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Rainbow Sdn. Bhd. operates a wholesale nursery growing and selling plants.

Seth, Peter Pan and Rachael are the shareholders and directors. Seth manages

the company's day-to-day operations. Peter Pan, is in charge of the nursery.

Rachael is a non-executive director who does not take an active part in the

management or operations of the company.

The company has been doing very well. However, six months ago, a competing

business opened nearby and since then the company's profits have dropped

considerably.

Seth thinks that the company should move to larger premises in a

different area. Without consulting Peter Pan or Rachael, he starts looking for

new premises and he decides the first place he inspects is perfect, although the

price is more than the company can afford. Seth does not think this will be a

problem, because there is no competition nearby and he expects that profits will

recover immediately. Seth calls a board meeting and tells Peter Pan and Rachael