting, T explained that the resolutions were needed as external financing which the
company needed to expand.
- It would only be forthcoming if he maintained tight control over the company.
- He also stated that he would guarantee the loans to the company and not call back his loans to the company if he had absolute
control of the company.
- It was held that the special resolution (75%) was valid – The test was whether a reasonable shareholder could have considered
that the amendments were for the benefit of the company.
- The arguments and the actions made to change the voting power of the shares were bona fide to the company’s interest.

**The bona fide test is not appropriate where an amendment is only for the purpose of regulating the rights of shareholders in matter
in which the company as a corporate entity has no interest – E.g., the distribution of dividends, capital or the power to dispose of
shares.
2. Principle: Shuttleworth v Cox Brothers [1927]
- The article was changed to allow a person to be director for life.
- “The only question is whether or not the shareholders, in considering whether they shall alter articles, honestly intend to exercise
their powers.
- No evidence of bad faith.
3. Principle: Gambotto c WCP Ltd
- A company cannot amend the constitution to enable the majority shareholders to acquire the shares of the minority.
- WCP was a company limited by shares. The majority shareholders were wholly-owned subsidiaries of Industrial Equity Limited
(“IEL”) and held 99.7% of the issued capital.
- The appellants were two out of several of the minority shareholders.
- The shareholding of WCP was such that IEL or any of its associated companies could not have acquired the appellant’s shares
compulsorily under the then Corporation Laws.
- In Gambotto, the High Court of Australia struck down an amendment to a company’s constitution which enabled the majority
shareholders to compulsorily acquire, or expropriate, the shares of the majority.
4. Principle: Sidebottom v Kershaw Leese & Co [1919]
- Altering articles to allow the board (majority shareholder) to buy out any shareholder who competes with the company.
- It was held that it is for the benefit of the company not to be obliged to have amongst them members who compete with them
in business.

Objective Test
1. Principle: Greenhalgh v Arderne Cinemas Ltd
- The pre-emptive rights in the articles were removed.
- Shareholders are not allowed more liberty to transfer the shares.
- The individual hypothetical test is used here.
- Evershed MR held that “…it is now plain that ‘bona fide’ …means … one thing. It means that the shareholder must proceed upon
what, in this honest opinion, is for the benefit of the company as a whole.”
- The second thing is that the phrase “the company as a whole” does not…mean the company as a commercial entity…” It means
the corporate as a general body… The case may be taken of an individual hypothetical member and it may be asked whether what
is proposed, in the honest opinion of those in favour, for that person’s benefit.
 13

8. Writing an Essay: Qua Member Rule

1. State the issue.

The issue seeks to consider whether the member has the rights to enforce a provision.

Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle + Apply relevant Case law / Statute.

According to Hickman v Kent or Romney Marsh Sheep-Breeders’ Association [1915], we consider X to be “in respect of their
ordinary rights as members.”

**In this case, the case law is more important than the statute.

3. Explain and reason out your judgement.

Evaluate and explain why he is considered as a member based on:
- What is the norm for a member in that country?
- Is it reasonable to expect a member to hold such rights within the context of the company’s setting?

In the context of the case facts, it is reasonable to expect that _____. This is because …

**Reasoning is more important than the conclusion itself.

4. Conclude.
Since it is evident that X is acting/does not act ‘in respect of their ordinary rights as members of the company …

9. Issue: (Qua Member Rule) Can a member enforce a provision not relevant to his membership of the company?

Main Idea: A member can only enforce a right if it is within the ordinary rights of his membership.
Principle: Hickman v Kent or Romney Marsh Sheep Breeders’ Association [1915]
- The article constitute a contract between a company and its members in respect of their ordinary rights as members.
- No article can constitute a contract between the company and a third person.
- The association’s articles provided that any dispute between itself and its members should be referred to arbitration.
- A dispute arose between the association and Hickman, a member.
- Hickman brought the matter to court.
- The association sought to stay the action on the ground of the arbitration clause.
Principle: Eley v Positive Government Life Assurance Co [1876] 1 Ex D 88 (Court of Appeal, England)
- Eley was just a shareholder. Hence, it is beyond his capacity as a member to enforce a right that he should be the company’s
solicitor.
- The company’s Articles of Association stated that Mr Eley, who was also a member, should be the company’s solicitor.
- When the company ceased to employ him as a solicitor, he sued to enforce the relevant article under the English equivalent of s
39.
- However, Eley failed as the court held that the statutory contract established by the section was enforceable inly in relation to
the rights that are personal to the members in their capacity as such and not in relation to rights they have in other capacities
(i.e., as the company’s solicitor in this case).

10. Issue: What are the consequences of not observing the memorandum & articles of association

s 39: Subject to Act, the memorandum and articles shall when registered bind the company and the members thereof to the same extent
as if they respectively had been signed and sealed by each member and contained covenant on the part of each member to observe all
the provisions of the memorandum and of the articles.
If a provision of a company’s memorandum or Articles of Association has not been observed, then the following may result in:
- In the case of non-compliance by the company, a member may be able to obtain a declaration or injunction requiring the company
to comply. A director or company secretary may also do the same.
- In the case of non-compliance by a member. Another member or the company may be able to obtain declaratory or injunctive relief,
or damages.
- The rights of third parties are generally not affected by non-compliance.

1.
State the issue.
The issue seeks to determine the consequences of X did not observe the memorandum & articles of association.
Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.
2. Apply the relevant case law/statute.
According to s 39, X’s non-compliance as a (company/member) would lead to (refer above).
3. Conclude.
 14

11. Issue: Is the director allowed to issue shares?

- The power to issue new shares in the company generally belongs to the board of directors and may be traced to the constitution of
a company. Hence, directors do not have the power to issue shares.
- However, under s 161 of the Companies Act provides that, notwithstanding anything in a company’s constitution, the power to issue
shares shall not be exercised without the prior approval of the company.
- s 161(1): A director may be granted the power to issue shares during the Annual General Meeting (AGM).
- s 161(2) & (3): The general approval may be given for each year, so it is not necessary to seek shareholder’s approval for recurring
issues within the same year.
- The approval may be confined to a particular exercise of the power or may apply generally.
- It is the practice for companies to grant general approval to their directors to issue shares at every AGM subject to specified limits.
- When directors issues shares, they decide on the number of shares, class and issue price of the shares and terms of issue.
- With the approval of the general meeting and the board, the company may then issue the new shares. A new shareholder “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 shareholders which was maintained by the
company itself. Under the 2014 Act, this function has now been reassigned to ACRA, which maintains an electronic Register of
shareholders (“EROM”) for each private company.
o This does not apply to listed public companies, which are recorded under a different system known as the Central Depositary
(or CDP) system. Share certificates are not issued.

