It’s no surprise that many are enraptured by the latest Night Owl Cinematics (NOC) saga.
When Xiaxue’s exclusive interview with Sylvia Chan spilt even more of the proverbial tea, we slurped it right up. The video does mention suicide and death though, so do take caution when watching it.
As a bastion for local startups and one ourselves, the interview brought up several important points when running a startup, especially regarding certain legalities and purported workplace practices.
Like you, we had several questions about NOC’s workplace practices, so we asked a lawyer about them. We consulted Maiyaz Islam, IP and Litigation Director of Magna Law Corporation, to answer some of our burning questions.
(Disclaimer: This article is based on the responses of a third party, and is not meant to be legal advice. Please also note that we are not privy to the company constitution of NOC, hence the lawyer has sought to generally address these queries.)
On a founder’s authority and founder disputes
Q: Can you hire family members and pay them a salary?
A: If someone is the CEO or the Director of the company or also managing the company, they’re authorised to hire people. However, as someone in a Director-type position, you have certain fiduciary obligations towards the company.
If you hired someone and you’re paying them a supposed amount, and they’re not doing any work, or the work is not commensurate or clearly not suited to the role or qualified, then that would be against the company’s best interests.
That would be a breach of that sense of fiduciary obligations towards the company.
Q: Are you allowed to backdate your resignation?
A: Generally, you’re not allowed to do that. Your resignation date is important.
For example, if your contract states that you are not allowed to be a Director of another company while you’re still an employee of said company and you set up another company, that is in breach of your contract.
However, if the Board of Directors voted you to allow you to do so, you’ll be doing it with the consent of the company. Then, I suppose that would be possible. But in general, you’re not supposed to do that.
Often, with big decisions like this, the Board of Directors will have a general meeting or raise this in the Annual General Meeting (AGM) to decide on this kind of clause. I don’t know what the company setup for NOC is as I don’t have access to the constitution, so I can’t really speak on that.
This one would be more like a breach of contract or something more along the civil route as opposed to something criminal. It’s not a criminal offence here.
Q: Does that mean that Ryan cannot start Reno King as a separate entity while he is still technically employed by NOC?
A: By right, that should be the case. Unless there’s some clause in his contract that allows him to pursue his own business interest of being a Director of another company.
But, typically, you won’t find that in employment contracts because it runs counter to the company’s interests.
Without actually looking at the documents (company bylaws of NOC) in question, it’s hard to take a concrete yes/ no position. I can tell you what is typically the case, and normally, you’re not supposed to do that because of the ramifications of that act.
However, if the company does give consent, then I suppose it may be possible.
Q: Then, are shareholders or directors allowed to withdraw company funds for personal use?
A: No, they’re not supposed to do that for personal use. There’s a distinction between shareholders and directors.
The directors are typically not allowed to take loans from the company. Only in very exceptional circumstances will they be allowed to take a loan from the company.
And then, under these exceptional circumstances, it still has to note that there has to be like an AGM or GM. It has to be approved, and there have to be certain terms when they take out these funds.
Shareholders are not as strictly marshalled as directors. It is possible for shareholders to take a loan from the company. It’s not like it’s your bank account where you are free to take it out as and when you wish.
Q: What if you were both shareholder and Director of the company?
A: Well, then you have to see in what capacity you are taking the loans out. There’s an important distinction. If you take a loan as a Director, that is considered income from employment, so that’s taxable.
But if you take it as a shareholder, then that is generally not taxable.
One of the implications is that one is considered as income, while the other (when a shareholder takes a loan) is not considered as income.
So, it depends on how you’re taking the loans from the company. For the shareholders, it’s the same thing. It is dependent on the decision of the Board of Directors.
When a Board of Directors decides whether to give a loan to a shareholder, they have to comply with their duties as directors. At all times, they have to act in the company’s best interest; there can be no conflict of interest.
Q: Therefore, has Ryan breached the director’s fiduciary duties as Sylvia claims?
