6 July 2018

Allen & Gledhill LLP successfully represented the plaintiff, Kiri Industries Limited (“Kiri”), in DyStar Global Holdings (Singapore) Pte Ltd v Kiri Industries Ltd & Ors and another suit[1]  (“DyStar Global Holdings”). This is the first ever decision by the Singapore International Commercial Court (“SICC”) on minority oppression and among the initial judgements issued by the SICC since its establishment in 2015.

The case, which involves major players in the dye industry, relates to Kiri’s investment in DyStar Global Holdings (Singapore) Pte. Ltd. (“DyStar”), the headquarters and parent company of the DyStar Group. The majority shareholder in DyStar is Senda International Capital Limited (“Senda”), which is the vehicle through which Zhejiang Longsheng Group Co., Ltd (“Longsheng”), a PRC company, made its investment. Kiri is listed on the Bombay Stock Exchange and the National Stock Exchange, while Longsheng is listed on the Shanghai Stock Exchange.  

The SICC found that there were in fact instances of oppressive conduct, and that Longsheng was in reality the entity behind such conduct. The decision of DyStar Global Holdings provides essential guidance on standards of corporate governance and transparency by which a company should be run. In particular, the SICC opined that as Kiri and Longsheng are publicly listed companies, the standard of governance and transparency required of listed companies permeated down to their subsidiaries and associated companies. The case also emphasises that directors must not put the interest of the majority shareholder who nominated them onto the board above that of the company’s. Hence, the Senda-nominated directors are required to act in the best interest of DyStar despite being nominated by the majority shareholder – this was especially important since Kiri did not secure any special veto or minority protection rights.

On the facts of this case, the SICC found that the oppressive acts of the majority shareholder had caused loss to Dystar. Such acts included Longsheng:

(a) causing DyStar entities to enter into transactions with Longsheng-related entities, such as related party loans and cash pooling arrangements. In December 2014, related party loans from DyStar entities to Longsheng-related entities reached US$102.82 million;

(b) causing the payment of US$2 million to a Senda-nominated director in the form of a special incentive for work allegedly done in 2014; 

(c) failing to re-assign a DyStar patent to DyStar. Instead, Longsheng collected fees from the licensing of the patent to third parties, and exploited the patent to produce its own dyes and earned revenue from the sale of the same;

(d) causing DyStar to pay Longsheng fees amounting to an aggregate sum of US$10.5 million for services which were allegedly rendered. These fees were found to lack bona fides and commercial justification; and

(e) causing the DyStar board not to declare dividends even though the company made total profits of US$380.53 million between 2013 and end June 2017.

Following the SICC’s finding that there had been minority oppression, Senda has been ordered to buy out Kiri’s shareholding in DyStar. Further, the Court has ordered that the losses caused by the oppressive acts are to be written back into the value of the shares in DyStar.  

The next phase of the court proceedings pertains to how the valuation of the shares should be carried out. This raises various issues including how the valuation should be undertaken and whether a discount should be factored into the valuation given that Kiri is a minority shareholder.

The Allen & Gledhill team representing Kiri was led by Partner Dinesh Dhillon and comprises Partners Lim Dao Kai and Margaret Joan Ling, and Counsel Ivan Lim. 

[1] [2018] SGHC(I) 06


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