Are there any restrictions on who the shares can be offered to?
- Yes if company wishes to rely on certain exemptions in the Securities and Futures Act.
- Yes is there are pre-emptive rights in memorandum and articles of association.
- Cannot issue to company itself or its holding company.
- Yes if there are special ownership restrictions
Is member approval required under any of the following?
- s 161(6): Unauthorised issue of shares is void (whether members’ approval obtained or still subsisting).
- Yes if rights of new shares to be included in memorandum and articles of association.
- Yes if it amounts to variation of class rights (Refer to next section).
- Yes if listing manual requires members approval.
- Yes if required by memorandum and articles of association or shareholders’ agreement.
Do special disclosure requirements under Part XIII Securities and Futures Act apply?
-

12. Issue: Is there a variation/cancellation of class rights?

Sometimes it can be difficult to determine whether a particular corporate action varies or cancels rights attaching to shares in a class of
shares. At times, it will be obvious, e.g., where the corporate action in question is a resolution to amend a company’s constitution to
remove the right to vote from shareholders holding shares in a particular class. But sometimes the issue will be more complex.

To determine where a particular action varies or cancels class rights under general law, it is this necessary to decide:
- Whether what is being varied or cancelled is a class right, and
- Whether what is being done amounts to a variation or cancellation of the right.

Dilution of rights due to division of share capital does not amount to a variation of rights.
Principle: Greenhalgh v Arderne Cinemas
- The company’s share capital was divided into 10s share and 2s shares.
- Greenhalgh held the majority of the 2s shares – both types had equal voting power.
- A resolution was passed to subdivide the 10s share into 2s shares – the new shares now ranked equally with Greenhalgh’s shares.
- The effect of such a resolution was to dilute Greenhalgh’s voting power drastically.
- He sought a declaration that the subdivision was void, inter alia, because his rights had been varied without his consent as
required by the modification rights article.
- The court held that there was no variation of Greenhalgh’s rights as before the passing of the resolution, he had 1 vote per share
and compared to after the passing of the resolution, he still has 1 vote per share.
Principle: White v Bristol Aeroplane Co
- The preference shareholders would have had the same rights after the proposed issue as before.
- Although their block voting power might have been diluted, there was no variation of their rights.
- The articles contained a modification of rights clause that stipulated that the approval of the shareholders of particular class had
to be obtained if their rights were ‘varied, dealt with, or abrogated in any manner’.
- The company proposed to make a bonus issue of preference and ordinary shares to the existing ordinary shareholders.
- The plaintiff, who was a preference shareholder, felt that his rights as a preference shareholder were affected by the proposal
and demanded a class meeting.
- The court declined to hold that the preference shareholders’ rights were affected.
 15

13. Issue: How to vary class rights?

The way that class rights may be varied depends on:

1. How the rights were created and conferred?

a. If the rights are contained in a provision in the company’s constitution, then they may be varied by amending the relevant
provision in the constitution.
b. If the rights were created pursuant to a company resolution, then they may be varied by the passing of another similar
resolution to that effect.
c. If the rights were created solely through the terms of issue of the relevant shares and are governed by relevant contracts
relating to the issue, then they may be varied by varying the relevant contract under principles of contract law.
2. Are there clauses protecting the class rights?
a. If protected by an modification of rights clause or an entrenching provision, then these provisions must be complied with
prior to effecting the variation of the class right themselves.

14. Overview: Modification of Rights Clause

- Modification of Rights (MOR) clause sets out the procedure to be complied with before a variation of class rights may be effected,
this is one method to protect the class rights.
- MOR is considered to deem to be a variation or abrogation of class rights which will enable class shareholders to make an application
under s 74 of the Companies Act to have the variation cancelled.
- It is submitted that a MOR clause in itself pertains to a class right as such a clause provides for rights as to how class rights are to be
altered.
- As such, if a company wishes to alter the procedure found in the MOR clause, it should have to comply with the procedure in the
MOR clause.
- Such an approach is consistent with s 74(7) which deems the alteration of provisions in a company’s constitution relating to the
manner in which the rights attaching to the shares of any class as itself being a variation of the rights attached to the shares of that
class.
- In addition, as the MOR clause is contained in the company’s constitution, the procedure for amending the company’s constitution
must also be complied with.
 16

15. Issue: Is the modification/variation of class rights clause an entrenching provision?

Table A Article 4

To prove that a class right (contained in a separate provision from the MOR clause) is an Entrenching Provision (s 26(A)(4), show:
- An existing provision in the memorandum or articles at the company’s inception; or
- Was later inserted by unanimous resolution of all the members.
With Table A Article 4, if the clause:
Is an Entrenching Provision:
- s 26A(2): You need an unanimous agreement.
Is not an Entrenching Provision:
- Was the clause in the memorandum before 1st April 2004?
o YES: A unanimous consent/approval is needed to remove/alter it.
o NO: To remove or alter, shareholders can call for a general meeting via a special resolution (s 184: 75%) through a class
consent.

16. Issue: If the modification clause require a class meeting to approve the proposed modification, how is the shareholder’s rights to
vote being limited?

Principle: Re Holders Investment Trust [1971]

*If the clause requires a class meeting to be held to approve the proposed modification, in what way is the shareholder’s rights to vote
limited?
- The company proposed a reduction of capital by cancellation of redeemable preference shares.
- The reduction had been fully authorised by a special resolution of the company.
- At a separate class meeting, the preference shareholders also passed a resolution approving the reduction.
- However, the majority shareholders in the class (who held 90% of the shares of the class) also held 52% of the ordinary shares.
- The resolution greatly benefited the ordinary shareholders.
- There was evidence that the majority shareholders had approved the reduction because it would have increased the value of
their ordinary shares.
- Accordingly Megarry K, it held that there had been no effective sanction of the reduction and declined to confirm it.

Note: The court is normally content to be guided by the decisions of the members or creditors on the round that they are usually much
better judges of what is to their commercial advantage than the court can be.

Shareholder’s right to vote is limited when:

- The majority shareholders who vote simultaneously hold a substantial number of shares from X class.
- And by voting, this has greatly benefited shareholders from X class.
- Their vote is driven by the intention to increase their value of shares from X class.
 17

17. Writing an Essay: Determine if a relief can be provided due to a variation/cancellation of class rights

**You can only apply s 74 if there is a modification of rights clause.

1. State the issue.

The issue seeks to consider whether the (insert class rights) has been varied or cancelled.

Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. Apply the relevant case law/statute + reason out your judgement.

A. Case Law:
i. Principle: Greenhalgh v Arderne Cinemas
- Dilution of rights does not amount to a variation of rights.
- The company’s share capital was divided into 10s and 2s shares.
- Greenhalgh held the majority of the 2s shares – both types had equal voting power.
- A resolution was passed to subdivide the 10s share into 2s shares – the new shares now ranked equally with
Greenhalgh’s shares.
- The effect of such a resolution was to dilute Greenhalgh’s voting power drastically.
- He sought a declaration that the subdivision was void, inter alia, because his rights had been varied without his
consent as required by the modification rights article.
- The court held that there was no variation of Greenhalgh’s rights as before the passing of the resolution, he had 1
vote per share and compared to after the passing of the resolution, he still has 1 vote per share.
ii. Principle: White v Bristol Aeroplane Co
- The preference shareholders would have had the same rights after the proposed issue as before.
- Although their block voting power might have been diluted, there was no variation of their rights.
- The articles contained a modification of rights clause that stipulated that the approval of the shareholders of
particular class had to be obtained if their rights were ‘varied, dealt with, or abrogated in any manner’.
- The company proposed to make a bonus issue of preference and ordinary shares to the existing ordinary
shareholders.
- The plaintiff, who was a preference shareholder, felt that his rights as a preference shareholder were affected by
the proposal and demanded a class meeting.
- The court declined to hold that the preference shareholders’ rights were affected.

