Corporate Governance in Winding Up — Statutory Derivative Actions and Professional Liquidators

Events in Singapore have shone a spotlight on the rarely discussed issue of corporate governance in a members’ voluntary winding up and the related question of corporate governance in insolvent liquidation. First, a series of related litigation concerning the liquidator’s conduct and the right of minority shareholder/creditor led to the question of whether the statutory derivative action is available in a winding up. The Singapore Court of Appeal concluded that it is not. Second, the recently passed Insolvency, Restructuring and Dissolution Act 2018 continued with the old policy of excluding members’ voluntary winding up from the requirement that the liquidator must be a licensed insolvency professional. This article discusses the two questions within the broader context of corporate governance in winding up. Through analysing the governance structures in winding up and comparing that with governance structures in going concerns, this article supports the Court of Appeal’s decision beyond the specific reasons given in the judgment, and argues that sound governance in members’ voluntary winding up is seriously undermined by allowing non-professionals to act as liquidators.