Sometimes you can take things a little too far. Be a tad too greedy.

Singapore’s sovereign wealth fund GIC Pte Ltd and travel & leisure-focussed private equity fund KSL Capital Partners might be accused of such a sin in the wake of the Singapore International Commercial Court’s recent rebuke of their actions as (indirect) majority owners of Maldivian resort operator Soneva Holdings.

At first glance, GIC and KSL essentially did what private equity funds do. They invested a significant sum (USD 225.6m) in a promising business through an investment vehicle (Steele SVA Holdings). When things turned a little ugly, they converted their debt securities into a 74% equity stake and took control of the board. Then, they looked for an exit via a sale of the business. And as liquidity pressures mounted, they caused the group to offer new debt securities to both Steele and minority shareholder SH BVI (controlled by Soneva founder Sonashah Shivdasani). So far, so good.

But there was a problem. Twice previously, GIC and KSL had addressed Soneva’s liquidity needs via an emergency funding mechanism set out in the parties’ shareholders’ agreement at an agreed rate of 15% per annum. This time, however, they eschewed that approach. Instead, (through Steele) they planned to cause Soneva to issue USD 37m of new senior debt securities carrying a coupon of 18% compounded annually, which would need to be mandatorily redeemed by Soneva upon any exit event at a price double the then outstanding principal and accrued coupons.

Understandably, SH BVI objected to that. To it, the funds were simply taking advantage of their recently acquired control of Soneva to unfairly extract maximum value from the business at exit, at SH BVI’s expense.

No doubt the group needed liquidity. But there was no commercial justification for raising USD 37m, nor was there a need for Soneva to accept such onerous terms – Steele could have tested the market for a better deal or funded any required capital injection via the emergency finding mechanism.

Making matters worse, the securities issuance seemed to have been structured in a manner which aimed to deter SH BVI’s participation given the inclusion of an asymmetrical transfer restriction that prevented SH BVI (but not Steele) from pledging its securities as collateral to obtain financing to fund its subscription. Steele hadn’t even bothered to discuss the proposed financing with SH BVI at board level – SH BVI’s directors had been left completely in the dark until just before the issuance.

GIC and KSL (through Steele) protested their innocence. In their view, there was an urgent need for the funding, the securities had been issued in strict compliance with contractually agreed mechanisms, and their terms reflected private equity norms.

But International Justice Anselmo Reyes wasn’t buying that. To him, Steele’s directors had failed to act bona fide in the interests of Soneva as a whole, had wrongly bypassed the applicable emergency funding mechanism, and had excluded SH BVI from meaningful participation in any board deliberations leading to the issuance. Instead, Steele had used its majority control to structure a financing arrangement on terms that were extortionate, disproportionate to the group’s genuine funding needs, and designed to maximise Steele’s extraction of value upon exit at the expense of the minority. That rendered its actions oppressive, and liable to be undone.

For GIC and KSL, that’s an embarrassing outcome. Flagrantly promoting your own interests to the detriment of the business you control isn’t a good look – particularly for a sovereign wealth fund. Credit must go to the Singapore court for being alive to the governance failures and stepping in to protect minority interests.

Exiting on one’s own terms

GIC and KSL first invested in Soneva (via Steele) in 2019, acquiring USD 106m of convertible securities. By 2024, their investment had grown to around USD 225.6m via further debt security subscriptions. Then things turned sour.

Founder Shivdasani said the parties’ fallout was due to his refusal to sell the business and pave a way for the funds to exit their investment. GIC and KSL, however, painted a different picture. They pointed to significant cost overruns, governance failures, and financial mismanagement, as well as their discovery that Shivdasani was an undischarged bankrupt in Thailand, a fact that would have precluded him from acting as a director or being involved in the group’s management. The final straw was Shivdasani’s abrupt resignation, purportedly due to ill-health – an explanation that the funds considered far too convenient insofar as it avoided triggering a founder voluntary departure event under the parties’ shareholders’ agreement, an event which would have allowed Steele to take control of the business.