With reference to the legal principle in (insert the case), it (does not amount/amounts) to a variation. This is because the (issuance of
new shares/division of share capital) leads to a dilution of rights which only affects the enjoyment of rights. Hence, this (does not
amount/amounts) to a variation of rights. ***Use the case facts to explain.

If applicable:

B. Statutes:
s 74-: (Refer to table in the next section for more details)
(1) If, in the case of a company the share capital of which is divided into different classes of shares,
- Provision is made by the memorandum or articles for authorising the variation or abrogation of the rights attached to
any class of shares in the company,
- Subject to the consent of any specified proportion of the holders of the issued shares of that class or the sanction of a
resolution passed at a separate meeting of the holders of those shares, and in pursuant of that provision,
- The rights attached to any such class of shares are at any time varied or abrogated,
- The holders of not less in the aggregate than 5% of the issued shares of that class,
- May apply to the Court to have the variation or abrogation cancelled, and, if any such application is made, the variation
or abrogation shall not have effect until confirmed by the Court.

(6) The issue by a company of preference shares ranking pari passu (equally) with existing preference shares issued by the
company shall be deemed to be a variation of the rights attached to those existing preference shares unless the issue of the first-
mentioned shares was authorised by the terms of issue of the existing preference shares or by the articles of the company in
force at the time the existing preference share were issued.

(7) For the purpose of this section, the alteration of any provision in the memorandum or articles of a company which affects or
related to the manner in which the rights attaching to the shares of any class may be varied or abrogated shall be deemed to be
a variation or abrogation of the rights attached to the share of that class.

Since it is evident that x’s class rights has been varied and cancelled, x can obtain relief under (insert relevant s 74 statute).
Pursuant to (inset relevant s 74 statute), x can (explain why the application of s 74 is relevant here – refer to table in the section X)

3. Conclude.
 18

18. Issue: What is the protection given to shareholders when a class right is altered?

**Note: The application of the statutes are not mutually exclusive, you can use multiple elements from the statutes to prove.

**Note: You can only apply s 74 if there is a modification of rights (MOR) clause.

s 74(1)
- If, in the case of a company the share capital of which is divided into different classes of shares,
- Provision is made by the memorandum or articles for authorising the variation or abrogation of the rights attached to any class
of shares in the company,
- Subject to the consent of any specified proportion of the holders of the issued shares of that class or the sanction of a resolution
passed at a separate meeting of the holders of those shares, and in pursuant of that provision,
- The rights attached to any such class of shares are at any time varied or abrogated,
- The holders of not less in the aggregate than 5% of the issued shares of that class,
- May apply to the Court to have the variation or abrogation cancelled, and, if any such application is made, the variation or
abrogation shall not have effect until confirmed by the Court.

This section is for shareholders to demand for a variation.

How to prove?
1. Holders of 5% of the shares of the class must be in question.
2. The class of shares must be special.
3. There must be a MOR.
*The variation or abrogation will not have any effect until the court confirms that the variation will unfairly prejudice the shareholders
of the affected class.
s 74(6)
- The issue by a company of preference shares ranking pari passu (equally) with existing preference shares issued by the company
shall be deemed to be a variation of the rights attached to those existing preference shares unless the issue of the first-mentioned
shares was authorised by the terms of issue of the existing preference shares or by the articles of the company in force at the
time the existing preference share were issued.
- It is deemed as a variation of rights if the issuance of shares are pari passu with existing preference shares.

Similarly in Table A Article 5 (Found in section 15)

How to prove pari passu?

1. Same time
2. Same rank

*All must be made in the context of the case facts!!

s 74(7)
- For the purpose of this section, the alteration of any provision in the memorandum or articles of a company which affects or
related to the manner in which the rights attaching to the shares of any class may be varied or abrogated shall be deemed to be
a variation or abrogation of the rights attached to the share of that class.

This section is for shareholders to ask the court to cancel the section.

How to Prove?
1. There must be a MOR clause.
2. Company wants to use a special resolution to change the MOR clause.
3. There must be at last 5% or more of the class that is being change disapproved.
 19

19. Issue: Identifying different types of shares.

**When there is no expressed distinction between the rights of different classes, the law presumes that all shareholders rank equally.
Ordinary Shares
- Is rarely defined expressly but may be understood as the residual class of shares with the following rights:
o Right to share equally in dividends (if declared)
o Right to vote at general meetings
o 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
- s 4(1): “Preference shares”, in relation to sections 5, 64 & 180, means a share, by whatever name called, which does not entitle
the holder thereof to the right to vote at a general meeting (except in circumstances specified in section 180(2)(a), (b) & (c) or to
any right to participate beyond a specified amount in any distribution whether by way of dividend or on redemption, in a winding
up, or otherwise.
- Fixed or preferential dividends.
- Priority in return of capital in the event of the company’s winding up.
- s 75(1): CA: Rights attached to preference shares must be set out in Memorandum of Agreement (MOA) or Articles of Association
(AOA). These includes:
1. Voting or non-voting
2. Cumulative or non-cumulative: cumulative is better as companies are required to pay in the following year, hence ↓ risk;
3. Participating or non-participating: Right to participate in surplus asserts and profits.
4. Convertible or non-convertible
 Whether you can change to ordinary, if you convert, you exchange the preference shares for ordinary shares.
 Not usually 1 for 1 but ratio is set out at the beginning when the share is issued.
5. Redeemable or non-redeemable
 Give back share for cash.
 S 70: Companies can redeem preference shares if authorised by its articles (paid out of profits or capital or issue new
shares)
6. Priority to payment of dividend the shares carry vis-à-vis other classes of shares;
7. What priority the shares carry with respect to payment of capital in winding up.
Treasury Shares
- s 76J provides that a company will not exercise certain rights in respect of treasury shares so long as these shares are being held
by the company as treasury shares.
- These rights include the right to attend or vote at meetings.
- No dividends may be paid, or distribution of the company’s assets may be made, to the company in respect of treasury shares.
- However, s 76J does not prevent the allotment of shares as fully paid bonus shares in respect of treasury shares or the subdivision
or consolidation of any treasury shares into treasury shares of a greater or smaller amount if the total value of treasury shares
remained unchanged.
- s 76I provides for the maximum holdings of treasury shares.
- Where a company has shares of only one class, the aggregate number of shares held as treasury shares is limited to an amount
not exceeding 10% of the total number of shares of the company at that time.
- Where the share capital of a company is divided into shares of different classes, the aggregate number of the shares of any class
held as treasury shares is limited to an amount not exceeding 10% of the total number of the shares in that class at that time.
- Treasury shares that exceed this limit are known as “excess shares”.
Excess shares must be disposed or cancelled in accordance laid down in s 76K.
- A private company may dispose or cancel of treasury shares by lodging a prescribed notice of the cancellation or disposal of
treasury shares with the Registrar together with the prescribed fee.

