PP v Lew Syn Pau: Financial Assistance for Share Acquisition & Corporate Veil
In Public Prosecutor v Lew Syn Pau and Wong Sheung Sze, the High Court of Singapore acquitted Lew Syn Pau and Wong Sheung Sze of charges related to authorizing financial assistance for the acquisition of shares in Broadway Industrial Group Ltd (BIGL). The court, presided over by Sundaresh Menon JC, found that the financial assistance was provided by Compart Asia Pacific Ltd, a subsidiary of BIGL, and not directly by BIGL itself. The court upheld the principle of separate legal personalities, determining that the prosecution failed to prove that BIGL had given the financial assistance in question.
1. Case Overview
1.1 Court
High Court1.2 Outcome
Mr. Wong and Mr. Lew are acquitted of the charges brought against each of them.
1.3 Case Type
Criminal
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Lew Syn Pau case: Court acquitted accused of authorizing financial assistance for share acquisition, upholding separate legal personalities.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Public Prosecutor | Prosecution | Government Agency | Case Dismissed | Lost | Ng Cheng Thiam, Amarjit Singh, Ong Luan Tze |
| Lew Syn Pau | Defendant | Individual | Acquitted | Won | Michael Hwang, Nicholas Narayanan |
| Wong Sheung Sze | Defendant | Individual | Acquitted | Won | K Shanmugam, Kenneth Pereira, Eugene Thuraisingam |
| Silver Touch Holding Pte Ltd | Other | Corporation | |||
| Tan Beng Phiau Dick | Other | Individual |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Sundaresh Menon | Judicial Commissioner | Yes |
4. Counsels
| Counsel Name | Organization |
|---|---|
| Ng Cheng Thiam | Deputy Public Prosecutor |
| Amarjit Singh | Deputy Public Prosecutor |
| Ong Luan Tze | Deputy Public Prosecutor |
| Michael Hwang | Michael Hwang |
| Nicholas Narayanan | Michael Hwang |
| K Shanmugam | Allen & Gledhill |
| Kenneth Pereira | Allen & Gledhill |
| Eugene Thuraisingam | Allen & Gledhill |
4. Facts
- Wong Sheung Sze was the executive chairman of Broadway Industrial Group Ltd (BIGL).
- BIGL needed to redeem Redeemable Cumulative Convertible Preference Shares (RCCP Shares).
- Lew Syn Pau was engaged to find investors for BIGL.
- Dick Tan Beng Phiau expressed interest in investing in BIGL through Silver Touch Holding Pte Ltd.
- Compart Mauritius, a subsidiary of BIGL, provided a loan to Lew Syn Pau.
- Lew Syn Pau then loaned $4 million to Tan Beng Phiau, which was used to purchase BIGL shares.
- BIGL paid Capital Connections a commission for the successful share placement.
5. Formal Citations
- Public Prosecutor v Lew Syn Pau and Another, CC 14/2006, [2006] SGHC 146
6. Timeline
| Date | Event |
|---|---|
| Salomon v Salomon & Company, Limited decision issued | |
| BIGL issued Redeemable Cumulative Convertible Preference Shares to 3i Group plc | |
| BIGL tried to obtain credit from United Overseas Bank | |
| BIGL appointed PricewaterhouseCoopers Corporate Finance Pte Ltd as financial advisor | |
| BIGL engaged Capital Connections Pte Ltd to find investors | |
| Silver Touch Holding Pte Ltd incorporated | |
| Share placement agreement executed between Silver Touch and BIGL | |
| BIGL made public announcement regarding share placement to Silver Touch | |
| BIGL made public announcement regarding share placement to Silver Touch | |
| UOB offered loan of $6m to BIGL | |
| Formal agreement reached between 3i and BIGL regarding early redemption of RCCP Shares | |
| Mr. Tan informed BIGL of difficulty in raising funds | |
| Mr. Lew took director’s loan of $4.2m from Compart Mauritius | |
| Mr. Lew and Mr. Tan signed personal loan agreement | |
| Mr. Lew handed over cheque for $4m to Mr. Tan | |
| 20 million BIGL shares issued in the name of Silver Touch | |
| Mr. Tan failed to repay Mr. Lew his loan | |
| Mr. Wong and his wife provided Mr. Lew with a total sum of $3m | |
| Repayments made to Compart Singapore | |
| Judgment reserved |
7. Legal Issues
- Financial Assistance for Acquisition of Shares
- Outcome: The court held that the financial assistance was provided by the subsidiary, not the holding company, and acquitted the accused.
