Seah v Connectus: Winding Up Application Based on Insolvency and Just & Equitable Grounds

In the case of Seah Chee Wan and Seah Shiang Ping v Connectus Group Pte Ltd, the Singapore High Court addressed a winding-up application by shareholders Seah Chee Wan and Seah Shiang Ping against Connectus Group. The application was based on the company's alleged insolvency and the argument that it was just and equitable to wind it up due to a breakdown in the relationship between shareholders. Ang Cheng Hock J did not grant the winding up order on insolvency grounds, but directed the parties to file submissions on whether a buyout order should be made.

1. Case Overview

1.1 Court

High Court of the Republic of Singapore

1.2 Outcome

Winding up order not granted on insolvency grounds; parties directed to submit on potential buyout order.

1.3 Case Type

Insolvency

1.4 Judgment Type

Judgment

1.5 Jurisdiction

Singapore

1.6 Description

Singapore High Court considers a winding-up application for Connectus Group based on insolvency and just & equitable grounds due to shareholder disputes.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Seah Chee WanPlaintiffIndividualWinding up order not granted on insolvency groundsPartialRajiv Nair
Seah Shiang PingPlaintiffIndividualApplication withdrawnWithdrawnRajiv Nair
Connectus Group Pte LtdDefendantCorporationWinding up order not granted on insolvency groundsNeutral
APBA Pte LtdOtherCorporationOtherNeutralKhoo Ching Shin Shem, Teo Hee Sheng, Christian, Esther Yong

3. Judges

Judge NameTitleDelivered Judgment
Ang Cheng HockJudgeYes

4. Counsels

Counsel NameOrganization
Rajiv NairGKS Law LLC
Khoo Ching Shin ShemFocus Law Asia LLC
Teo Hee ShengFocus Law Asia LLC
ChristianFocus Law Asia LLC
Esther YongFocus Law Asia LLC

4. Facts

  1. Connectus Group was incorporated on 16 August 2012 to provide human resource services.
  2. The initial shareholders were AS, SS, LTH, and APBA, with APBA holding a 29.8% stake.
  3. In July 2013, LTH sold his shares to Ong Poh Suan (SO), wife of Edwin Lim (EL).
  4. EL became the CEO of Connectus Group.
  5. Connectus Group established a joint venture in China in 2013.
  6. EL made unauthorised withdrawals of company funds and resigned as CEO in July 2017.
  7. AS and SS commenced proceedings against Connectus Group seeking recovery of outstanding shareholders’ loans and interest due to them.

5. Formal Citations

  1. Seah Chee Wan and another v Connectus Group Pte Ltd, Companies Winding Up No 78 of 2018, [2019] SGHC 228

6. Timeline

DateEvent
Connectus Group incorporated
Shareholders’ Agreement entered into
Connectus Group entered into a Cooperation Agreement with Shanghai Lethic Business Consulting Co Ltd
Lim Tien Ho sold his shares in Connectus Group to Ong Poh Suan
Shanghai Connectus Group Co Ltd established
Connectus Group executed an agreement with Shanghai Lethic Talent Services Co., Ltd
AS, SS and PN discovered that EL had made unauthorised withdrawals of the company’s funds
Edwin Lim resigned as the CEO of the company
Edwin Lim was made a bankrupt by Resorts World Sentosa
PN started pressing AS and SS to account for the state of affairs of the company
AS and SS commenced proceedings against Connectus Group seeking recovery of outstanding shareholders’ loans and interest due to them
AS and SS discontinued proceedings against Connectus Group
TSHK commenced proceedings in Singapore against Connectus Group, seeking recovery of its loans
AS cancelled the “consultancy fee” agreement with SLTS
The landlord of the office premises served a statutory demand on Connectus Group for the amount of S$67,743.10 due as unpaid rent
APBA requisitioned an EGM of the company to consider resolutions to remove AS and SS as directors of the company
EGM was dissolved for being inquorate
EGM was again dissolved due to a lack of quorum given the absence of AS and SS
Statutory demand served on Connectus Group by AS
APBA filed OS 449/2018 seeking the court’s leave under s 182 of the Act to convene an EGM of Connectus Group without the necessary quorum
AS and SS filed CWU 78/2018, seeking to wind up Connectus Group
All staff left in the company, as all of them had resigned
Hearing of the evidence
Judgment reserved
Judgment delivered

