14 May, 2015
In Lim Kok Leong v Seen Joo Company Pte Ltd & Ors [2014] SGHC 239 (14 November 2014), the Singapore High Court held that an application for an order to compel the production of company records under section 199 of the Companies Act can be made by a director against both the company and the other directors.
Facts
The Plaintiff had been a “sleeping” director of the First Defendant, Seen Joo Company Pte Ltd (the “Company”) since 1997 and had not been involved in the management or the day-to-day operations of the Company. The Second to Sixth Defendants were also directors of the Company. In July 2014, when the Plaintiff discovered that he had been removed as a director, he sought to inspect the accounting and other records of the Company for the last five years, but his request was not acceded to.
The Plaintiff took out an application under section 199 of the Companies Act (the “CA”) to compel the Company and its directors to allow him access to the Company’s accounting and other records. Section 199 of the CA provides that every company and the directors and managers thereof shall keep records to sufficiently explain the transactions and financial position of the company and those records shall at all times be open to inspection by the directors.
Decision
The Singapore High Court allowed the Plaintiff’s application. With respect to the application against the directors, the Court noted as follows:
- Unlike the UK and Australian legislative equivalents to section 199 of the CA, the Singapore provision expressly extended the responsibility personally to the directors and managers of the company by use of the words “Every company and the directors and managers thereof shall…” in the first line of section 199(1).
- Having regard to the legislative purpose of section 199 of the CA, the Court held that it was justifiable to include the other directors of the company as defendants. This was because the company’s directors were officers of the company and were accordingly persons whom section 199 intended to be responsible for compliance, which included making records of the company available for inspection. Section 199 provided a statutory right that was in addition to the common law right of a director to inspect the company’s documents.
Accordingly, the Court held that with regard to the wording of section 199, the Singapore position must be that Parliament intended for directors to be able to apply to court for an inspection order against not just the company but also their fellow directors.
Our Comments / Analysis
Making an application against the directors allows the order to be made against them as well. This would mean that a failure to comply with the order may be enforced against the directors personally and not simply through the company.
For further information, please contact:
Annabelle Yip, Partner, Wong Partnership
annabelle.yip@wongpartnership.com
Joy Tan, Partner, WongPartnership
joy.tan@wongpartnership.com