- Category: Substantive
- Sub-Issues:
- Indirect Financial Assistance
- Use of Subsidiary Funds
- Piercing the Corporate Veil
- Outcome: The court upheld the principle of separate legal personality and declined to pierce the corporate veil.
- Category: Substantive
- Sub-Issues:
- Separate Legal Personality
- Control vs. Ownership
8. Remedies Sought
- Fine not exceeding $20,000
- Imprisonment for a term not exceeding 3 years
9. Cause of Actions
- Contravention of section 76(1)(a)(i)(A) of the Companies Act (Chapter 50, 1994 Revised Edition)
- Abetment of contravention of section 76(1)(a)(i)(A) of the Companies Act (Chapter 50, 1994 Revised Edition)
10. Practice Areas
- Corporate Law
- Criminal Litigation
11. Industries
- Manufacturing
- Financial Services
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Salomon v Salomon & Company, Limited | House of Lords | Yes | [1897] AC 22 | England and Wales | Cited as the foundational case establishing the principle of separate legal personality in company law. |
| Toh Teong Seng v PP | High Court | Yes | [1995] 2 SLR 273 | Singapore | Cited for the application of the 'mischief' rule in statutory interpretation. |
| In re VGM Holdings, Limited | Chancery Division | No | [1942] Ch 235 | England and Wales | Cited in relation to the objective of preventing parties gaining control of a company with substantial assets using the funds of the company itself to do so. |
| Victor Battery Company, Limited v Curry’s Limited | Chancery Division | No | [1946] Ch 242 | England and Wales | Cited in relation to the objective of preventing parties gaining control of a company with substantial assets using the funds of the company itself to do so. |
| Wallersteiner v Moir | Court of Appeal | No | [1974] 1 WLR 991 | England and Wales | Cited in relation to the objective of preventing parties gaining control of a company with substantial assets using the funds of the company itself to do so. |
| PP v Taw Cheng Kong | Court of Appeal | Yes | [1998] 2 SLR 410 | Singapore | Cited for the principle that Singapore legislation does not have extra-territorial application. |
| Forward Food Management Pte Ltd v PP | High Court | Yes | [2002] 2 SLR 40 | Singapore | Cited for the approach to interpreting penal provisions. |
| Charterhouse Investment Trust Ltd v Tempest Diesels Ltd | High Court | Yes | [1986] BCLC 1 | England and Wales | Cited for the elements required to establish an offence under s 54 of the Companies Act and the interpretation of 'financial assistance'. |
| Burton v Palmer | Supreme Court of New South Wales | Yes | (1980) 5 ACLR 481 | Australia | Cited for the test to determine whether there was financial assistance within the meaning of the statutory provision. |
| Darvall v North Sydney Brick & Tile Co Ltd | Supreme Court of New South Wales | Yes | (1987) 12 ACLR 537 | Australia | Cited for the clarification of the approach taken in Burton v Palmer regarding the diminution of financial resources. |
| Darvall v North Sydney Brick & Tile Co Ltd | Court of Appeal | Yes | (1989) 15 ACLR 230 | Australia | Cited for applying the depletion of assets test advanced in Burton. |
| Re National Mutual Royal Bank Ltd | Supreme Court of Queensland | No | (1990) 3 ACSR 94 | Australia | Cited as a case that doubted the test in Burton v Palmer. |
| ZBB (Australia) Ltd v Allen | New South Wales Supreme Court | Yes | (1991) 4 ACSR 495 | Australia | Cited for the finding of financial assistance in connection with shares subscribed for pursuant to an underwriting agreement. |
