Question

Mr Ong Teck Leong started a company Bougainville Garden Pte Ltd (Bougainville Garden) selling nuts and biscuits out of his shop located in Geylang in 1968. Through hard work and good business acumen, his company expanded into a large manufacturer of nuts, biscuits and pre-mixed sauces and these products are packaged under a well-known and registered trademark “Bougainville Garden”. The company had factories in Indonesia, Malaysia and Singapore.
Mr Ong died in 1999 and bequeathed his business to his wife and eight children. The siblings could not agree on how the company should be run and there had been a few legal proceedings brought before the court to settle their disputes. The court has made orders for the siblings to buy out each other’s shares. Currently, there are four remaining shareholders: Andy has 40% shares, while Barry, Charles and their mother Mrs Ong each has 20% shares in the company.
Andy and Barry are executive directors of the company, while Mrs Ong is listed as a non- executive director. Charles is a lecturer who teaches in a university and he is not on the board of directors. Mrs Ong has been receiving directors’ fees, but she has never been to any board of directors’ meeting. She rationalises this by saying she only had four years of primary school education, so she would let her sons manage the business. Mrs Ong is happy receiving director’s fees to fund her mahjong sessions with her friends.
It has come to Charles’ attention that the business of the company has been in decline and is now facing liquidation. Upon investigation, Charles uncovered a few events that took place over the last few years:
 Bougainville Garden products are being manufactured and sold in Singapore and Malaysia by two companies that are not part of Bougainville Garden Pte Ltd, but they bear identical names “Bougainville Garden”. These products are in fact manufactured
by two companies called Bougainville Garden Makan (Singapore) Pte Ltd and
Bougainville Garden Makan (Malaysia) Sdn Bhd. These companies were incorporated and solely owned by Barry.

In 2007, Bougainville Garden Pte Ltd sold the “Bougainville Garden” trademark to Forest Holdings, a company registered in The Isle of Man for $100,000. Andy is the
director and beneficial owner of Forest Holdings.
 In 2008, Forest Holdings granted a 10-year licence to Bougainville Garden Pte Ltd to
make and sell “Bougainville Garden” products.
 When the licence expired in 2018, Andy and Barry did not renew the licence but
allowed the company to go into an impeding liquidation.
 In 2016, Forest Holdings granted a licence to Bougainville Garden Makan (Singapore)
Pte Ltd and Bougainville Garden Makan (Malaysia) Sdn Bhd to use the trademark.
 In 2017, the factories in Indonesia and Malaysia were sold to Barry at an undervalued price. Furthermore, Barry was granted a “perpetual, irrevocable and exclusive” licence
to make and sell “Bougainville Garden” products in these countries for $1.
Charles has come to you for advice.
(a) Discuss how it is possible for Charles’ brothers to use this trademark for the companies controlled by them.
(b) Explain to Charles if Andy, Barry and his mother Mrs Ong have breached any director’s duties owed to Bougainville Garden Pte Ltd, and if so, what consequences they might face.

Answer 1

1. Firstly Charles Brothers can use the trademark for their existing business.

Further Charles brothers can also rent out the license for other companies and obtain royalty income.

The Charles Brothers can also sell the license to other company. However where there is sale of License to group companies as in the present case where there is sale of license to Forest Holdings by Andy there is need involved to ensure compliance of laws and no involvement of related parties or sale of license at Low value.

2. Andy has breached Director’s duties:

1)The sale of license by “Bougainville Garden” to Forest Holdings and providing license right to

“Bougainville Garden” for 10 years is appropriate.

However Forest Holdings also granted license to Bougainville Garden Makan (Singapore) Pte Ltd and Bougainville Garden Makan (Malaysia ) Pte Ltd before expiry of 10 year term is against the license issued policy to Bougainville Garden.

Adding to it sale of factories in Indonesia and Malaysia to Barry by Andy and sale of License for 2)Undervalued price at $1 also providing perpetual, “irrevocable and exclusive” use is something like illegal Agreement.

These are the two factors that state that Andy, Barry and her Mother Mrs Ong though acting as director are responsible for breaching their duties as directors to Charles.