EQ Capital Investments Ltd v The Wellness Group Pte Ltd: Winding Up Application for Directors Acting in Own Interests
EQ Capital Investments Ltd sought to wind up The Wellness Group Pte Ltd. The High Court of Singapore, on 25 June 2019, ordered Wellness to be wound up, finding that the directors acted in their own interests and that there was a lack of probity in their conduct. The court determined that the buy-out mechanism in Wellness's Articles of Association would not provide EQ Capital with a fair exit, justifying the winding up order.
1. Case Overview
1.1 Court
High Court of the Republic of Singapore1.2 Outcome
Ordered that Wellness be wound up.
1.3 Case Type
Insolvency
1.4 Judgment Type
Grounds of Decision
1.5 Jurisdiction
Singapore
1.6 Description
Winding up application against The Wellness Group Pte Ltd for directors acting in their own interests. The court ordered the company to be wound up.
1.7 Decision Date
2. Parties and Outcomes
| Party Name | Role | Type | Outcome | Outcome Type | Counsels |
|---|---|---|---|---|---|
| Sunbreeze Group Investments Ltd | Other | Corporation | Application dismissed | Lost | |
| EQ Capital Investments Ltd | Plaintiff | Corporation | Winding up order granted | Won | |
| The Wellness Group Pte Ltd | Defendant | Corporation | Winding up order | Lost |
3. Judges
| Judge Name | Title | Delivered Judgment |
|---|---|---|
| Chua Lee Ming | Judge | Yes |
4. Counsels
4. Facts
- Wellness’ auditors qualified the company’s accounts for FY2009 and FY2010 due to a lack of proper accounting records.
- No audited accounts of Wellness had been prepared since FY2010.
- No annual general meeting of Wellness had been held since 20 May 2012.
- Manoj caused Wellness to borrow S$1.05m and S$3.1m from Sunbreeze without the Vickers Funds’ consent.
- The loan of S$1.05m was used to pay the party-and-party costs ordered against Wellness and Manoj in Suit 187 and Suit 545.
- The loan of S$3.1m was used to pay the costs of the lawyers acting for Wellness and Manoj in Suit 187 and Suit 545.
- The total remuneration and professional fees paid to Manoj for FY2009–FY2011 amounted to S$1.105m, S$750,000 and S$1.07m respectively without the Vickers Funds’ prior written consents.
5. Formal Citations
- EQ Capital Investments Ltd v The Wellness Group Pte Ltd, Companies Winding Up No 62 of 2018, [2019] SGHC 154
6. Timeline
| Date | Event |
|---|---|
| Wellness incorporated | |
| Vickers Funds became shareholders of Wellness | |
| TWG Tea incorporated | |
| Shareholders’ agreement dated | |
| Manoj employed by Wellness as CEO | |
| Shareholders’ agreement addendum dated | |
| EQ Capital became shareholders of Wellness | |
| Manoj and Kanchan transferred their shareholdings in Wellness to Sunbreeze | |
| Manoj started discussions with OSIM regarding investment into TWG Tea | |
| OSIM SPA dated | |
| Shareholders of Wellness passed a resolution authorising the distribution of dividends | |
| Raymond Kong queried whether there were sufficient profits for the distribution of dividends | |
| Last annual general meeting of Wellness held | |
| Manoj tendered his resignation as CEO | |
| TWG Tea’s audited PBT for FY2013 signed off | |
| OSIM purchased all the shares in Paris | |
| TWG Tea proposed a rights issue to raise capital | |
| Manoj informed Wellness’ shareholders that the amount of dividends that had been paid in excess was S$10,997,730.49 | |
| EQ Capital asked for an explanation as to how the distribution of excessive dividends came about | |
| Dr Finian Tan said that the Vickers Funds were willing to return the excess dividends received by them | |
| Dr Finian Tan signed a Board resolution authorising Manoj to appoint lawyers to advise Wellness | |
| Wellness and Manoj commenced Suit No 187 of 2014 | |
| Manoj ignored the Vickers Funds’ and EQ Capital’s requests that Wellness subscribe to the Rights Issue | |
| Manoj ignored Dr Finian Tan’s email and did not take any steps to resolve the issue of the excess dividends | |
| Manoj appointed lawyers to commence Suit 187 | |
| The issue of the excessive dividends was not resolved | |
| Wellness and Manoj commenced Suit No 545 of 2014 | |
| Claims in Suit 187 dismissed | |
| Wellness’ appeal in Civil Appeal No 64 of 2016 dismissed | |
| Dr Finian Tan objected to the use of Wellness’ funds to pay Manoj’s personal liability for the costs | |
| Manoj did not respond to this objection in his reply | |
| Manoj offered to sell Wellness’ shares in TWG Tea to OSIM and Paris | |
| Manoj offered to sell Wellness’ shares in TWG Tea to OSIM and Paris | |
| Sunbreeze, Manoj and Kanchan offered to buy EQ Capital’s shares in Wellness at the price of S$3.69m | |
| Court granted the Vickers Funds leave to withdraw their application | |
| Court granted EQ Capital’s application to be substituted as the plaintiff | |
| Court ordered Wellness to be wound up | |
| Judgment issued |
7. Legal Issues
- Winding up of a company
- Outcome: The court ordered the company to be wound up under ss 254(1)(f) and 254(1)(i) of the Companies Act.
