Reference no: EM133809394

Question

Fitstore Pte Ltd ("Fitstore"), a sports shop in Singapore, was founded in the 1990s by Mao. He was the sole shareholder and director. In 2019, Mao handed over the running of the business to the next generation. His daughter Anya and son-in-law Nathan became additional shareholders of Fitstore, with Mao retaining his own shares. Mao officially stepped down from Fitstore's board of directors, and Anya and Nathan were appointed directors of Fitstore in place of Mao.

Worried that Anya and Nathan would not be able to cope with the business, Mao continued to help in the shop after his retirement. Mao would also regularly negotiate with Fitstore's suppliers. Furthermore, Mao continued to meet with Fitstore's accountants and thereafter would instruct Anya and Nathan on what they should do. Since Mao had stepped down as a director, he did not attend the board meetings of Fitstore. Nonetheless, Anya and Nathan would still always follow his advice on major decisions for the business.

The business of Fitstore was negatively impacted by the recent pandemic. Sometime in 2023, in an attempt to boost its sales, Fitstore negotiated with Dry-Fit Ltd for purchasing a new line of high-performance fitness apparel with superior sweat-wicking properties. However, following subsequent discussion at the board meeting, Fitstore opted to postpone signing the purchase contract with Dry-Fit Ltd due to insufficient funds. Anya then set up her own company which signed the same purchase contract with Dry-Fit Ltd, and made a profit for herself. Anya did not see the need to disclose the matter to Fitstore because she believed that the latter could not have taken up the purchase contract anyway.

Despite the effort to boost its sales, Fitstore continued to struggle. In early 2024, Fitstore was bought over. Fitstore (under its new ownership) is now threatening legal action against Mao. The new owner claims that just prior to the change in ownership, Mao (along with Anya and Nathan) had negligently sold Fitstore's warehouse for $200,000 to a third-party developer when its true value was nearly $350,000. Mao does not dispute the figures but contends that he had set the price honestly by looking at past property values on the internet (without obtaining a proper valuation though). Mao further claims that the sale of the warehouse was to help raise cash for Fitstore.

Discuss whether Mao owes any directors' duties to Fitstore, whether he has breached any directors' duties, and his potential liability arising from such breach (if any).