What are the consequences of a breach?

- Where a company cancels or disposes treasury shares, the directors of the company shall lodge with the Registrar a prescribed
notice of the cancellation or disposal of treasury shares together with the prescribed fee within 30 days after the cancellation or
disposal of treasury shares.
- If a company buy back its shares in a way not allowed by s 76B-76G of the Companies Act, the buy-back will be a prohibited self-
acquisition and the company and its officers will be liable under s 76A. There may be other consequences as well. s 76F(3) provides
that every director or chief executive officer of a company who approves or authorises the purchase of the company’s own shares
knowing the company is not solvent is guilty of an offence.
 20

20. Issue: How to determine if X has a deemed interest in Y arising from control?

1. State the issue.

The issue seeks to consider whether the x has a deemed interest which arises from control in y.

Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

3. Apply the statute.

s 7(4)
…states that x has a deemed interest in y arising from either board control or voting control.

Explain and reason out your judgement.

- I deciding whether x has deemed interest in y, we consider if x has a board control/voting control in y.
- This is evident from the fact that (inset evidence).
- Explain how evidence is a form of board control/voting control.

Note: This is used when the relevant part have an

- “Actual” control over the company.
- Interest in shares in other company.

4. Conclude.
Hence, x have/do not have a deemed interest in y as x holds/does not hold and voting control in y.

21. Issue: How to determine if X has an interest in Y arising from 20% interest?

1. State the issue.

The issue seeks to consider whether x has a deemed interest which arises from a 20% interest in y.

Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

3. Apply the statute.

s 7(4A)
States that x has a deemed interest in y arising from 20% or more of the voting rights in y.

Explain and reason out your judgement.

The 20% voting rights which x has can be obtained from the fact that (insert case fact from the case).

Note: Apply s 7(4A) aka 20% rule when:

- A person and/or his/her associates is entitled to exercise or control the exercise 20% or more of the voting rights of a
body corporate that person is deemed to have an interest in all interests in shares that the body corporate has in any
other company.
- You can apply this rule after s 7(4), or before s 7(4) but you cannot apply directly after s 7(4A).

4. Conclude.
Hence, x have/do not have a deemed interest in y as x holds/does not hold any voting control in y.

Rationale of finding the deemed interest of x in y:

- Interest can be deemed or expressed
- We use this deemed interest to determine if a certain director can take a loan from a certain company.
 21

22. Issue: Identifying different types of directors.

Executive Director
- An executive director is a person who works for the company on a more or less full-time bases, possibly under a contract of
service.
Non-executive Director
- A director who does not work for the company in a full time capacity.
- The distinction between directors and management is clearer in large companies, but that does not mean that small companies
do not have non-executive directors.
- Non-executive directors are nominees of major shareholders – their job is not to run the company but to keep a close eye on
managers and executive directors in order to safeguard the investment.
Alternate Director
- Alternate directors turn up at meeting only when the principal director is unable to do so.
- Generally, alternate directors are proxies, but are NOT agents.
- They are considered to be a full director by law.
Informal/De facto Director
- A de facto director is a person who acts as a director although never formally appointed as such.
- The necessary formalities to appoint such a person may not have been observed.
- Such a person will be a director in fact and will, as such, be subject to the usual duties incumbent on a director since s 4(1) defined
a director to include any person occupying the position of director of a corporation by whatever name called.
Shadow Director
- A puppeteer – he pulls the strings and his puppets on the board dance.
- A shadow director is considered to be a director too because s 4(1) of the Companies Act defines the term ‘director’ to include a
person in accordance with whose directions or instructions the directors of a corporation are accustomed to act.

**You recognise the shadow director to determine if he is liable for the actions he commits.

23. De facto Director vs. Shadow Director

Principle: Re Hydrodam (Corby) Ltd

DE FACTO DIRECTOR
- A De Facto Director is a person who assumes to act as a director.
- He is held out as a director of the company, and claims and purports to be a director, although never actually or validly appointed
as such.
How to prove a De Facto Director’s position?
- Show that he undertook functions in relation to the company which could properly be discharged only by a director.
- Cannot prove base on the fact that he was:
o Concerned in the management of the company’s affairs; or
o Undertook tasks in relation to its business which can properly be performed by a manager below board level.
SHADOW DIRECTOR
- A Shadow Director does not claim or purport to act as a director.
- He claims not to be a director.
- He lurks in the shadow sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself.
- He is not held out as a director by the company.
How to prove a Shadow Director’s position?
- There are at least 2 directors who listens to the shadow director.
- That the defendant directed those directors how to act in relation to the company or that he was one of the persons who did so;
- That those directors acted in accordance with such directions; and
- That they were accustomed to so act.
Principle: Secretary of State for Trade & Industry c Deverell
- The phrase ‘accustomed to act’ does not need to include:
o Over all or most of the corporate activities.
o A degree of compulsion above the implicit fact that the board are accustomed to act in accordance with them.
How to prove?
- Does he have real influence over the affairs of the company (i.e., influence the majority of the directors)?
Principle: Pioneer v Giant Resources Ltd
- Pioneer held, through 2 wholly-owned subsidiaries, 42% of Giant and had effective control of Diant as the only other significant
shareholders held, respectively, approximately 10%, 6%, 6% & 3% of the shares of Giant.
- Pioneer also had nominee directors on the board of Giant.
- Held: Pioneer exercised extensive management control of Giant, in particular, decisions regarding the sales of assets of Giant
Resources were not taken by the board of directors of Giant but were taken by Pioneer. In this circumstances, Pioneer was held
to be a shadow director of Giant.
- This meant that Pioneer was liable for certain debts of Giant because s 588G of the Australian Corporations Law provided that a
director (including shadow director) of an insolvent company may be liable for the debts of the company in certain circumstances.
 22

25. Writing an Essay: Must a Shadow Director Comply with every Rule in Company Law?

1. State the issue.

The issue here is whether x, a shadow director, needs to comply with the rules in y.

Note: The issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle states that a shadow director…

3. Apply the relevant case law.

Principle: Help Huat Rubber Co. v Kong Choot Sian
The standard laws in the statute does not apply to shadow directors.
The question in this case was whether the director needed to disclose his remuneration on the article.
Pursuant to s 16, the judge ruled that the shadow director need not disclose.

With reference to the case of Heap Huat Rubber Co v Kong Choot Sian, the (apply case facts)…
Note: Before using this format, ensure that you have proven that x is a shadow director already.

4. Conclude.
Since x is shadow director, he is not liable for the consequence of y despite his non-compliance.

26. Issue: Identifying if X is a director, officer or a secretary.

Section 4(1) defines officers of a corporation – The directors, secretary and managers are collectively referred to as the company’s officers.