- Category: Substantive
- Sub-Issues:
- Directors acting in their own interests
- Unfair prejudice to minority shareholders
- Lack of probity in directors’ conduct
- Related Cases:
- [2006] SGHC 135
- [2018] 1 SLR 763
- [2007] 1 SLR(R) 46
- [2019] 1 SLR 1046
- Directors' duties
- Outcome: The court found that the directors had breached their duties by acting in their own interests and failing to maintain proper accounting records.
- Category: Substantive
- Sub-Issues:
- Duty to act in the best interests of the company
- Duty to maintain proper accounting records
- Duty to hold annual general meetings
- Minority oppression
- Outcome: The court found that the directors' conduct was grossly unfair to EQ Capital, a minority shareholder.
- Category: Substantive
8. Remedies Sought
- Winding up order
9. Cause of Actions
- Winding up under s 254(1)(f) of the Companies Act
- Winding up under s 254(1)(i) of the Companies Act
10. Practice Areas
- Commercial Litigation
- Insolvency
11. Industries
- No industries specified
12. Cited Cases
| Case Name | Court | Affirmed | Citation | Jurisdiction | Significance |
|---|---|---|---|---|---|
| Re HL Sensecurity Pte Ltd (formerly known as HL Integral Systems Pte Ltd) | High Court | Yes | [2006] SGHC 135 | Singapore | Cited for the principles regarding directors acting in the interests of the members as a whole and the meaning of 'unfair and unjust' in the context of winding up applications. |
| Perennial (Capitol) Pte Ltd and another v Capitol Investment Holdings Pte Ltd and other appeals | Court of Appeal | Yes | [2018] 1 SLR 763 | Singapore | Cited for the principle that unfairness is the foundation of the court’s jurisdiction under s 254(1)(i) and that the court can superimpose equitable considerations on the exercise of legal rights. |
| Summit Co (S) Pte Ltd v Pacific Biosciences Pte Ltd | High Court | Yes | [2007] 1 SLR(R) 46 | Singapore | Cited for the objective test for unfairness in determining whether a majority shareholder’s conduct unfairly prejudiced the minority’s interests. |
| Ma Wai Fong Kathryn v Trillion Investment Pte Ltd and others and another appeal | Court of Appeal | Yes | [2019] 1 SLR 1046 | Singapore | Cited for the principle that the court can wind up a company under s 254(1)(i) where the company’s business has been carried on in a fraudulent manner or there is a lack of probity in the directors’ conduct. |
| The Wellness Group Pte Ltd and another v OSIM International Ltd and others | High Court | No | [2016] 3 SLR 729 | Singapore | Cited to provide background on the previous suits involving Wellness, OSIM, and Manoj, and the findings related to the Profit Swing Clause and the Rights Issue. |
| In re A & BC Chewing Gum Ltd | Court of Appeal | No | [1975] 1 WLR 579 | England and Wales | Cited regarding the application for a stay of the winding up order pending appeal. |
13. Applicable Rules
| Rule Name |
|---|
| No applicable rules |
14. Applicable Statutes
| Statute Name | Jurisdiction |
|---|---|
| Companies Act (Cap 50) | Singapore |
| Section 254(1)(f) of the Companies Act | Singapore |
| Section 254(1)(i) of the Companies Act | Singapore |
| Section 160(1) of the Companies Act | Singapore |
| Sections 175, 197, 199 and 203 of the Companies Act | Singapore |
| Section 269(1) of the Companies Act | Singapore |
15. Key Terms and Keywords
15.1 Key Terms
- Winding up
- Directors' duties
- Minority oppression
- Shareholders' agreement
- Annual general meeting
- Audited accounts
- Profit Swing Clause
- Rights Issue
- Excessive dividends
- Buy-out mechanism
15.2 Keywords
- winding up
- companies act
- directors duties
- minority oppression
- shareholders agreement
17. Areas of Law
| Area Name | Relevance Score |
|---|---|
| Winding Up | 95 |
| Company Law | 80 |
| Minority Oppression | 60 |
| Fiduciary Duties | 40 |
| Contract Law | 30 |
| Arbitration | 10 |
16. Subjects
- Company Law
- Insolvency Law
- Winding Up