A: If you’re talking about a situation where Ryan is the Director of this company (NOC), and he went on to start a new company. Then, this new company is a direct competitor of the previous company that he is still a Director of.
So, you’re taking business away from your first company and directing it to a new company in such an instance. That would be a breach of your fiduciary obligations as a Director towards your previous company.
In that sense, if that’s what she means, it would appear to be so.
Update: Ryan has released a statement regarding both his and Sylvia’s roles in the company, the incorporation of Reno King, among other issues. You can read it here.
On workplace practices
Q: When it comes to workplace behaviour, what constitutes verbal abuse?
A: I suppose it’s the context. You work in a lot of different places where you will hear people swear and things like that.
This verbal abuse thing, if somebody has a complaint, then they can go ahead and file a claim under the Protection from Harassment (POHA) Act — depending on what has taken place, if it is something where you feel threatened or intimidated that falls under certain sections of the Act.
You have to see whether what is happening or what has happened to you falls under one of the elements of the sections in the POHA Act.
If it is, then you can pursue it that way. If not, then I think if you go to the Ministry of Manpower (MOM) website, where they have a certain section where if you have workplace grievances, they give you a guide on what to do.
Q: Are employees allowed to be compensated for “harsh treatment” at workplaces? Are there any MOM clauses that clearly state general workplace standards that firms need to follow strictly?
A: I’m not aware of anything in the Employment Act that has anything like that, but I suppose compensation can be served through the POHA Act if a certain environment has been created.
You can claim for damages through the POHA Act if your case falls within one of the sections there. But, in general, I don’t think the Employment Act provides for that.
Q: So are there legal ramifications of this verbal abuse then?
A: Yes, if you make a claim through the POHA Act. In the POHA Act, there are different sections to explore. There’s the criminal section, and then there’s the civil one.
If you want to make a criminal claim against them, then you will (need to) make a police report. Criminal sanctions can be done. That way, you have to make a police report, the police will investigate it, and then give it to the prosecutors from the Attorney General Chamber (AGC). And then, if they decide that there’s a case there, they can take it up.
There are different types of punishment. Generally, (for) a first-time offence, a fine is like S$5,000 and jail for up to six months possible.
For repeat offenders, it gets multiplied. So, if you’re a repeat offender, it can be S$10,000, 12 months jail, that kind of thing.
So, that would be for criminal sanctions. You can also take out civil remedies. In a civil remedy, you can seek protection orders or expedited protection orders against this person.
Or you can seek a claim for damages. Then, you have to quantify what loss or damages you have suffered because of that.
On working overtime without pay
Q: Can CEOs make employees work overtime without pay? Can CEO pay talents/employees late? How late is legally acceptable?
A: So, for the late thing, you’re not supposed to. I mean, (payment timeline has to be) whatever is (stated) in your contract of employment. We’re only talking about employees, so we’re not talking about freelancers or independent contractors.
There is a particular section in the Employment Act, specifically Part IV. So, only people who fall within Part IV, there is a statutory thing where they cannot make you work overtime without being paid extra in full.
This only covers two types of employees. It covers someone who’s called a workman who does manual labour, earning a basic monthly salary above more than S$4,500.
And then the other type of employee, an employee who’s not a workman, is basic monthly service not more than S$2,600.
So, these people will be covered under Part IV of the Employment Act. So, if they have to do overtime, I think the calculation is given within the Act itself — it’s something like 1.5 times your normal pay or something like that.
Q: What if your pay falls in between these categories?
A: I suppose if you’re a workman who makes more than S$2,600, then you’re not covered by this Act.
We see a lot of employment contracts in Singapore; they will mention your normal working hours. But your employer may ask you to work beyond these hours for the goals and objectives of the company. So, you know, that does not appear to be covered by the Employment Act.
Q: With that clause, that means working beyond your working hours is technically allowed?
A: If you have something that says, these are your normal working hours. Moreover, there’s nothing there that says that you’re supposed to work beyond the scope of these working hours, then you could make an argument that you don’t have to.
If there are any disputes, the normal way to do these things is to first approach your employer and see if you can have discussions in good faith and try to work it out. If that fails, then yes, you should go ahead and make a claim.
