Two nurses and a nephrologist set up a dialysis centre together in 2021. Within two years the relationship had broken down, and the nurses sued, claiming an oral agreement had been broken and that they had been oppressed as minority shareholders. The High Court dismissed every claim. The judgment is a clear guide to how founders’ informal promises are tested in court.
The dispute
The company was incorporated in May 2021. One nurse held 33% of the shares, partly for her husband, who was also a nurse and worked as the operations lead. The doctor held 67%. The claimants said that at a meeting in May 2021 the three agreed that profits would be split equally between the doctor on one side and the couple on the other, that important decisions needed both shareholders’ agreement, and that no one would draw fees until the business was profitable.
In 2022 the doctor took a medical director’s fee, the wife was retired as a director, and her husband was removed as company secretary and later dismissed. The couple said they were shut out of the company and its finances, and that no dividends were declared while the doctor and a new managing director were paid well.
Was there a founding agreement?
The court found that the claimants had not proved the agreement (at [35], [40]). There were no contemporaneous documents recording the meeting. The later conduct relied on was ambiguous and could be explained in other ways (at [36]). Some of it pointed the other way: the husband was only made company secretary a year later, and his own message referred to “profit 40%” rather than an equal split (at [37]). Letters from the claimants’ earlier solicitors complaining of oppression did not mention the agreement at all (at [38]–[39]). The misrepresentation claim depended on the same agreement and failed with it (at [41]–[42]).
The oppression claim
The court considered the oppression claim on its own merits, since parts of it did not depend on the founding agreement (at [46]–[47]). It applied the test of commercial unfairness: a visible departure from the standards of fair dealing the shareholders were entitled to expect.
- Standing. The husband was not a registered shareholder and could not sue in his own right. His wife could, and could rely on his economic interest in the shares she held for him (at [49]–[53]).
- A personal relationship, but no proven expectations. The court accepted there was mutual trust and confidence between the founders (at [69]–[72]). But the claimants had pleaded their expectations only by reference to the founding agreement, and were held to that case (at [73]–[74]).
- Removal. Removing the wife as director and the husband as secretary was not unfair. The husband had been preparing a competing dialysis centre, which justified the removals (at [86]–[90]).
- Information. Shareholders have no general right to financial information outside general meetings beyond what the Companies Act provides, and the documents were eventually given (at [95]–[98]).
- Remuneration and dividends. The doctor’s fee and salary were not excessive (at [116]). No dividend could be paid for a year in which the company made a loss, and the court would not second-guess the directors’ decision for the profitable year, particularly where the shareholder had not asked for a dividend or called a meeting (at [117]–[121]).
Lessons for founders
- Write it down. If founders agree on profit shares, vetoes or roles, put it in a shareholders’ agreement. An oral bargain is hard to prove years later.
- Plead every expectation. If a claim rests on expectations that do not depend on a disputed agreement, they must be pleaded separately.
- Use your shareholder rights. Ask for a dividend, requisition a meeting, and put requests in writing. The court noticed when this had not been done.
- Watch your own conduct. Starting a competing business can justify the very exclusion you complain of.
Common questions
Can an oral shareholders’ agreement be enforced in Singapore?
Yes, if it is proved. The court looks first at documents, then at what the parties did at the time, then at oral evidence. Later conduct alone is usually too ambiguous to prove that an agreement was made.
Can a nominee shareholder bring an oppression claim?
In this case the court accepted that a registered shareholder holding shares partly for another person could sue under section 216, relying on that person’s economic interest in the shares. The beneficial owner, who was not a registered shareholder, had no standing in his own right.
Do shareholders have a right to dividends?
No. Declaring a dividend is a business decision for the directors, and dividends can only be paid out of profits. A refusal can be oppressive if it is made for an improper purpose or in bad faith, but not otherwise.
Akesh Abhilash is a Singapore disputes lawyer with eleven years in practice, acting in commercial, cross-border and criminal matters before the Court of Appeal, the High Court, the State Courts and international tribunals. Read his profile.