Overview
The article summarily reports Overseas Union Enterprise (OUE) selling 26.1 million shares belonging to shareholder United Overseas Bank (UOB) for $378.8 million and $282.1 million would be distributed to shareholders as special dividends. Although this is a short article, there are several points that we can highlight or bring to attention, including the law of separate entity and more importantly, the director's duties and whether there is any breach of these duties.
Separate Legal Entity
Firstly, we must recognize that OUE is a separate legal entity from its shareholders as per Cap 50 of Companies Act, which means that OUE is an artificial person created by the law and thus it has rights, obligations, liabilities, property and contracting powers all in its own name. We would not be looking at lifting the corporate veil in this case but acknowledging the fact that OUE is an artificial and separate entity in the eyes of the law would lay the foundations for our discussion later.
Since OUE is but an artificial person, we do not expect it to make decisions on its own but instead to rely on its board of directors who are appointed by its shareholders. The board generally has the authority to manage the business under Section 157A(2), and such powers generally cannot be overridden by its members. Vested with such high responsibilities, the directors do owe the company a number of duties and we shall further discuss if there is any possibility that the directors would have breached any duty in their course of selling UOB's shares.
Duty of Care
There exists both statutory and general laws for the directors of UEO to exercise due care as part of their duties. Under sec 157 of the Companies Act, the directors must at all times act honestl ...