Create the Future LP & Anor v Pirate Studios Pte. Ltd. & 2 Ors

Facts

Pirate Studios Pte Ltd received investment from the EXS group under a convertible loan agreement and an investor rights agreement (IRA), both dated 3 June 2024. Its constitution was amended so that the founders could appoint Founders Directors and EXS's vehicle, EPIC, could appoint EPIC Directors. Regulation 89(1) required, for a quorum, a majority of the directors including at least one Founders Director and one EPIC Director, and certain Reserved Matters needed the vote of one of each.

On 30 October 2025 EXS gave notice alleging breaches by the founders and stating that the Founders Directors' voting rights were suspended under Art 16.2 of the IRA. After the lenders issued a notice converting part of their loans into equity, the EPIC Directors held a board meeting on 24 November 2025. Neither the Founders Directors nor the two directors appointed by earlier shareholders attended. The four EPIC Directors present passed resolutions, including approving the processing of the conversion, which would apparently make EPIC the majority shareholder.

Two existing shareholders, Create the Future LP and Blackbeard Limited, brought Originating Application No 1402 of 2025 against the company and two EPIC Directors, Eric Norman Solberg and Kyle Roland, seeking a declaration that the resolutions were invalid and an injunction against acting on them.

Issues

1. Whether the board meeting on 24 November 2025 was inquorate and, if so, whether the irregularity caused substantial injustice
2. Whether a term should be implied into the constitution that directors whose voting rights are suspended are disregarded for quorum and voting requirements
3. Whether an injunction should be granted in addition to a declaration

Holding

Philip Jeyaretnam J allowed the application in part. He declared the resolutions passed at the meeting invalid but declined to grant the injunction. Costs were fixed at $20,000 all-in, payable by the second and third respondents to the applicants. The second and third respondents have appealed.

Reasoning

On the first issue, only four of the eight directors attended and no Founders Director was present, so the quorum requirement was not met. A lack of quorum is a procedural irregularity, but following Chang Benety v Tang Kin Fei, where a quorum rule protects the representation of different stakeholders as part of a bargain, its breach prima facie causes substantial injustice. Here the resolutions were adverse to the founders and other shareholders, approving the suspension of the Founders Directors and processing a conversion that would make EPIC the majority shareholder. The argument that the result would have been the same anyway went to whether the quorum rule still applied.

On the second issue, applying the three-step test in Sembcorp Marine Ltd v PPL Holdings Pte Ltd, there was no gap to fill. The constitution expressly dealt with when a director could be excluded for quorum, in cases of conflict of interest, and expressly provided that a suspended director's positive vote was not needed for Reserved Matters, without saying that his attendance was not needed. Nor was the term necessary for business efficacy: deadlock mechanisms, written resolutions and shareholder decisions remained available. The IRA notice itself did not suspend the Founders Directors' right to attend. Unparticularised complaints of conflict did not amount to a good faith judgment by the other directors excluding them.

On the third issue, an injunction is discretionary, and the declaration disposed of the matter. The parties remained free to pursue their rights under the loan and investor agreements in arbitration. The judge added that a director's refusal to attend in order to frustrate a valid contractual conversion might itself ground a properly notified conflict of interest exclusion.

From the judgment