The Anatomy of Singapore's Statutory Derivative Actions

Abstract

The derivative action is widely acknowledged to be an important part of corporate law and governance. Over a quarter century after the statutory derivative action landed in Singapore and almost five years after reforms extended it to listed companies, the time is ripe to investigate a fundamental but long-neglected question: what is the reality of Singapore’s statutory derivative action? Drawing on unpublished data on Singapore companies from government sources, and a hand-collected dataset of all publicly available judgments on statutory derivative actions in Singapore from 1993 to 2018, my study reveals that litigation rates are generally low. Derivative suits involving listed companies are completely absent, and the vast majority of actions are instituted by shareholders in closely-held companies. Shedding light on this divergence, this Article explains why derivative actions remain rare and unlikely for listed companies in Singapore, and also offers insights into how context-specific, non-financial factors affect shareholder litigation. Finally, this Article gives an account of how the statutory derivative action plays a distinctive and valuable role in closely-held companies—in spite of poor financial incentives to sue, and the availability of alternative, seemingly superior shareholder remedies.

Samantha S Tang

Lecturer

My research interests include corporate law, shareholder activism, and ESG investing.