The initial founders of a company are also known as shareholders. According to the Singapore Company Law, in order to register certain types of entities a minimum number of shareholders is required. Also, company shareholders are subject to various requirements, among which submitting a minimum share capital when setting up the company. However, they must also comply with certain regulations which imply fulfilling their duties towards the company and its staff. Shareholders in Singapore can be divided into main shareholders who also have the right to vote at the Annual General Meeting (AGM) and minority shareholders who do not have this right. This is one of the main reasons, not seldom disputes may arise between them.
The main regulatory framework providing for the resolution of shareholder disputes in Singapore is the Company Law which under Section 5 specifies how these cases can be settled. According to Section 5, shareholders are entitled to seek a remedy in a dispute by filing for an order with a Singapore court. Based on the evidence submitted by the litigant parties, the judge will decide the measures to be taken in order to resolve the dispute. It must be taken into consideration that the Company Act specifies that the court’s interest is that the company’s shareholders reach an agreement for their dispute and will not rule in cases related to the management of the company.
It is best to verify with a law firm in Singapore the specific provisions of Section 5 in the Company Law.
Court settlement is not the only solution shareholders may appeal to when dealing with a litigation case, as they can also use alternative dispute resolution methods, such as arbitration and mediation. In both cases, the arbitrator or the mediator will try to reconcile the litigant parties.
A common practice nowadays is to draft a shareholders’ agreement in order to try and avoid disputes. These agreements can contain clauses on how shareholder disputes can be settled or can provide for the method to be used in order to resolve them.
For complete information about dispute resolution methods for settling shareholder disputes or for assistance in drafting shareholders’ agreements, you can contact our Singapore lawyers.
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