| Dempster v National Companies and Securities Commission | Full Court of the Supreme Court of Western Australia | No | (1993) 10 ACSR 297 | Australia | Cited as a case that declined to adopt the test in Burton v Palmer. |
| Milburn v Pivot Ltd | Federal Court of Australia | Yes | (1997) 15 ACLC 1,520 | Australia | Cited for the propositions in relation to the prohibition against a company giving financial assistance. |
| Tallglen Pty Ltd v Optus Communications Pty Ltd | New South Wales Supreme Court | Yes | (1998) 28 ACSR 610 | Australia | Cited for following Burton and resolving the debate between cases that advocated the Burton approach and those that appeared to spurn it. |
| Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2) | Court of Appeal | Yes | [1980] 1 All ER 393 | England and Wales | Cited for the proposition that financial assistance could be found even if the company’s balance sheet is undisturbed. |
| Intraco Ltd v Multi-Pak Singapore Pte Ltd | Court of Appeal | Yes | [1995] 1 SLR 313 | Singapore | Cited for the holding that there was no prohibited financial assistance on the basis that the transaction was entered into bona fide in the commercial interest of the company. |
| Lipschitz No v UDC Bank Ltd | Appellate Division of the Supreme Court | Yes | [1979] 1 SA 789 | South Africa | Cited for the meaning of 'financial' assistance. |
| Gradwell (Pty) Ltd v Rostra Printers Ltd | Appellate Division of the Supreme Court | Yes | [1959] 4 SA 419 | South Africa | Cited for the impoverishment test to determine if there was financial assistance. |
| Armour Hick Northern Ltd v Armour Trust Ltd | High Court | Yes | [1980] 3 All ER 833 | England and Wales | Cited for the principle that a company paying its own debt does not give financial assistance. |
| Anglo Petroleum v TFB (Mortgages) Ltd | High Court | Yes | [2006] EWHC 258 | England and Wales | Cited for the principle that it is lawful for a company to assist the repayment of its own indebtedness by providing security. |
| Arab Bank plc v Merchantile Holdings Ltd | High Court | Yes | [1994] Ch 71 | England and Wales | Cited for the principle that the giving of financial assistance by a subsidiary does not ipso facto constitute the giving of such assistance by the parent company. |
| Walker v Wimborne | High Court of Australia | Yes | (1975) 137 CLR 1 | Australia | Cited for the principle that each company in a group is a separate and independent legal entity. |
| Industrial Equity Ltd v Blackburn | High Court of Australia | Yes | (1977) 17 ALR 575 | Australia | Cited for the principle that the provisions of the Companies Act do not operate to deny the separate legal personality of each company in a group. |
| Briggs v James Hardie & Co Pty Ltd | New South Wales Court of Appeal | Yes | (1989) 16 NSWLR 549 | Australia | Cited for the observations on the piercing of the corporate veil. |
| DHN Food Distributors Ltd v Tower Hamlets London Borough Council | Court of Appeal | No | [1976] 1 WLR 852 | England and Wales | Cited as a case where it was suggested that there is a general tendency to ignore the separate legal entities of various companies within a group. |
| Woolfson v Strathclyde Regional Council | House of Lords | No | (1978) 38 P&CR 521 | Scotland | Cited as a case where the actual decision in DHN was considered doubtful. |
| Bank of Tokyo Ltd v Karoon | Court of Appeal | Yes | [1987] AC 45 | England and Wales | Cited for the principle that the distinction between parent and subsidiary company is, in law, fundamental and cannot be bridged. |
