Challenges Faced by Eu Yan Sang
Discuss about the Wealth Planning Management.
Established in the year 1879, Eu Yan Sang International Ltd is a Malaysiancorporation. It engages in the production, dispensation, circulation, vending, and trade of conventional Chinese and other medication. The group also manufacturesmedicinal pills and tablets as anintermediary for a variety of pharmaceutical commoditiesandprovides integrative health services.On top of the produce mix,Eu Yan Sang retailsfoodstuff and drinksin addition toproduction and circulation of spa products. The group also engages in the advancement of iGates, asuperior technology to decipher chemical constituents in conventional Chinese medications. It controls a network of more than 150 retail stores in China, Malaysia, Hong Kong, and Macau. The corporation also has possession ofabout 20 conventional Chinese medication health centers in Malaysia and Singapore, and one integrative remedial outlet in Hong Kong (Euyansang.com, 2016).
Challenge 1: With the demise of Eu Tong Sen (the only son of Eu Kong – the founder) in 1941, his 13 sons and 11 daughters from 10 wives were left to face the family feuds in the subsequent years. His family was dispersed in Malaysia, Hong Kong and Singapore, and this geographical and maternal dispersion resulted in the family clashes. Tong Sen’s demise weakened the family ties significantly, even after he distributed his empire and property equally among his 13 sons.
The third generation sons were incapable of workingin a consensual manner and formed their own alliances within the family itself. Age group, like the young generation versus the older one, categorized the alliances usually. The next issue that the group faced was the deaths of the third generation sons in their early 50s, leaving behind the business empire with no strong leadership.These sons had their own individual careers and businesses. When they were retiring during the late 1980s, they started preparing for that and gradually sold off or liquefied assets of almost all the businesses. Just Eu Yan Sang Holdings (EYSH) in Singapore and Eu Yan Sang Hong Kong (EYSHK) in Hong Kong and Southern China remained.The third generation sons thought that the fourth generation sons had no strong leadership talent or any kind of skill to continue running the company on their own. Therefore, they started selling their shares to Lum Chang Holdings (LCH), whose main motive was to take advantage of an existing public listed organization as a cover to tap into the thriving real estate marketplace in Southeast Asia.By the late 1990s, all the third generation sons had sold their shares to Lum Chang. The leadership issue got solved when Richard Eu, a 4th generation member, stepped up and volunteered for becoming the CEO after one of his uncle retired without naming a successor (Kohn 2014).
Solution - Sole Proprietorship
Soon after Richard became the CEO, Lum Chang Holdings gained command over the company. This stalled all the initialgrowth plans formulated by Richard for the company for the time being.The merger plan between LCH and EYSH did not go well. The shares bought by Lum Chang Holdings were re-bought completely by Richard and his cousins Joseph and Clifford and together they formedEu Yan Sang International (EYSI). The EYSH once again came under the control of the Eu family, with Richard as the CEO and Clifford as the managing director by 1993. They took on the name Eu Yan Sang International and the fourth generation of the Eu family became the major shareholders (GómezandTuan 2014).
In this situation, EYSH should have changed to sole proprietorship. The sole proprietor is entitled to the businesses’ profits and are responsible for the business’ debts and liabilities too. The ease of operating a sole proprietorship is a hugely popular aspect of business structure. They are relatively unburdened by administration regulations and can run a business autonomously without being liable to answer to associates, shareholders or board members.The owner himself controls all decisions and the profit (Carter 2016). Sole proprietors have the advantage of reporting income tax returns by their own individual tax returns, instead of facing all the lengthy documentation processes if filling as a business. It saves time and is hassle free.On an individual level, their remains flexibility in careers for the proprietors.They can anytime close the business without much formalities, without any headaches of answering to anyone (Jonesetal. 2014). EYSH was late in shifting to sole proprietorship, or a single-ownership structure, but all their problems got solved once the company got a single manager, the CEO, Richard Eu.
