Rainbow Sdn. Bhd. (Rainbow) is a food manufacturing company with seven shareholders, of whom Zara, Adam, Michael and Muthusamy are the directors. The company has ventured into the bakery and coffee shop business and exported its products to other countries too. However, there has been a sharp drop in the company's financial performance since the Movement Control Order was imposed, affecting the company's operational status. The executive director, Zara, is concerned about the deteriorating state of the company. Upon scrutiny, the following irregularities have come to light. In early 2020, the company entered into a contract with a supplier of organic wheat and chocolates called Saga Manufacturer. Unknown to the company, Saga Manufacturer is owned by Michael's uncle. Michael receives a 0.1% bonus from his uncle for each delivery.

Since Rainbow's business is expanding, Michael, one of the directors is now looking for a new place for the company to keep their supply. Their current place now does not have enough space for them to keep the supply that needs to be refrigerated. He, later on, purchases a business premise on behalf of the company for storage of their business supply. He has taken out an insurance policy for the premise with Selesa Assurance Bhd. In the proposal form, he had stated that part of the premise will be used for living purposes and that another part of the premise would be used for storage. In the said form there appears to be a clause that requires the insured to inform the insurer within 14 days upon occurrence of fire. Not long after that, the premise is affected by the fire. The insurer also discovers that Michael had failed to inform that part of the premise had been used to store Liquefied Petroleum Gas before it is sent to their coffee shop and bakery. It surprised the other directors when they discovers that the policy of insurance is in Michael's name.

Muthusamy is sent to Kuala Lumpur to explore the possibility of getting a supplier for the butter and margarine. Without consulting Adam, Michael and Zara, he set up a meeting with the director of the Health OG Sdn Bhd, Jokowi, one of the well-known suppliers for the bakery business. After their first meeting, he immediately agrees to sign a contract with the Health OG Sdn Bhd because he thinks the company can profit more when they sell the cakes and pastries. The price is a little bit higher than the company can afford. However, Muthusamy does not think this will be a problem because their company has a good marketing team, and his friend, Yasin. is also interested to get the supply of cake and pastries from Rainbow. Therefore, he expects that profits will recover immediately.

Muthusamy then contacts Yasin and asks him to go to the Rainbow headquarters to discuss his contract with the company. Yasin is the owner of Perfect Bakery and now intend to open a few branches of his bakery in Melaka. He wants Rainbow to supply cakes and pastries to his shop on weekly basis. Adam, one of the managers of Rainbow shows Yasin a brochure of all the different kinds of cake and pastries that the company has for sale. Adam then brings a few slices of cake for him to try. Yasin tastes the cake and said that the cake tastes more or less similar to Sentosa Delight which is so popular in Malaysia. Yasin later signs a contract with Rainbow for 1 year for the supply of the cake and pastries and the contract is going to be renewed again if there is no issue arising during this period. He also paid RM30,000 for the price of the cake and pastries as agreed in the contract.

Yasin manages his business with the help of his wife, Zalina. Zalina handles day-to-day operations and monitors their shop. To express his gratitude to his wife, he intends to surprise her with a car during her birthday. Yasin then signed a hire purchase agreement with Mayank for a BMX car in January 2021. Zalina is very happy because she finally gets what she wants. Yasin however, suffered financial difficulties and could not pay the instalment for 3 months. On 1st April 2021, Yasin received a notice of intention to repossess the car from Mayank Sdn.Bhd. demanding payment within 14 days failing which the case will be repossessed. On 5the April 2021, while driving in town, Zalina was stopped by customs officers who then seized the car for non-payment of import duty. Zalina only got the car back five days later after Mayank Sdn. Bhd. cleared the matter with the authority. On 14 April 2021, agents of Mayank Sdn. Bhd. towed the car from Yasin's house while he was asleep. They left a notice in his letterbox stating that the car was repossessed due to his failure to pay the instalment. Zalina was very upset with the incident and left the house after an argument with her husband.

After 2 weeks of Perfect Bakery selling the cakes that were supplied by Rainbow, Yasin has received some complaints from their customers that they suffer stomach ache and diarrhoea. His staff also show him that the chocolate cake has white mold after 2 days. Yasin is very frustrated with Rainbow. He set a meeting with Adam and Muthusamy in one popular caf at Bukit Beruang to discuss their problem. While waiting for Adam and Muthusamy to arrive at the caf, a promoter comes inside the caf and distributes a flyer to all customers there. He is very surprised when he looks at the flyer. The trademark used in the flyer is similar to the Perfect Bakery trademark. In fact, Yasin has registered the trademark "Perfect cake, Perfect taste" for his Perfect Bakery. Later, he also discovered that the flyer belongs to his former employee, Mustika, who has set up a bakery business by using the name Perfecto Bakery. Mustika was taught by Yasin everything about their business including the secret recipe for the cakes and pastries. The taste of cake and pastries at Perfecto Bakery is similar to the cake of pastries at Perfect Bakery. Yasin now is very upset with his wife and Mustika.

At the same time, Zara confronted her fellow directors and questioned them on the irregularities but was threatened not to take any legal action against them. Advise all the parties involved.

What are the issues?