On the back of those concerns, the funds caused Steele to approach the SICC seeking orders: (i) appointing a valuer to determine Soneva’s market value as a prelude to Steele converting its debt securities into equity; and (ii) confirming that Shivdasani’s resignation constituted a founder voluntary departure. Steele then converted its debt into ordinary shares and became the majority shareholder of Soneva with a 74.% stake (while SH BVI retained 24.8% and a former interim CEO held the balance).

Steele and SH BVI eventually settled their dispute via mediation in May 2025, signing a settlement deed and revised shareholders’ agreement which broadly provided for:

1. Shivdasani to cease all involvement in the group’s business;
2. Steele to be granted the right to appoint a majority of the board of directors, with any written resolutions capable of being passed by a simple majority without support from any SH BVI-appointed director;
3. Steele to be granted the right to affect a marketed sale of Soneva (including SH BVI’s minority interest);
4. SH BVI to relinquish its veto rights over various reserved matters including the issuance of debt securities, emergency funding, and Steele’s right to affect a marketed sale; and
5. an existing emergency funding mechanism (providing for shareholder financing at a 15% coupon where required to address liquidity needs) to be expanded to cover breaches or reasonably expected breaches of any payment obligations, a requirement to provide funding for any capital expenditure commitments, and a shortfall in liquidity in respect of any of the Soneva resorts. To utilize the mechanism, Steele would have the right — acting reasonably, in good faith and in consultation with the board – to assess the nature of any need for emergency funding, determine the appropriate level of funding required, send a written notice to Soneva and the board concerning such funding needs, and concurrently issue an emergency funding request on behalf of Soneva to its shareholders.

Steele then invoked the emergency funding mechanism in May and June 2025 to provide USD 20m of funding. But in August, Steele announced that its next financing round would be implemented outside of the emergency funding mechanism — a new class of senior debt securities would be offered to shareholders with an aggregate facility size of USD 37m and a coupon of 18% per annum (accruing daily and compounding annually), redeemable at Soneva’s option by payment of the subscription price plus all accrued coupons. Importantly, the securities provided that if a mandatory redemption event occurred – defined to include an exit event, liquidation event, or the proposed marketed sale — Soneva would be required to redeem the securities at a price of 2x the outstanding principal and accrued coupons.

SH BVI understandably took issue with those terms, questioning the commercial rationale for both the size of the issuance and the decision to raise it on such onerous terms outside of the agreed emergency funding mechanism. And after Steele pushed forward and advanced USD 12m immediately, SH BVI approached the SICC for buyout orders under section 216(1) of Singapore’s Companies Act, arguing that the affairs of Soneva were being conducted in a manner that was: (i) oppressive; (ii) in disregard of its shareholder’s interests; (iii) unfairly discriminatory; or (iv) otherwise prejudicial to SH BVI.

Strict compliance with terms vs legitimate expectations

To prove Steele’s issuance of the securities was oppressive, SH BVI needed to show that its conduct constituted a visible departure from the standards of fair dealing which minority shareholder SH BVI was entitled to expect. That involved two-pronged examination. First, the legitimate expectations held by SH BVI based upon its legal rights as set out in Soneva’s constitutional documents, shareholders’ agreement and settlement deed needed to be identified. Then, the court needed to consider whether those expectations had been violated in a commercially unfair manner.

SH BVI (represented by Providence Law Asia LLC) argued that it had three legitimate expectations as a minority shareholder in Soneva which had been breached. First, it had legitimately expected that Soneva’s Steele-appointed directors would exercise their powers bona fide in the interests of Soneva as a whole, not as instruments of Steele (and the funds). That expectation had been breached as a result of those directors:

1. issuing the securities without the support of an SH BVI-appointed director (because the securities constituted a related party arrangement as defined under the revised shareholders’ agreement);
2. issuing the securities on extortionate terms designed to extract value from Soneva for Steele’s benefit rather than to serve the genuine financing needs of the group; and
3. deliberately structuring the issuance to prevent SH BVI from subscribing for its share of the securities thanks to a restriction placed on SH BVI (but not Steele) preventing it from raising finance to acquire the securities by assigning or encumbering its rights in them.