Challenge 2: The last issue faced by Richard and his cousins dealt with legal issues involving a set of third generation uncles regarding trademarks. EYSH got public listing on the Hong Kong Stock Exchange in 1992, and that was the origin of the dispute.The IPO documents did not clearly define the trademark issues that led to legal troubles. It brought complications for EYSH as they became unsure whether they had the legal rights to use the trademark of EYE’s ascertained brand name for retailing their products.EYE’s brand name has been used by the business since the 1960s.EYSH, for ensuring complete legal compliance, wanted EYSI to permit the rights to use the brand name in Hong Kong market.EYSH demanded this right on the grounds that they were the sole supplier of various proprietary goods to EYSI for many years. Richard had believed for a long time that EYSHK has not been giving EYSI reasonable pricing on those goods, and they feared that the supply of these goods might have been blocked. For a long time Richard kept on negotiating with his uncle Charles Eu, the executive director of EYSH, but no solution was found to that. To sever the clash and the continued negotiations, Charles made up his mind to commence a lawsuit in opposition to EYSI without even first consulting with his EYSH board of directors. It enraged the board members of EYSH and ended up in a string of enquiries against Charles’ behavior. For the consecutive couple of years this controversial lawsuit intensified the family drama, and put the matter into the public spotlight, fully exhibiting the issue to the media and the paparazzi, naming Charles as the “black sheep” of the family business.The enquiries revealed that some of EYSH’s products contained components derived from endangered species, which was illegal according to Hong Kong laws. The board members asked Charles to resign from the post of executive director and he was removed from the board too. His brothers also boycotted him and later Richard Eubought all his shares. The fourth generation of Eu descendants became the major shareholders of EYSH. Richard later took control of EYSH by the end of the 1990s, with the help of Robert and a project capital firm named MBO Partners. The lawsuit also was withdrawn and EYSH was de-listed from the Hong Kong Stock Exchange (Kumaretal. 2015).
Legal Issues - Trademark Disputes
The decision taken by the board in Charles’ case was the appropriate one. The board of directors of an organization is made up to take a joint decision on any issue. Their skills and expertise are imperative for the decision making process (Blake 2016). They keep track of the regulations of the company, and also follow if those are being abidedbyor not.They are in charge of enhancing an organization's public representationand functionas a court of petition. They review the employees’ performance and ensure efficientadministrative development(Van den Berghe 2012).The board members of EYSH, in the case of Charles, fulfilled their responsibilities and took the right decision in terminating him and removing him from the board.In addition, the decision was crucial since Charles wasnot fulfilling his responsibilities properly and keeping an eye on the products and the legal rules related to them.
After Richard Eu finally got the ownership rights of EYSH and changed it to EYSI, he started facing some trademark related issues. EYSI was the main trademark holder and EYSH was using the brand name for years to market the products. They demanded EYSI to grant them the right to use the name in Hong Kong too, for legal compliance. This led to legal disputes and ended up in a filed lawsuit against Richard Eu (Masood 2015).
What we can learn from this trademark dispute is that we first need to judge and understand the risks of collaborating with any company in any given country. The collaborating parties should understand all the clauses in the agreements and be aware of all the statutory requirements. Everything has to be in pen and paper and properly documented. The parties should check their legal rights in the licensing context, and the owner should be lawfully registered. The laws are multi-faceted and must be analyzed properly. In case of overseas trade all the clearance procedures have to be properly explained and carried out (Horowitz and Horowitz 2015).
Another lesson that we can learn is that any business should not use any unregistered trademarks, or trademarks for which they have not obtained rights. Right conflicts are bound to arise and are dangerous. Unregistered trademark owners face the issue of not being properly protected by law. They are at a risk of facing infringement notices, at their home country or in any location they wish to expand. What is needed is a trademark attorney who would help with these regulations. Just because an organization is using a brand name of its mother company does not mean it can demand legal right over it. The original company can file a lawsuit against this non-registered companies (Nandini and Reddy 2016).
The Role of Board of Directors
Another thing to keep in mind is that protection of creations or products is necessary. For that, a properly owned registered trademark licence is needed. With the license registration, the competitors are alerted that another company has a claim on the product, or the brand. A registered license also enables smooth expansion of the product. The company should clearly state the trademark rules in their agreements and official documents for partners and employees to be aware of them (Meng and Ma 2014).
We find two conflicting situations in the Eu Yan Sang company. We can see how a company has grown from a small shop to a big corporation that provides remedies and medications to the world's biggest economy. Since its enlisting the company has delivered only double digit expansion and enjoys the biggest market share in its sector. The business had evolved from a small medicine shop to a big enterprise that chiefly focuses on widespread well-being. They have focused on effective corporate governance, and have given priority to family too. They have tried innovations, but have kept their core values intact. They have been cautious in their business investments and acquisitions. Throughout all the ups and downs they have never diverted from their key motive of serving the masses. They have preserved their business models and also their personal and organisational motives. The company’s main motto was to care for mankind and they have been successful in maintaining that. The masses have learnt to trust them because of that. They have maintained good employer-employee relationship too, and that has helped them in preserving their repute and business success for the last century.
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