Director Duties Company Law
Achem Pte Ltd (Achem) was in the business of trading in industrial chemicals. The company was founded by Heng and Tan. Both were directors and shareholders of the company. Other than Heng and Tan, the other shareholders include Heng’s and Tan’s relatives and some of these relatives were also employees of Achem. Employee turnover was low and every employee was treated as part of one big family.
After several years, Tan decided to sell his 55% stake in Achem to Union Pte Ltd (Union) because he was excited about a different business opportunity. Initially, Tan had planned to sell his shares to Union and exit Achem’s board. Heng and Union thought it would be useful to keep Tan on Achem’s board as he had many business contacts. He agreed to remain as director of Achem on account of his friendship with Heng and received nly a nominal director’s fees per annum. [Tan – non-exec Dir, diff standard expected]
Union was, at the time it was negotiating with Tan on the purchase of his shares, a company in expansion phase. Its investment in Achem was only a small part of its expansion plan.
Union was also deliberating on whether to expand its operations in Vietnam. As Union knew it was going to apply for a bank loan to fund its investment in Vietnam, it discussed with
Heng and Tan, on the understanding that they were to remain as directors of Achem, whether they could agree to procure Achem to stand as guarantor for Union’s bank loan
[duty to retain discretion, is this best interest of company? Equiticorp?]. Heng and Tan signed a contract with Union stating they would procure Achem to stand as guarantor for
Union’s bank loan. It turned out that eventually Achem did not stand as guarantor because
Union shelved the plan to expand in Vietnam.
After Union took over the company, the board of directors of Achem comprised Heng, who was also Achem’s Chief Executive Officer (CEO) and two non-executive directors, namely,
Ong and Tan. Ong was Chief Financial Officer
After several years, Tan decided to sell his 55% stake in Achem to Union Pte Ltd (Union) because he was excited about a different business opportunity. Initially, Tan had planned to sell his shares to Union and exit Achem’s board. Heng and Union thought it would be useful to keep Tan on Achem’s board as he had many business contacts. He agreed to remain as director of Achem on account of his friendship with Heng and received nly a nominal director’s fees per annum. [Tan – non-exec Dir, diff standard expected]
Union was, at the time it was negotiating with Tan on the purchase of his shares, a company in expansion phase. Its investment in Achem was only a small part of its expansion plan.
Union was also deliberating on whether to expand its operations in Vietnam. As Union knew it was going to apply for a bank loan to fund its investment in Vietnam, it discussed with
Heng and Tan, on the understanding that they were to remain as directors of Achem, whether they could agree to procure Achem to stand as guarantor for Union’s bank loan
[duty to retain discretion, is this best interest of company? Equiticorp?]. Heng and Tan signed a contract with Union stating they would procure Achem to stand as guarantor for
Union’s bank loan. It turned out that eventually Achem did not stand as guarantor because
Union shelved the plan to expand in Vietnam.
After Union took over the company, the board of directors of Achem comprised Heng, who was also Achem’s Chief Executive Officer (CEO) and two non-executive directors, namely,
Ong and Tan. Ong was Chief Financial Officer