You are on page 1of 3

1. Discuss the evolution of the rivalry between Kinsen and Ronald.

The evolution of the rivalry between Kinsen and Ronald began when Kam died in 2004 with
no management succession plan, leading to a lack of clear management authority over Yung
Kee i.e. whether the business should be run by both sons as a team, or otherwise.

Furthermore, prior to Kam’s death, Kinsen and Ronald were running different parts of the
business - kitchen and property development respectively. However, there never was any
collective decision making as partners on Kinsen and Ronald’s part, as Kam’s presence
constantly loomed as the traditional authority figure over the restaurant.

As such, upon the death of Kam, this lack of a clear delineation in black-and-white over who
was to take over, led to a clash between the generational difference in emphasis on Confucius
philosophies based on command & order versus Modern management based on discussion
& democracy. The value gap between Kinsen and Ronald also led to a breakdown in
communication, discussion of issues facing Yung Kee, and the ability to collectively make
decisions together. Ultimately, this led to a power struggle between both brothers and hence
the publicised clash between Kinsen and Ronald over the management of Yung Kee, one of
the most famous restaurants in Hong Kong.

2. What was the ownership design that Kam Senior had in mind when he divided the
shares among his family?
Kam Senior divided shares in the family-business: 70% going to his two older sons (each
getting 35%) and the remaining 30% split between his third wife and youngest son and
daughter (10% each). The ownership design he had in mind was probably that of Kinsen his
eldest son to succeed him at the helm; with Ronald the 2nd eldest playing out a supporting
role, as per traditional Chinese fashion.

3. Why do you think Yung Kee Holdings was registered in the BVI?
Given the widespread pessimism towards the transfer of the region’s sovereignty i.e. the future
of a capitalist Hong Kong coming under a socialist Chinese government at that point in time,
there were several risks associated with the political transformation regarding the transfer of
Hong Kong to China (from Britain) in 1997, namely:
● Concern over the stability of property rights i.e. fears that local property may be forcibly
confiscated by the Chinese government
● Concern over recovering anticipated future returns on investment, especially for an
investment holding company like Yung Kee Holdings

Secondly, Yung Kee Holdings consists of not just the restaurant business, but also assets
which included hotels, shopping centres and also income from partnering deals. Registering
Yung Kee Holdings in the BVI provided an opportunity to avoid paying taxes in Hong Kong on
property transactions.
 BVI is a jurisdiction with almost no tax imposed:
o No corporate income tax jurisdiction;
o No capital gains tax;
o No inheritance tax;
o No gift tax;
o No sales tax;
o No value added tax;
This means that any income generated from Yung Kee Holdings would not be
subjected to any tax liabilities; preventing further erosion of wealth.
 BVI does not impose any kind of stamp duty for the transfer of the shares. Ronald, in
his capacity on the property development side of the business, may have come up with
such an idea in preparations of plans to take over the shares of his family members in
future.
 BVI-incorporated companies also find it easier to do mergers with BVI-incorporated
companies or companies from other jurisdictions; with the final merged company being
allowed to belong to either of the countries involved.
 BVI provides secrecy in exchange for a small fee to shield beneficial owners or
controllers of assets behind ‘nominee’ company agents, in the form of:
o allowance of bearer instruments i.e. fixed income securities that pay out
coupons, where no ownership information is recorded
o no requirement of companies to disclose annual financial statements, audit
reports or conduct annual general meetings
This would allow the wealth generated by Yung Kee Holdings to be shielded from the
public eye, or rather the scrutiny of the government. As mentioned, given the upcoming
political uncertainty at that time, this might have been an extremely viable solution.

4. How did Ronald go about taking over control of Yung Kee?


Having received a 35% share in the family-owned business, Ronald later inherited an
additional 10% share upon the death of his youngest brother Kwan-Ki, following up with an
acquisition of an additional 10% share from his sister Kelly, which gave him the crucial 55%
majority shareholding to force Kinsen out of the business and take over control of Yung Kee.

5. Why do you think Kinsen took Ronald to court?


Kinsen took Ronald to court, as he felt indignant over Ronald’s control over the family business
which traditionally was meant for him to take the helm.

Not only did Ronald acquire a majority shareholding over the company, he also appointed his
own offspring as the board of directors to attain financial control of the company, effectively
excluding Kinsen from management of the restaurant. Furthermore, the issue of extravagant
executive compensation packages given to Ronald’s children who only worked part-time in
comparison to their late brother - Kwan-Ki’s operational kitchen staff salary, did not sit well
with Kinsen who probably had a more traditional mindset that emphasised on generational
hierarchy. As such, being ingrained with values based on Confucius philosophies, Kinsen
could not tolerate the disrespect shown to him by Ronald’s children, whom were outrightly
rude to Kinsen in electronic communication and physical meetings, and had probably abused
their positions of power to fire restaurant employees who showed loyalty to Kinsen.

6. Do you think Kinsen should have avoided taking the case to court?
Yes, Kinsen should have avoided taking the case to court as this way he would not have
incurred the obligation to bear Ronald’s estimated legal costs of HK$30 million to simply
challenge Kinsen’s petition.

Kinsen was on the losing end of things as:


● Firstly, given the estranged relationship between Kinsen and Ronald, Kinsen should
have expected that Ronald would not relinquish control or even be compliant to his
wishes without putting up a fight.
● Furthermore, Ronald being better educated and more commercially involved in legal
transactions - given his dealings with property development - gave him an advantage
in terms of a wider network i.e. better lawyers to defend him against Kinsen.

7. Describe the role of mother and daughter in the dispute.


In this entire dispute, the role of mother and daughter effectively determined which brother
gained control over the family business.

Incomplete answer; I just copied key points from case

8. What are the cultural clashes between the traditional Chinese approach to
ownership and the modern approach?

The traditional Chinese approach to ownership was for the eldest son to inherit the family
business. There is an emphasis on keeping the family together, with equal respect for each of
the inheritors, followed by age-based respect for the eldest.

On the other hand, the modern approach to ownership emphasises profit and efficiency,
determined based on an individual’s business acumen and knowledge.

Incomplete answer; I just copied key points from case

9. Discuss the alternatives that were available to Kam Senior in planning the
succession.

Arrange for his sons to run the family business as a team with common goals, to ensure that
a relationship could be built on trust between Kinsen and Ronald, such that decisions could
be made collectively on how funds were deployed across the restaurant or the other entities
of the family business.

Focus not just on ownership succession but also management succession

Creating a family trust to hold the controlling shares of the business. This would have ensured
that decisions were made according to certain procedures family members had to agree to.
For example, this would have obliged Kinsen to work within the family-created structure to sort
out the transfer of his shares.

Incomplete answer; I just copied key points from case

10. Is there still a way out of this family feud?


Separate emotion from divisive personal/family issues.

Incomplete answer; I just copied key points from case

You might also like