| Adams v Cape Industries plc | Court of Appeal | Yes | [1990] Ch 433 | England and Wales | Cited for the principle that the court is not entitled to lift the corporate veil merely because the corporate structure has been used so as to ensure that the legal liability will fall on another member of the group. |
| Win Line (UK) Ltd v Masterpart (Singapore) Pte Ltd | High Court | Yes | [2000] 2 SLR 98 | Singapore | Cited for affirming the principle that the doctrine of separate legal personality is not displaced simply by virtue of the fact that the companies in question are organised as a single economic unit. |
| Yeow Fook Yuen v Regina | High Court | No | [1965] 2 MLJ 80 | Malaysia | Cited for the principle that a criminal act could not be decriminalised by subsequent approval. |
| Hooper v Kerr, Stuart & Co Limited | N/A | Yes | (1900) 83 LT 729 | England and Wales | Cited to show that ratification was not only permissible but had the effect of retrospectively clothing an initially unauthorised act with the requisite authority. |
| Charterbridge Corporation Ltd v Lloyds Bank Ltd | Chancery Division | Yes | [1970] Ch 62 | England and Wales | Cited for the principle that it would have been legitimate for Compart Mauritius to have made the loan if it had in fact acted on this premise. |
| Haw Tua Tau v PP | High Court | Yes | [1980–1981] SLR 73 | Singapore | Cited for the test prescribed by Lord Diplock at the close of the Prosecution’s case. |
| Chan Kin Choi v PP | N/A | Yes | [1991] SLR 34 | Singapore | Cited for the approach to be taken to the evidence at the close of the Prosecution’s case. |
| PP v Abdul Rashid | N/A | Yes | [1993] 3 SLR 794 | Singapore | Cited for the approach to be taken to the evidence at the close of the Prosecution’s case. |
| PP v IC Automation (S) Pte Ltd | N/A | Yes | [1996] 3 SLR 249 | Singapore | Cited for the approach to be taken to the evidence at the close of the Prosecution’s case. |
| Skelton v South Auckland Blue Metals Ltd | Supreme Court | Yes | [1969] NZLR 955 | New Zealand | Cited for the mischief that the section is aimed at is the improper depletion of a company’s assets to the detriment of its creditors. |
| Simmah Timber Industries Sdn Bhd v David Low See Keat | High Court | Yes | [1999] 5 MLJ 421 | Malaysia | Cited for the question to ask is, ‘Has the company’s financial resources been diminished, including its future resources, as a result of this lease-back agreement?’ |
| Independent Steels Pty Ltd v Ryan | Supreme Court | Yes | [1990] VR 247 | Australia | Cited as an example of ways in which assistance can be given. |
| The Maritime Trader | N/A | Yes | [1981] 2 Lloyd’s Rep 153 | N/A | Cited for the owner of a company does not own the company’s assets. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50, 1994 Rev Ed) s 76(1)(a)(i)(A) | Singapore |
| Companies Act (Cap 50, 1994 Rev Ed) s 76(5) | Singapore |
| Companies Act (Cap 50, 1994 Rev Ed) s 408(3)(b) | Singapore |
| Penal Code (Chapter 224, 1985 Revised Edition) s 109 | Singapore |
| Criminal Procedure Code (Cap 68, 1985 Rev Ed) s 121 | Singapore |
| Interpretation Act (Cap 1, 2002 Rev Ed) s 9A(1) | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Financial assistance
- Share acquisition
- Corporate veil
- Separate legal personality
- Subsidiary
- Holding company
- Directors' duties
- Redeemable Cumulative Convertible Preference Shares
- Consolidated accounts
- Group of companies
15.2 Keywords
- Financial assistance
- Share acquisition
- Corporate veil
- Companies Act
- Criminal
- Singapore
- Subsidiary
- Holding company
16. Subjects
- Company Law
- Criminal Law
- Financial Assistance
- Corporate Governance
17. Areas of Law
- Company Law
- Criminal Law