Other HR matters
Q: To what extent can an employee help the CEO/leaders in a company with non-related work tasks? For favours and out of goodwill, where is the line drawn?
A: Suppose you’re talking about things that are outside the scope of your work, it’s really up to you. You don’t have to do things outside of what you’re supposed to do for work.
So, this is completely up to you whether you wish to do that or not. But, I suppose in a practical sense, if your boss asks you to do something, you kind of feel compelled to do it because it’s your boss.
However, you’re not legally obligated to do that because it’s not part of your job.
Q: Is it an offence to leak company group chats and/or expose the company’s financial data?
A: This would be more of something that is inside your employment contract. Things such as financial data and all would normally be covered under the confidential information clause.
If you were to leak this information, then yes, it would be a breach of this particular clause of your employment contract. If your workgroup chat stuff contains information of this nature, it will be a breach of the confidential information clause.
Q: What if the person that leaked this information is anonymous?
A: Again, you have to decide what kind of information is being disclosed. If it does concern the company and financial data, then it would certainly fall within that. Moreover, your employment contract should always have a confidential information clause.
Q: This applies to the recordings of team meetings as well?
A: Yes, if it contains that kind of information like trade secrets or things of that nature.
Q: Right, so this hinges on the kind of information shared. This means that the way someone behaves or the way employees are being treated is technically not a trade secret, then?
A: I suppose not. If it doesn’t contain confidential information, then no.
Banning a CEO from access to company accounts
Q: Does the finance person have the right to lock the CEO out of company accounts? If yes, under what circumstances?
A: For this one, I don’t know whether Sylvia is the Director of the company or not. She’s listed as the CEO of the company. By right, the CEO should be the company’s Director, but I don’t know whether she’s listed on the Accounting and Corporate Regulatory Authority (ACRA) board of registers.
CEO is at least a management position. If you’re a CEO of the company, then it is part of your job scope to look at its financial accounts and make decisions with them.
You can’t just lock this person out because this person cannot function in their role. But if we’re talking about the law, a Director of the company normally has access to the accounts.
So, unless you fire the person or the person has resigned or terminated, they will have access to the accounts.
For this role as CEO, I don’t know whether it’s a Director type of role where, by law, she has access to the accounts. But if it is something that she needs for her job and it’s within her job scope, then, you cannot just bar her from the account because she cannot function in a role after that.
Q: When co-founders can no longer work with each other, are they allowed to split the assets (what assets can be split or shared and what cannot) and manage their own company with the same branding?
A: For Directors, their only ownership of the company would be their shareholders.
If you’re a shareholder then you can deal with your shares. Normally, we have certain clauses within your own company constitution which tell you how you’re able to deal with it.
For simplicity’s sake, let’s say you’re allowed to deal with it as you wish, so you can sell it, and that’s for you to do with.
It depends on other kinds of assets, for example, computers or disks or something like that. There are certain companies like manufacturing companies that have a lot of equipment.
They have factories, things like that, I don’t think that applies to this particular case. But if you are a founder of the company, then I assume that you are also a shareholder of the company; so you can deal with those shifts, that’s fine.
But thereafter, the other assets of the company are meant to belong to the company.
When it comes to managing your own company with the “same branding” — if by branding you mean trademarks, patterns or things of that nature — those are considered assets of the company.
So, if you have sold your shares and you are no longer connected with the company. I don’t see how you can carry on with the same branding. A scenario where you could carry out the same brand that says one shareholder sold all the shares to the other shareholder. Then, that one person becomes the sole shareholder of this company.
Then, of course, you can carry on with the company. The person who’s no longer a shareholder, and is no longer employee of the company, cannot do that.
The other way that it can be done is, let’s say somebody needs the company but then get into a license agreement with this company, then you know you’re paying to use the branding or you have some sort of arrangement, then that’s possible.
Featured Image Credit: Ryan Tan’s Instagram and a screenshot of Sylvia’s interview with Xiaxue
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