Friday 2 February 2018

Singapore: High court finds 'insider reverse piercing' contrary to principle and unsupported by authority

The High Court decision Jhaveri Darsan Jitendra v Salgaocar Anil Vassudeva [2018] SGHC 24, handed down earlier this week and available here (pdf), is noteworthy because of the discussion it contains of 'reverse piercing' and, in particular, 'insider reverse piercing'. The latter arises where a controlling or dominant shareholder attempts to disregard the company's separate legal personality in order that they can bring or benefit from company claims against third parties. Such piercing was held by the court to be unsupported by authority and contrary to the fundamental principle that the company is an entity separate from its shareholder.  Moreover, Kannan Ramesh J. stated (at para. [74]):
Where one chooses to conduct one’s affairs using a company, one takes advantage of the independent legal status of the company and the consequences that flow from that, including the fact that the property of the company does not belong to the shareholder and vice versa. It did not seem correct as a matter of principle that, having chosen to claim the benefits of separate legal personality, a shareholder could then avoid the disadvantages of the same by inviting the court to allow insider reverse piercing".

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