Petroships Investments Ltd v Wealthplus

When confronted with a derivative action brought by a disgruntled shareholder, a natural reaction of the defendant directors would be to make it go away—even if it meant erasing the company from existence. In Petroships Investments Pte Ltd v Wealthplus Pte Ltd 1 the defendant directors, who were also in control of the majority of the company’s voting power through holding companies, caused the company to enter members’ voluntary liquidation. Should the directors be allowed to avoid the derivative action by killing the company? The Singapore Court of Appeal seems to have said “yes”. This case should stand as a cautionary tale to Commonwealth observers of how clever lawyers can use “settled” law to force unsettling outcomes.

Wealthplus Pte Ltd (“Wealthplus”) was an investment vehicle established in 1998 by Alan Chan (“AC”) and the Koh Brothers Group Ltd (“KBGL”) to exploit rights to develop land in China. AC held his investment through Petroships Investment Pte Ltd (“Petroships”), which was a 10 per cent shareholder in Wealthplus. KBGL held its investment through Megacity and Koh Brothers Building and Civil Engineering Contractor (Pte) Ltd (“KBBCE”), which collectively held the remaining 90 per cent of shares in Wealthplus.2 From July 1998 to September 2009, Wealthplus’ three directors consisted of two nominees