Reference no: EM133121916

Question - Kokoa Sdn Bhd ("KSB") is a private limited company. Mr Koshi is the managing director of the company and he holds ninety four percent (94%) of the paid-up share capital of the company. The remaining shares of the company are shared equally between his two sons.

KSB's business activities are processing and wholesale supply of cocoa ingredients in Malaysia. KSB has entered into a contract with Flavorful Bhd ("FB") to supply the Super Cocoa powder to FB's outlets for a period of three years. FB is a multi-level marketing corporation with main business activity of selling 'superfoods' and dietary supplements. FB has made a payment of RM1,000,000.00 to KSB in accordance to the terms of the contract. However, due to COVID-19 pandemic, cocoa beans supplies has been in decline and will completely cease. As KSB is unable to fulfil FB's order, it sent a letter to inform FB regarding the situation. FB demanded a refund of sum amounting to RM700,000.00. However, KSB is unable to repay the amount as it is having serious financial issues. FB announced that the company is planning to take a legal action against Mr Koshi for KSB's failure to refund the money since Mr Koshi is the main owner and controller of KSB.

In the meantime, Mr Koshi and his wife have started a divorce proceeding following a long period of marital problems. Mr Koshi then transferred two properties held in his name to KSB to prevent Mrs Koshi from getting a fair settlement from the division of matrimonial assets. When Mrs Koshi later discovers about the transfer, she sought for a court order that the division of the matrimonial properties be enforced against the assets held by Mr Koshi and KSB.

KSB is now under a tremendous amount of financial stress and is in the brink of liquidation. The company is unable to meet its customers' demands and is losing customers. The company have failed to remit contributions to its employee's Employees Provident Fund (EPF). As a result, the EPF Board has commenced a legal action against the KSB and Mr Koshi as the company's director.

Advise all parties regarding their liabilities in the above situations.