Funcup Limited is a manufacturing company that produces and sells pop-com machines for its local and international market. Dinky Investments Limited acquired 60% ownership of Funcup by purchasing shares in recent times. Tom, Bobby, Eben and Isabel also own 5% of shares each while the remaining 20% share is owned by a number of dispersed shareholders a total of 15 shareholders) in small proportions. Mr Adu is the managing director of the company and was appointed by his wife who happens to be the board chairperson of Funcup and a board member of Dinky Investment Limited. Funcup is currently having a liquidity crisis and the external auditors have pointed out the need to control the operations of the managing director to curtail the issue. The managing director thinks an increase in incentives will motivate staff to operationalise decisions made to enable the firm make a turnaround from its crisis rather than heeding to audits which may be unnecessary. Mr Adu's wife agrees with him but the other independent members of the board disagree on this decision. Since board meetings hardly take place, appropriate board committees expected to handle the issue can hardly be constituted and equipped to work and so the business continues with the anomaly. e. a. Identify the governance issues evident in this company [4 marks] b. What opportunities exist for shareholders to tackle the problem? [2 marks] c. Predict what could happen in the Corporate Governance setup of Funcup if Mr Adu obtains proxy votes from Dinky Investments during an annual meeting? [2 marks] d. In your assessment, which pillars of Funcup's Corporate Governance system have been compromised by the turn of events? [6 marks] As a financial manager, would you recommend Funcup explores the possibility of using more debt options to curtail the problem? Explain how this may or may not help? [3 marks) f. In case debts are used, what are the possible conflicts that can arise between Funcup and the creditors? Recommend ways in which the company can prevent the problems mentioned. (4 marks) g. You have been tasked to design a more effective board structure, what measures will you put in place to constitute a more effective board and what roles will you assign the board
