The anatomy of Singapore’s statutory derivative action: why do shareholders sue – or not?

Abstract

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 question: what is the reality of Singapore’s statutory derivative action? Drawing on unpublished data on Singapore companies and a hand-collected dataset of all publicly available judgments on statutory derivative actions in Singapore from 1993 to 2018, my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. 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. 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 remedies.