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Case Note: Oral Implied Guarantee Rejected in Shareholder Dispute – SGHC Judgment Issued on 9 April 2025
We were recently instructed as Lead Counsel in a matter involving an experienced Chinese businessman who had invested in a Singapore-incorporated private limited company that promoted Mandarin through educational services.
The company suffered significant losses during the Covid-19 pandemic and eventually ceased operations. Following this, the investor commenced legal proceedings, claiming, among other things, that his two fellow shareholders had effectively guaranteed his shareholder loss via an implied term of their agreement.
The core issue before the High Court was whether such an implied term, said to be agreed orally, could amount to a legally enforceable guarantee.
Lead Counsel, Mr Salem Ibrahim, argued that any such oral promise could not amount to a binding guarantee under Singapore law as it was against section 6(b) of the Civil Law Act 1909, which provides that guarantees must be in writing. The Court agreed and dismissed the claim, finding that the purported implied guarantee was legally untenable.
The key takeaway from this case is that one should be aware that an implied term, usually oral, is a legal fiction. The temptation to characterise oral financial obligations as implied terms that, in substance, amount to a guarantee must be resisted. Such arguments should be avoided in pleadings and firmly challenged when they arise.
This case is reported inRen Xin Wu v Lee Kuan Fung & Chua Chim Kang [2025] SGHC 63.
We at Salem Ibrahim LLC stand ready to advise and help you to take this step forward with employing the appropriate steps to pursue your interest, whether as a minority shareholder, or on behalf of the company.
Salem Ibrahim LLC is your go-to business lawyer in Singapore.