Director
- This term includes ‘shadow directors’, who are not named as directors of the corporation, but who will pull strings behind the
scenes.
- A shadow director is a person in accordance with whose directions or instructions the directors of a corporation are accustomed
to act.
- Alternate, a substitute and associate directors, although treated in practice as rather less than full directors, nevertheless, they
are considered to be directors under the Act and are subject to the full range of duties and liabilities.
Secretary
- Only refers to the company secretary, not members of the secretarial pool.
- The company secretary is the person who ensures compliance with the many regulations affecting companies.
- He is the one who keeps the necessary registers, sends out notices, organises meetings, takes down minutes and files whatever
forms are required by the Accounting and Corporate Regulatory Authority (ACRA).
- The secretary’s function is to handle all the paperwork and procedural matters that running an incorporated company involves.
- In large listed companies, the company secretary is usually an employee – he may double up as a legal officer if legally trained.
- It is common for the company secretary of the ultimate holding company to act as group secretary for many (if not all) of the
subsidiaries.
- With the separate entity doctrine, he will have to be separately appointed to each and every subsidiary of which he is a secretary.
- In smaller companies, one of the directors may act concurrently as company secretary (if qualified) or the task may be farmed
out to an independent company secretary.
- A company secretary will not be an employee of the company but will be an independent contractor providing services to the
company when secretarial services are provided by an external law and accounting firms.
- Nevertheless, the company secretary will still be an officer, whether he is an employee or not – he will have authority to bind
the company to contracts within the scope of his administrative duties.
- Normally, the company secretary has no power to make commercial decisions on the company’s behalf.
Officer
- A person employed in an executive capacity by a corporation – it includes all employees and executive officers.
- Executive is not defined, however, presumably it implies some managerial or supervisory function.
- s 157(2): An officer has a duty not to misuse the company’s information.
Receiver and Manager
- A receiver and manager of any part of the undertaking of the corporation appointed under a power contained in any instrument.
- It should be notes that a mere receiver has no power to manage the business of a corporation and is not considered to be an
officer.
- A receiver and manager appointed by the court is also not a corporate officer.
Liquidator
- A liquidator appointed in a voluntary winding up.
- A liquidator appointed by the court or by the creditors in a creditors’ voluntary winding up is not a corporate officer.
 23

27. Proving for Independent Directors.

Code of Corporate Governance 2012, 2.3: An “independent” director is one who has no relationship with the company, its related
companies, its 10% shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the
director’s independent business judgement with a few to the best interests of the company.

How to Prove? Show:

1. Not a subsidiary, holding, subsidiary of subsidiary, or related.
2. Is a 10% shareholder.

How are independent director different from non-executive?

1. Non-executive can still be in some way related to some director/shareholder (e.g., wife).

Who will and how to determine the independence of a director?

1. The management committees will decide who is on the board.
2. In an AGM, we can decide who to be a director by ordinary meeting.
3. For public companies, we cannot vote director in a package.
4. For private companies, under CA s 150, we can vote director in package.
5. CA s 150: Appointment for directors must be voted on individually.
6. Members may control the composition of the board through a power to elect directors or a power to remove directors or a
combination of both.
7. s 149B of the Companies Act provides that a company may appoint a director by ordinary resolution passed at a general
meeting unless the constitution provides otherwise.
 24

28. Issue: When will a director be disqualified?

Automatic Disqualification
1. Undischarged bankrupts
- (1): A person who is an undischarged bankrupt may not be appointed as a company director, “or directly or indirectly takes
part in or is concerned in the management of, any corporation.”
- However, in special circumstances, an undischarged bankrupt may apply to the Court or the Official Assignee for their
approval to continue to manage a company.

2. Persons convicted of offences involving fraud or dishonesty

- s 154(1): A person who has been convicted of any offence involving fraud or dishonesty punishable with imprisonment for
3 months or more is disqualified from acting as a director, or taking part in the management of a company.
- The period of disqualification is for a period of 5 years from the time of his conviction, or the time of his release from prison
(if he has been sentenced to imprisonment).

3. Persistent default in delivery of documents

- s 155: If a person is convicted 3 times for failing to file documents with ACRA, he is disqualified from acting as a director for
a period of 5 years.

4. Being subject to the imposition of a civil penalty under s 232 of the Securities and Futures Act
- x
Disqualification by Court Order
The disqualification here is not automatic, but is subject to the court’s discretion. The order can only be made upon an application by
the Minister or Official Receiver.

1. Persons unfit to be directors due to insolvency

- s 149: If a person is a director or a company which has gone into liquidation, or which went into insolvent liquidation within
3 years of his cessation as a director, the court may make a disqualification order against him if the circumstances show
that he is unfit to be a director.
- The maximum period of disqualification is 5 years.

2. Commission of certain non-fraudulent offences

- s 152: This section applies to persons who have been convicted of offences relating to the formation or management of a
corporation, or offence under s 157 or s 339.

29. Issue: Effects of disqualification.

1. State the Issue.

The issue seeks to consider whether the (insert class rights) has been varied or cancelled.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle states that his actual and apparent authority to bind the company must still continue, notwithstanding the fact
that he is committing an offence by remaining in office.

3. Reason and Explain your argument.

s 151: The acts of a director shall be valid notwithstanding any defect that may afterwards be discovered in his appointment or
qualification.

Principle: Royal British Bank v Turquand

An outsider would not have to check whether the directors were properly appointed and qualified.

Principle: Asia Commercial Finance (M) Bhd v Pasadena Properties Development Sdn Bhd
A person who was disqualified under s 148, has no capacity to affirm an affidavit on behalf of the company.

- Is the disqualified person dealing with the public, employees or the creditors of the company?
- Is he exercising a discretion that would affect the company’s relations with such persons?
- Is he closely supervised such that persons are adequately?
If the director acts according to the above 3 criteria, it is considered that he has breached the prohibition of participating in the
management.

4. Conclude.

Note: The acts of the disqualified director must still be binding upon the company.
 25

30. Writing an Essay: Determine if loans can be given to directors.

1. State the Issue.

The issue seeks to consider whether it is legal to provide a loan to the director.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle + Explain and reason out your judgement.
With reference to s 162(1), a company is generally prohibited from making loans to directors.