Second, SH BVI argued that it had legitimately expected any debt finance sought to address a liquidity need would be raised through the emergency funding mechanism at the agreed rate of 15% per annum without any exit multiplier (rather than outside of that mechanism). And third, it said that it legitimately expected to be given reasonable notice of, and the opportunity to participate meaningfully in, the governance of Soneva; something that hadn’t proved to be the case given the new securities had been issued without its involvement.

Steele (represented by Allen & Gledhill LLP) responded as you might expect it to. First, it denied that the legitimate expectations of the parties extended any further than the express terms of the arm’s length, solicitor-drafted, revised shareholders’ agreement. The securities had been issued in full compliance with those terms, and no SH BVI-appointed director approval was required. SH BVI’s governance rights hadn’t been trampled on; the securities had been issued in accordance with agreed procedures.

Second, it said that the issuance was completely justified. The group had been in acute financial distress when the funds took control in May 2025 – it had defaulted on an Aareal Bank facility and owed approx. USD 120m to lenders and USD 12m to trade creditors who were threatening to discontinue supplies. According to an estimate prepared by Soneva’s then interim CEO, the group required USD 28.7m in emergency funding for May and June alone. And after Steele had made USD 20m available over that time, a Steele-appointed Soneva director then advised that the group actually required total funding of up to USD 53.2m through to September. Given that USD 20m had already been provided, that left a shortfall of USD 33.2m plus refinancing costs.

Third, it said that the terms of the securities weren’t extortionate – they reflected private equity norms insofar that investments in performing businesses should typically earn a minimum 20% IRR for investors and a 2x return on their capital, while investments in underperforming businesses such as Soneva’s should achieve even higher rates. It also denied that the issuance had been structured to deprive SH BVI of a right to participate (after all, SH BVI had been offered the securities on identical terms to Steele) and denied that Steele was bound to use the emergency funding mechanism given that nothing in the shareholders’ agreement prohibited funding being raised by alternative means.

Oppression in the air 

Justice Reyes agreed with the funds that the issuance of the securities didn’t constitute a related party arrangement under the shareholders’ agreement and therefore didn’t require SH BVI support. But that was as good as it got for the funds.

In short, Justice Reyes dismissed each and every element of their other defences, concluding that:

