Shareholders' Reserve Power: Implied Terms and Public Policy

Pey Woan LEE, Singapore Management University


Do shareholders have reserve or residual powers of management when the board is unable or unwilling to act? In Chan Siew Lee v TYC Investment Pte Ltd [2015] 5 SLR 409, the Singapore Court of Appeal answered this question in the affirmative. In so doing, the court employed a contractarian approach, rationalising the power as one that is conferred on shareholders by a term implied in the company’s constitution on the basis of necessity or business efficacy. But a closer review will demonstrate that the court’s analysis, despite its overt reliance on contractual principles, is ultimately of a hybrid nature that takes on board both contractual as well as public policy concerns. This approach aptly reflects the complex nature of the company’s internal workings and warns against a reductionist approach that tackles the issue from a monolithic (contractual) perspective.