Directors Duties in Company Law

Andrew Wang Rui Wen

A0088289H

FACTS

Our client is a minority shareholder in Alpha Centauri Engineering Ltd. (“Alpha”), a company listed on the Singapore stock exchange. Alpha incorporated a wholly owned subsidiary, Proxima Centauri Pte Ltd. (“Proxima”). Proxima handles Alpha’s business in Azerbaijan.

The two directors of Proxima were senior employees of Alpha. They reported to the CEO of Alpha, who oversaw the operations of Proxima. He would report to the full board of Alpha.

Proxima was awarded contracts by the Azerbaijan government. These contracts contributed to Alpha’s profits. However, these contracts had been obtained through bribes paid to the Azeri government. The bribes were exposed. As a result, the contracts were cancelled and Proxima was fined, as well as barred from tendering for public sector contracts in Azerbaijan for 10 years. Singaporean authorities also commenced investigations. Charges were laid against Alpha for abetment of corruption. The company pleaded guilty and was fined.

The decision to enter the transactions, which included the bribe, was made by the board of Alpha. A paper setting out details of the project (including information on ‘consultancy fees’ which were in fact the bribe) was prepared by the two Proxima directors, supported by the Alpha CEO, and presented to the Alpha board.

DISCUSSION

Alpha has been fined and its Caspian Sea business ruined due to its damaged reputation. As a shareholder, our client seeks to enforce accountability. He wants to see heads roll, and those responsible for the company’s loss affixed with liability.

Before any consideration of possible procedural obstacles our client might encounter, we must first establish, prima facie, that there exist substantive grounds for any potential claims.

PRIMA FACIE CAUSES OF ACTION

It must be established substantively, that the company (Alpha) has a prima facie cause of action against those who have caused it damage.

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