7. Legal Issues

  1. Insolvency
    • Outcome: Court found Connectus Group to be cash flow insolvent but declined to wind up the company on this ground.
    • Category: Substantive
    • Sub-Issues:
      • Cash flow test
      • Balance sheet test
      • Disputed debt
      • Cross-claim for breaches of fiduciary duties
  2. Just and Equitable Winding Up
    • Outcome: Court found grounds for winding up under s 254(1)(i) of the Act have been established, but directed parties to file submissions on whether a buyout order should be made.
    • Category: Substantive
    • Sub-Issues:
      • Quasi-partnership
      • Breakdown of trust and confidence
      • Management deadlock
      • Loss of substratum

8. Remedies Sought

  1. Winding Up Order

9. Cause of Actions

  • Winding Up

10. Practice Areas

  • Commercial Litigation
  • Insolvency

11. Industries

  • Human Resources

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Encus International Pte Ltd (in compulsory liquidation) v Tenacious Investment Pte Ltd and othersHigh CourtYes[2016] 2 SLR 1178SingaporeCited for the cash flow test and balance sheet test for determining insolvency.
Re Great Eastern Hotel (Pte) LtdHigh CourtYes[1988] 2 SLR(R) 276SingaporeCited for the definition of cash flow test and balance sheet test.
Chip Thye Enterprises Pte Ltd (in liquidation) v Phay Gi Mo and othersHigh CourtYes[2004] 1 SLR(R) 434SingaporeCited for the principle that regard must be given to all the evidence which appears relevant to the question of insolvency.
Metalform Asia Pte Ltd v Holland Leedon Pte LtdHigh CourtYes[2007] 2 SLR(R) 268SingaporeCited for the principle that the court will restrain the winding-up petition as it is an abuse of process for the creditor to try to enforce a disputed debt.
Mann v GoldsteinUnknownYes[1968] 1 WLR 1091England and WalesCited for the principle that the court will restrain the winding-up petition as it is an abuse of process for the creditor to try to enforce a disputed debt.
Pacific Recreation Pte Ltd v S Y Technology Inc and another appealCourt of AppealYes[2008] 2 SLR(R) 491SingaporeCited for the applicable standard for determining the existence of a substantial dispute.
Ebrahimi v Westbourne Galleries LtdHouse of LordsYes[1973] AC 360United KingdomCited for the definition of a quasi-partnership.
Sim Yong Kim v Evenstar Investments Pte LtdCourt of AppealYes[2006] 3 SLR(R) 827SingaporeCited for the definition of a quasi-partnership.
BNP Paribas v Jurong Shipyard Pte LtdCourt of AppealYes[2009] 2 SLR(R) 949SingaporeCited for the discretionary power of the court to order a winding up.
Ting Shwu Ping (administrator of the estate of Chng Koon Seng, deceased) v Scanone Pte Ltd and another appealCourt of AppealYes[2017] 1 SLR 95SingaporeCited for the introduction of Section 254(2A) of the Companies Act.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore
Section 254(1)(e) of the Companies ActSingapore
Section 254(1)(i) of the Companies ActSingapore
Section 254(2A) of the Companies ActSingapore
Section 182 of the Companies ActSingapore
Section 199 of the Companies ActSingapore
Section 216A of the Companies ActSingapore

15. Key Terms and Keywords

15.1 Key Terms

  • Winding up
  • Insolvency
  • Just and equitable
  • Quasi-partnership
  • Shareholders’ agreement
  • Cash flow test
  • Balance sheet test
  • Management deadlock
  • Loss of substratum
  • Breach of fiduciary duty

15.2 Keywords

  • Winding up
  • Insolvency
  • Shareholder dispute
  • Just and equitable
  • Companies Act
  • Singapore

16. Subjects

  • Insolvency
  • Winding Up
  • Company Law
  • Shareholder Disputes

17. Areas of Law

  • Insolvency Law
  • Company Law
  • Winding Up