3. Exceptions.
a. Does the loan fall into the definition stated in Creanovate? – It is not subjected to s 162(1) if it does not.
In the case of Creanovate Pte Ltd v Firstlink Energy Pte Ltd 2007, a contract of loan of money is a contract whereby one
person lends or agrees to lend a sum of money to another, in consideration of a promise expressed or implied to repay that
sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or
without interest.
Show:
There is a loan of the principal amount and the interest.

b. Is the company incorporated in Singapore?

s 162(2): The prohibition does not apply to a foreign company, which consequently may lend to its directors or give security
for or guarantee a loan made to them,

c. Does the company have a loan scheme for full-employees?

s 162(2)(a): Loans may be made to a director who are full-time employees of the company or its related corporations. The
loan must be made in accordance with the scheme which must have been approved beforehand by the general meeting.
**There are 2 elements to prove here.

d. Does it satisfy these 3 conditions?

s 162(2)(b): Money can be lent to the director for the purchase of a house if:
a. It is approved by AGM
b. He/She is a full time employee (need not be a CEO).
c. It is only for the purchase of the 1st house (subsequent houses cannot).

e. Does it satisfy these 2 conditions?

s 162(2)(c):
a. If a company have a scheme to lend money to employee.
b. Which have been approved by the AGM.
c. Director is a full time employee here.

f. Is the company a financial institution?

s 162(1)(d): It is permissible for the loan to be made in the ordinary course of business by a bank, finance company or
insurance company to a director.

g. Is the company an exempt private company?

s 162(1): An exempt private company is not prohibited in making loans to its directors.

s 4(1): “exempt private company” means:-

a. A private company in the shares of which no beneficial interest is held directly or indirectly by any corporation and
which has not more than 20 members; or
b. Any private company, being a private company that is wholly owned by the Government, which the Minister, in the
national interest, declared by notification in the Gazette to be an exempt private company.

4. Conclude.
 26

31. Writing an Essay: Determine if loans can be given to persons connected with the directors.

1. State the Issue.

The issue seeks to consider whether it is legal to provide a loan to persons connected to the directors.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

With reference to s 163, the legal principle states that a company is generally prohibited to provide a loan to persons connected
with the directors.

3. Exceptions.
- Is the company incorporated in Singapore?
- Does the directors have a 20% or more interest in the shares of the company?
o Can use s 7(4A) on page X to determine.
o s 163(2)(a): Prohibits the provision of a loan to the directors with 20% or more interest.
- Is the company a financial institution?
o s 163(1)(d): It is permissible for the loan to be made in the ordinary course of business by a bank, finance company or
insurance company to a director.
- Is the company an exempt private company?
o s 163(4)(b): An exempt private company is not prohibited in making loans to directors.

4. Conclude.
Since the corporate veil should be lifted/should not be lifted, the (insert the name of the principal/agent/company) is liable.

s 7(4A) → s 163
s 7(4) → s 162

32. Writing an Essay: Determine the disclosure of interest.

1. State the Issue.

The issue here is whether x should disclose his interest.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle states that a director has a duty to disclose his interest.

3. Apply the relevant statute.

You can use s 7 to decide if the director holds any interest in the company.
- s 165: A director has a duty to disclose his interest.
- s 164(15): A director has a duty to disclose his interest held by his own infant son (infant = underage).

Conclude.
 27

33. Writing an Essay: Determine the compensation for loss of office.

1. State the Issue.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle states that a company may not make any payment to a director as compensation for loss of office as an officer
of the company or of its subsidiaries or as consideration for or in connection with his retirement from any such office.

3. Exceptions.
Evaluate whether the compensation for the loss of office is valid by proving the following elements.

If the payment is not proposed in conjunction with a takeover offer for the company:
1. Has the particulars of the proposed payment (including the amount) disclosed to the members of the company?
2. Has the proposed payment been approved by the members at a general meeting via an ordinary resolution (50% votes)?

If the payment is proposed in conjunction with a takeover offer for the company:
1. Has the directors taken all reasonable steps to secure that the details of the proposed payment?
2. Has the directors secure the details of the proposed payment with any notice of the takeover offer that is sent to the
company’s shareholders?

If it has not, the compensation cannot be provided.

After evaluating, consider the following exceptions:

1. s 168(5)(a): Did the agreement take place before 1st January 1967?
If yes, then the compensation can be made.

2. s 168(5)(b): Has the particulars of the payment been disclosed and approved by a special resolution of the company?
Show:
1. Payment has been disclosed.
2. Payment has been approved.
3. A special resolution (75% votes) has been cast to approve the compensation.

If you can prove all three elements, then the compensation can be made.

3. s 168(5)(c): Is the payment a bona fide payment made for breach of contract?
Show:
1. Payment is bona fide.
2. Payment was made to award damages for breach of contract.

If you can prove the two elements, then the compensation can be made.

4. s 168(5)(d): Is the payment a bona fide payment made for past services?
Show:
1. Payment is bona fide.
2. Payment was accrued (interpretation of the phrase, “past services”?

5. s 168(5)(e): Is the compensation made before x became a director?

Show:
1. There was an agreement made before x became a director, where the company agreed to pay x when they fire him.

It was held in the case of Grinsted. Edward held that a “severance package” fell within the scope of s 168(5).

4. Conclude.
Since the compensation falls/does not fall within the scope of s 168(1) and s 168(5) it should/should not be provided to x.
 28

34. Issue: What are the procedural requirements for the appointment of directors?

Private Limited Company Public Company

Table A Article 66 s 152(1)
- Provides for companies to elect or re-elected their - Gives a public company to remove a director regardless of the
directors by passing an ordinary resolution (50% votes). memorandum, articles, agreement which the director made
with the shareholders.
Table A Article 67
- Givers the company the ability to increase or reduce the
number of directors through an ordinary resolution.
- However, many private companies have articles that do not
provide for directors to be elected by a majority of
members. E.g., The Company’s articles may provide for
particular persons to be appointed to the board, or to have
the right to nominate one or more directors.
- Members of a private company may have the right to
remove directors, but this depends on the terms of the
company’s articles.

Table A Article 69
- Allows members to remove directors by an ordinary
resolution (50% votes) and to appoint another in his/her
stead in the same manner.
s 153
- If the private company is a subsidiary of a public company, an ordinary resolution (50% votes) is required for the appointment of
a director who is aged over 70 years under s 153 of the Companies Act.
s 168
- Requires the member approval for certain payments to directors on their retirement from office as officers of the company or in
connection with the transfer of the whole or any part of the undertaking or property of the company. Special procedural
requirement apply refer to Chapter 10.

35. Writing an Essay: What is the remuneration that should be provided to directors?

1. State the Issue.

The issue here seeks to determine if the remuneration given to the director is legally valid.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

3. Apply the relevant statute.

- s 169(1): A remuneration must be approve by shareholder in an AGM by an ordinary resolution and a resolution must be a
standalone resolution (cannot be related) or it will be void.
- s 169(2): A company cannot lent money to director. With the exception of 162(a) to (d):
o s 169(2)(a): It has to be authorise by the AGM.
o s 169(2)(b): Money can be lent to the director for the purchase of a house if:
 It is approved by AGM.
 He/She is a full time employee (need not be a CEO).
 It is only for the purchase of the 1st house (subsequent houses cannot).
o s 169(2)(c): The company has a scheme for loans to employee and it has been approved by the AGM + Director has to
be a full time employee.
o s 169(2)(d): A director can lend money from the company if the company is a bank.

4. Conclude.
Therefore, the remuneration can be provided to the employee/director.
 29

36. Writing an Essay: Determine validity of proxy’s vote.

1. State the Issue.

The issue here seeks to determine if the proxy’s vote is legally valid.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

s 181(1A): The legal principle states that a proxy cannot vote except on a poll and no multiple proxies on the same meetings.

