Some Procedural Points for the Statutory Derivative Action

In the recent unreported High Court decision of Abdul Rahim bin Suleiman and another v Faridah binti Md Lazim & 7 Others dated 3 April 2015, Justice Wong Kian Kheong considered an application for leave under section 181A of the Companies Act 1965 to bring a statutory derivative action. I have written a commentary on the statutory derivative action provisions over here before.

The decision is useful in setting out some of the procedural guidelines that must be met in bringing such an action. Some of the significant points are:

  1. A complainant only apply under 181A to bring a new action, to act for the company when the company intervenes in an action, and to defend a pending action against the company.
  2. A complainant cannot seek to apply to act for the company where the suit is already concluded or where the suit is pending (as that suit would be under the control of the present management of the company).
  3. Notice under section 181B must be given to each of the directors. It is not sufficient just to address it to the Board of Directors.
  4.  This decision gave some guidance on what should be in the contents of the section 181B notice and the decision referred to several Canadian cases.
  5.  The application for leave is filed by way of Originating Summons (OS). In the OS, the applicant need only cite the Company itself as the sole Defendant. There is no need to cite the other alleged wrongdoers as parties to the OS. Nonetheless, citing the other alleged wrongdoers was not fatal in this case.
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