1. Steele could point to no evidence that USD 37m of funding was needed or commercially justified. It had put forward no cashflow models, no board papers, no independent financial assessments, and no contemporaneous records of any deliberation by the directors evidencing how that sum had been arrived at. Its high-level snapshot of anticipated cashflow needs wasn’t much more than a preliminary internal estimate. And the fact that only USD 12m was initially drawn down (with some USD 16m still having been unutilized eleven months later) suggested the funding wasn’t as urgent as alleged;
2. While structuring the unused USD 25m as a line of credit available for future drawdown may have been sensible, the real issue was whether the scale of the commitment and the terms upon which it was made were proportionate to the group’s actual and reasonably anticipated needs at the time. The fact that the terms of the securities meant that the greater the amount committed, the greater the potential extraction of value by Steele upon an exit (on the basis of its 2x redemption mechanism) made it even more important to demonstrate that group actually needed the funding;
3. Steele’s failure to explore alternative (and potentially less onerous) financing sources was also problematic. Steele knew that more than 70 potential lenders had previously offered finance to the group, but it had chosen not to re-approach those lenders to see if funding could now be obtained. That simply wasn’t good enough – just because Soneva’s previous attempts to refinance had proven unproductive didn’t mean that revised attempts after Steele had taken control would also fail;
4. There was no evidence to support the argument that the terms of the securities reflected private equity norms. The internal KSL Capital due-diligence questionnaire presented by Steele did nothing more than record that Steele was targeting that level of recovery. In the absence of any expert evidence or market data, that simply wasn’t good enough. And even if Steele’s 20% IRR benchmark was accepted at face value, the securities in fact provided for an IRR of around 48% on a three-year exit – an extraordinarily high return due to the interaction between an 18% compounding coupon and the 2x redemption multiplier. Steele provided no evidence to justify such a return commercially;
5. Ultimately, the key was whether the issuance materially altered the distribution of exit proceeds between the shareholders and whether SH BVI was being treated oppressively as a result. The short answer was that it did, and SH BVI was. The only conclusion which could be drawn was that the securities were calibrated to maximise value extraction from future sale proceeds rather than simply compensate Steele for financing risk;
6. The fact that the securities had been offered to SH BVI on identical terms to those offered to Steele offered no defence. The formal availability of a right to subscribe didn’t cure underlying unfairness. The issue was whether the terms offered made subscription commercially unattractive or impractical for SH BVI in a manner that did not apply to Steele. That they did – the transfer restriction that prevented SH BVI (but not Steele) from assigning its interest in the securities to financial institutions or lenders had the practical effect of leaving SH BVI unable to pledge its securities as collateral to obtain third-party financing to help fund its subscription, materially impairing its ability to participate in the issuance. There was no commercial justification for that asymmetry – Steele’s suggestion that the restriction was necessary to prevent SH BVI bringing in third parties who could disrupt a sale process made little sense given that these were debt securities over which lenders would obtain no governance rights as part of any security;
7. Steele had no excuse for not providing the funding through the emergency funding mechanism. Admittedly, no term of the revised shareholders’ agreement prohibited alternative funding mechanisms being adopted. But that wasn’t the end of the issue. Steele was under an obligation pursuant to the shareholders’ agreement to act reasonably and in good faith when assessing whether a liquidity need existed — it didn’t have an unfettered discretion to simply decline to recognise such a need if one objectively existed so as to avoid triggering the emergency funding mechanism. On the facts, there was clearly such a need. And that meant Steele should have used the mechanism to provide funding carrying a 15% coupon and no exit multiplier; and
8. Steele had also breached SH BVI’s legitimate expectation of transparency and meaningful board participation. The fact that SH BVI had ceded majority control to Steele didn’t mean that its continuing right to appoint directors could be deprived of meaningful content. The SH BVI directors still needed to be provided with all information necessary to participate effectively in board decisions and their views needed to be considered before any board decisions were finalised. That simply hadn’t happened — SH BVI had been excluded from any board consideration of how capital would be raised and what quantum was required. The terms, structure and size of the securities were unilaterally determined by Steele. And while notice of the issuance was eventually given to SH BVI, by that point the transaction was a fait-accompli because Steele’s directors had already passed a resolution approving the issuance and the terms were already settled.

An embarrassing rebuke

Ultimately, Justice Reyes concluded that Steele’s actions in causing Soneva to issue the securities was a departure from the standards of fair dealing that SH BVI was entitled to expect as a minority shareholder. Steele’s directors had failed to act bona fide in the interests of Soneva as a whole, bypassed the applicable emergency funding mechanism, and excluded SH BVI from meaningful participation in the deliberations leading up to the issuance. Instead, Steele had used its majority control to structure a financing arrangement on terms that were extortionate, disproportionate to the group’s genuine funding needs, and designed to maximise its extraction of value upon exit at the expense of the minority.

In other words, GIC and KSL took control and then acted solely in their own interests.

Some might say that’s hardly a surprise; private equity funds aren’t really known for their benevolence. But acting in your own interests when they’re broadly aligned with those of the business is one thing; doing so to the detriment of the business is another. Corporate governance responsibilities can’t simply be ignored as a desirable exit is prioritized. Acting in strict compliance with contractual terms is no answer to claims that your actions have caused unfair prejudice or oppression. And claiming that you’re just acting like any other private equity investor would have done won’t win many friends.

Prior to joining Debtwire, Ashley was a Partner at DLA Piper in Hong Kong with a practice focused on cross-border restructuring and insolvency matters. Ashley’s team advised lenders, funds, officeholders and debtors on a range of high-profile distressed scenarios across APAC (including in Australia, China, India, Indonesia, Malaysia, the Philippines, Singapore and Thailand) and worked closely with local counsel to coordinate related proceedings in the Caribbean, the UK, and the US. Ashley is a Fellow of INSOL International and is qualified in Australia, Hong Kong, and England & Wales.

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