3. Apply the relevant statute + Reason out your judgement.

If you need to determine if x is a proxy or not, use s 181 to show that x:
1. Is a member of a company entitled to attend and vote a meeting;
2. Or at a meeting of any class of members of the company;
3. Is entitled to appoint another person or persons (even though they might not be a member);
4. And have the same right as a member to vote and speak at a meeting.

A proxy’s vote is subjected to the following exceptions:

- s 184A: Private and non-listed companies can pass written resolutions.
- s 184G: Only a written document is needed as a resolution for one-man companies.
- s 181(1C): Financial institutions can nominate more than one proxy.

4. Conclude.
Hence, (state case facts), therefore the proxy’s vote is valid/invalid.

37. Issue: What is the voting power that a proxy has?

General Rules:
- A member need not be personally present in order to cast his vote.
- A proxy is someone whom the member appointed to vote on his behalf.
- One person may be the proxy of more than one member.
- In absence of a contrary provision in the articles, a proxy may only vote a poll, demand a poll.
o This has the same effect as a member demanding a vote.
If a member turns up at a meeting himself and votes, the company must accepts his vote and reject that of the proxy’s
Principle: Cousins v International Brick Co Ltd [1931]
- The articles of the company contained an article similar to Table A Article 62.
- Cousins held proxies representing over 102,000 votes.
- He cast these votes in favour of a resolution, against which 96,000 votes were cast.
- The chairman nevertheless declared that the resolution had been defeated.
- The explanation was that shareholders holding some 11,000 votes had revoked the authority given to Cousins and had voted
personally against the resolution.
- Other shareholders of whom Cousins was proxy has also voted personally at the meeting, even though they had not revoked the
authority given to Cousins.
- Cousins claimed that the chairman was wrong to ignore the proxy votes that he had cast on behalf of these shareholders, as the
revocation of his authority was not in accordance with the articles.
- Held: The chairman had acted rightly in rejecting the proxy votes.
- Every proxy’s authority is subjected to an implied condition that it should only be used if the shareholder does not attend the
meeting.
- A shareholder may choose to attend and vote notwithstanding that he has appointed a proxy.
- The proxy cannot prevent this from happening.
- This does amount to a revocation for the proxy’s authority, but is merely a step which obviates the need for a proxy.
The proxy may vote on a subsequent resolution if his principal does not. (The attendance of the shareholder is not an automatic
revocation of the proxy’s authority.)
Principle: Ansett v Butler Air Transport Ltd [1958]
- The annual general meeting of the company was adjourned in order for an auditor to be appointed to examine the legality of a
proposed dividend.
- At the resumed meeting, several shareholders who had appointed proxies attended in person.
- Certain resolutions were carried unanimously by a show of hands.
- A poll was then demanded on the next item of business, the election of directors.
- The meeting was again adjourned so that a poll could be conducted.
- At the second resumption of the meeting, a shareholder objected that those who had turned up and voted in the previous stage
should not be allowed to vote on the poll by proxy.
- The poll was taken and the votes of the shareholders who attended personally were rejected; different directors would have
been elected if these votes had been accepted.
- Held: The authority of the proxies had not been revoked by the attendance of the principals, and that could validly vote.
 30

The proxy’s is valid if the member does not specify his instructions in the proxy form, even though the proxy’s vote is contrary to
his intentions.
s 181(1)(a): provides that proxies are only permitted to vote on a poll and not entitled to vote on a show of hands unless the contrary
is stated in the company’s articles of association.

The member may instruct the proxy to vote in a specified manner or they may give the proxy the discretion to vote in whatever way
the proxy thinks fit (referred to as a “general proxy”). The following rules apply in relation to votes cast by a proxy:
- Where the proxy cast a vote in accordance with the instructions on the proxy form, the votes are valid.
- Where the proxy does not cast a vote, the instructions on the proxy form do not carry any weight and are not counted towards
the vote.
- Where the proxy cast a cote that is against the instructions on the proxy form, the votes cast are regarded as spoilt votes and
the members votes are treated as if they had not been cast.

Principle: Tong Keng Meng v Inno-Pacific Holdings Ltd

- It was held that the chairman was under a legal duty to exercise the right and ought to have demanded a poll and used the
proxies.

38. Issue: Informal Assent (approval) of Members.

General Principle: No general meeting need be held if all members assent to a certain course of action – where it can be shown that all
shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting
of the company could carry into effect, that assent is as binding as a resolution of the company.

The assent of members who have no vote is unnecessary, unless there is some provision in the Act requiring disclosure to all members.
Principle: Re Duomatic Ltd [1969]
- The ordinary shares of the company were held by Elvins, Hanly and East, all of whom were directors.
- Non-voting preference shares were held by a company called AG Bondo NV (Bondo).
- The remuneration of the directors was to have been fixed by the general meeting.
- However, no resolution was ever passed.
- The directors drew sums from the company from time to time as the need arose.
- Hanly subsequently quarrelled with his co-directors.
- Although they could have removed him from the board, they chose not to do so because he threatened to sue the company.
- Instead, they paid him money as an inducement for him to leave without trouble.
- The liquidator claimed this sum back from the directors, as well as the amounts that they had informally taken as directors’
remuneration.
- Held: Although no formal meeting had been held to approve directors’ remuneration, the payments had been made with the
knowledge and consent of all the holders of voting shares.
- The fact that the preference shareholder did not know of these payments was irrelevant – the assent of the comparators was
as binding as a resolution.
- s 168: payments to directors by way of compensation for loss of office had to be disclosed and could be recovered from the
directors who authorised it.

39. Types of Meetings

General meetings of members is governed by the Companies Act and the Company’s articles in terms of notice period, attendance,
voting rights, procedures and different majorities required for special resolutions.
Board meetings are not controlled by the Companies Act and seldom are there detailed procedures for meetings spelled out in the
Company’s Articles.
Annual General Meeting (AGM)
- s 175 requires all companies to hold a meeting of members (AGM) at least once in every calendar year. The AGM should be held
within 15 months of the previous AGM. Companies need not hold an AGM in their first year of incorporation as long as their first
AGM is held within 18 months of the date on which they are incorporated.
- s 175A allows private companies to dispense with the need to hold an AGM where there has been a unanimous resolution of all
members at general meeting.
o Any provision under the Act that requires something to be done at the AGM may done through the passing of a resolution
by written means under s 184A.
o Any member of the company may, however require an AGM to be held in any particular year by giving notice to the company
of his or her request at least 3 months before the end of the year.
- Generally, BOD arranges for AGMs but court may order meeting on application of members.
- Companies Act prescribes the minimum business to be conducted is for the accounts to be laid before members and appointment
of auditor.
- Other business usually conducted: generally approval of share issuance, declaration of dividends, and election of directors.
Extraordinary General Meeting (EGM)
- Any general meetings other than AGM are referred to as extraordinary general meetings.
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Statutory Meetings
- Only public listed companies limited by shares are required to hold statutory meetings.
- A statutory meeting must be held once at the beginning of the company’s life not less than 1 month and not more than 3 months
after the date on which the company is entitled to commence business.
- Members may discuss any matter relating to the formation of the company. Matters specified in s 174(3).
Class Meetings
- A special resolution by members of a class is required.
o E.g., under s 74 to approve a variation or cancellation of class rights.

