ASTI Holdings: A “Discounted” Termination Payment?

On 22 December 2021, ASTI Holdings announced that it has decided to terminate the appointment of Dato’ Michael Loh Soon Gnee as CEO as part of its retrenchment exercise. He is to remain as Chairman.

The company said that Dato’ Loh was contractually entitled to an aggregate of S$2,040,750 as part of his termination. However, the Board has decided to pay him only an aggregate amount of S$1,378,270. It said that as this amount does not exceed the threshold stipulated under Section 168(1A) of the Companies Act, the approval of shareholders in a general meeting is not required.

Section 168(1)  states that “it shall not be lawful for a company to make to any director any payment by way of compensation for loss of office as an officer of the company or of a subsidiary of the company or as consideration for or in connection with his retirement from any such office…unless particulars with respect to the proposed payment, including the amount thereof, have been disclosed to the members of the company and the proposal has been approved by the company in general meeting…”

Section 168(1A) states that shareholder approval is not required “if the amount of the payment does not exceed the total emoluments of the director for the year immediately preceding his termination of employment; and the particulars with respect to the proposed payment, including the amount thereof, have been disclosed to the members of the company upon or prior to the payment.”

The ASTI board decided to pay less than his entitlement, thus avoiding the need to seek shareholder approval at an AGM. However, according to the remuneration table in the company’s annual report for the year ended 31 December 2020, the total amount of remuneration paid to Dato’ Loh was S$1,294,000. Did the total remuneration disclosed exclude certain emoluments? Or does the termination payment actually exceed his total emoluments for last year and therefore shareholder approval is required?

The corporate governance report also states: “There are no termination, retirement or post-employment benefits provided for in the employment contracts with the Directors, CEO or top five key management personnel”.  So why does the Board now say he is contractually entitled to a termination payment?

One would hope it is not a special Christmas bonus instead.