Statutory Derivative Action Is Not Available Once A Company Is in Liquidation

06 Apr 2016

In the recent case of Petroships Investment Pte Ltd v Wealthplus Pte Ltd and others and another matter [2016] SGCA 17, the Court of Appeal held for the first time that a statutory derivative action under s 216A of the Companies Act is not available once a company is in liquidation.

The Court of Appeal clarified that when a company enters into liquidation, the duties and powers of management are exercised by the liquidator rather than the directors. It would be up to the liquidator to commence corporate actions. Hence, a derivative action is not available to shareholders.

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Content authored by: Mahesh Rai, Director, Dispute Resolution; and Grace Morgan, Senior Associate, Dispute Resolution