40. Issue: Meetings of Directors.

Regulation of meetings are usually provided for in the articles of association

Principle: Dr Mahesan v Ponnusamy
- If notice is not given to some directors, the meeting may be declared to be invalid and the resolutions passed set aside.
- If notice is given but not reach the directors, there is an irregularity which can be validated.
- The length of notice may be stipulated by the articles where strict compliance is necessary – if no notice is stipulated, the court
will examine the previous practice of the company to determine whether sufficient notice has been given.
Principle: Aik Ming (M) Sdn Bhd v Chang Ching Cheun
- If notice is not given to some directors, the meeting may be declared to be invalid and the resolutions passed set aside.
- If notice is given but does not reach the directors, there is an irregularity which can be validated.
s 392: Lack of a quorum at a board meeting is an irregularity that can legally valid.

Principle: Re Goodwealth Trading Pte Ltd

- However, that provision cannot be applicable where the disputed meeting results in decisions being taken that may disadvantage
absent directors.
Principle: Golden Harvest Films Distribution (Pte) and Another v Golden Village Multiplex Pte Ltd [2006] SGHC 110
- Held: The appointment of the Chairman was valid pursuant to the shareholder’s agreement despite irregularity – s 392 could be
relied on to validate the proceedings.
- Joint venture Company by Golden Harvest (G) and Golden Village (V), each having 3 nominee directors on a board of 6.
- Articles: Chairman has a tie-breaker.
- G’s directors objected the appointment of P (V’s nominee) to be the chairman, though as required by shareholder’s agreement.
- P proceeded with the meeting, G’s 3 directors walked out of the meeting.
- Board went ahead with a resolution.
Principle: Chang Bentley v Tang Kin Fei [2012] 1 SLR 274 (SCA)
- Held: A lack of quorum is a procedural irregularity.
- Art 98 of the Articles and shareholders’ agreement require at least one of PPHL’s nominee directors to be present to constitute a
quorum for a board meeting to appoint a law firm.
- No nominee of PPHL attended a board meeting, which still passed a resolution.
- As the quorum was put into M&A and Shareholders’ Agreement, the judge held that there will prima facie be substantial injustice
to the side which exercised its deadlock rights’ at [48].
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41. Writing an Essay: Does a procedural irregularities invalidate a meeting? // Was the election/meeting illegal?

1. State the Issue.

The issue seeks to consider whether a procedural irregularity amount to substantial injustice/if the election was legal.

Note: This issue here should not be phrased in with absolute words – you do not make the judgement before a discussion.

2. State the legal principle.

The legal principle states that an election would be invalidated when substantial injustice is resulted from procedural invalidities.

3. Apply the relevant case law/statute + Reason out your judgement.

A. Principle: Golden Harvest Films v Golden Village Multiplex [2006]
- A slight irregularity; a lack of quorum does not fully invalidate a meeting (s 392) if all the members were present at
the beginning of the meeting.
- Joint venture Company by G and V, each having 3 nominee directors on a board of 6.
- Articles: Chairman has a tie-breaker.
- G’s directors objected the appointment of P (V’s nominee) to be the chairman, though as required by shareholder’s
agreement.
- P proceeded with the meeting, G’s 3 directors walked out of the meeting.
- Board went ahead with a resolution.

B. Principle: Chang Bentley v Tang Kin Fei [2012] 1 SLR 274 (SCA)
- S 392: Lack of quorum is a procedural irregularity.
- Art 98 of the Articles and shareholders’ agreement require at least one of PPHL’s nominee directors to be present to
constitute a quorum for a board meeting to appoint a law firm.
- No nominee of PPHL attended a board meeting, which still passed a resolution.
- As the quorum was put into M&A and Shareholders’ Agreement, the judge held that there will prima facie be substantial
injustice to the side which exercised its deadlock rights’ at [48].
4. Conclude.
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42. Issue: Granting relief under s 216

The Court will not grant relief just because a member is unhappy at being outvoted by the majority. So long as the decisions were made
honestly and in good faith, the fact that the decisions turn out to be wrong does not entitle a member to apply for relief under s 216.
Majority advancing own interest
Principle: Scottish Co-operative Wholesale Society Ltd v Meyer (1959)
- The defendants (majority shareholder + director) diverted the company’s businesses to another company which they set up
separately, which resulted the company’s operation came to a standstill and it stopped making profits.
Diversion of company’s business opportunities
Principle: Re Bright Pine Mills Pty Ltd (1969)
- Where a director of a company or the majority members of a company divert business opportunities to themselves or to other
companies which they control, but in which the minority member bringing the oppression action has no interest.
Disregard of minority’s rights & interests
Principle: Re Harmer; Kumagai v Zenecon
- The Court of Appeal held that the majority shareholders had chosen to dismiss the minority shareholder, rather than allowing
their legitimate expectation to be fulfilled by letting him continue to contribute to the management of the company.
- By choosing the former, the majority shareholders had put an end both to their legitimate expectation and to the prejudicial
conduct of the affairs of the company by Harmer.
- In such circumstances, there would be no access to the statutory unfair prejudice remedy.
Improperly excluding a member from management of the company
Principle: Tullio v Maoro (1994)
- If a member had invested in a company based on the express/implied understanding that he would be involved in the mgmt. of
the company, excluding the member from the mgmt. could amount to oppression.
Expropriation of member’s property
Principle: Dafen Tinplate v Llanelly Steel (1907)
- Dafen Tinplate Co Ltd was a shareholder in Llanelly Steel Co. Llanelly realised that Dafen were buying steel from an alternative
source of supply, and also to buy up the company's shares (an attempt which failed). Llanelly responded by altering its articles
through a special resolution to include a power to compulsorily purchase the shares of any member requested to transfer them.
Dafen Tinplate argued the alteration was invalid. The court held that the alteration was too wide to be valid. The altered article
would confer too much power on the majority. It went much further than was necessary for the protection of the company.
Unfairly refusing to pay dividends
Principle: Re Gee Hoe Trading Co Pte Ltd (1991)
- The majority shareholder (directors too) had made use their controlling power to adopt a policy which only benefitted themselves
– i.e., Directors’ fee, salaries and bonuses whilst the minority (non-directors) were not getting anything. Moreover, there was no
good reason for the company not to declare dividends since it was profitable. Such conduct was clearly oppressive and in disregard
of the minority shareholder’s interests.
Denying the minority information
Principle: Guan Seng Co. Sdn Bhd v Tan Hock Chuan (1990)
- A buyout was ordered on the ground that the minority’s interests were being disregarded since no AGM had been held for 6 years
and no audited accounts had been prepared for 7 years.