Recently, there was a legal tussle between the shareholders and co-founder (Mr David Gan) of homegrown F&B company Tipsy Collective, after the other co-founder (Mr Derek Ong) passed on unexpectedly in 2023. The wife of Mr Ong sold his shares to the other shareholders, which resulted in them holding majority shares in the company. The shareholders tried to remove Mr Gan as director of the company, alleging poor management and financial irregularities among other claims, while Mr Gan argued that no significant resolutions, including removal of directors, can proceed without his approval as the shareholders agreement provide him with veto power over board decisions.
It is unfortunate that this issue arose after the death of Mr Ong, where shareholders attempted to wrest control and chart the future of the company’s direction. This situation underscores the importance of robust agreements among co-founders and shareholders. Had there been a well-defined buy-sell agreement outlining the first right of refusal for share purchases upon a shareholder’s departure or death, this conflict might have been mitigated.
Additionally, implementing keyman insurance on the lives of key executives could provide financial protection during such turbulent times. This insurance helps businesses cope with the loss of crucial individuals, ensuring operational continuity and financial stability. The payout can assist in managing transitional challenges, securing successors, or stabilizing the company amid disputes. Regularly reassessing coverage is essential to align it with the company’s net assets value.For businesses looking to safeguard against similar risks, consider reaching out to MAKinsure to explore keyman insurance solutions tailored to your needs.