MC Payment's board must do better at explaining disagreements with Ching
MC PAYMENT's board has fallen out with its controlling shareholder Ching Chiat Kwong.
Mr Ching, who is also the chief executive officer of mainboard-listed property group Oxley Holdings, has said he has "completely lost confidence in the current board" and has made two requisitions - the first to nominate five new directors (including himself) to the company's board, and the second to remove all but one of MC Payment's directors (including its chief executive Anthony Koh).
MC Payment's board has responded that it wishes for the company to remain "above the fray" and "not be drawn into any private disputes Mr Ching may have with any particular shareholder or director".
Shareholders, however, may be just as interested in having Mr Ching's concerns thoroughly addressed by the board.
No disagreement?
Signs of trouble first surfaced during the annual general meeting (AGM) held on April 28. Three directors were up for re-election, in line with MC Payment's constitution calling for at least a third of directors to retire from office by rotation.
Mr Ching said three board members were originally selected: Harry Ng, Kesavan Nair and Mr Koh.
According to Mr Ching, Mr Koh said he was "not confident that the shareholders would re-elect him to the board". This resulted in Shawn Ching, Mr Ching's son, standing for re-election instead.
During the AGM, Mr Shawn Ching and Mr Ng - who is lead independent director at Oxley - were not re-elected. Votes in favour of their re-election came to only 43.3 per cent of votes cast or 83.2 million votes.
Mr Ching has alleged that Mr Koh had voted against the re-election of Mr Ng and Mr Shawn Ching. This is possible, as MC Payment's annual report shows that two substantial shareholders hold 89.7 million shares of the company - Mr Ching (73.7 million) and Mr Koh (16 million) - more than the 83.2 million votes.
To be clear, there is nothing wrong with directors and shareholders disagreeing and voting against each other if they believe it to be in the best interest of the company.
Yet when Singapore Exchange Regulation (SGX RegCo) asked on May 10 if there had been any disagreements between the board members or between the board and the management/controlling shareholders, MC Payment's board had said it "is not aware of any such disagreements".
Further signs that there were disagreements can be found in MC Payment's circular, where it said it was in discussions with Mr Ching between May 4 and 25 "in an attempt to reach an amicable resolution".
These discussions began before SGX RegCo's query. MC Payment's directors need to explain why they said they were "not aware" of disagreements, when the facts suggest otherwise.
It should also provide the reasons for their disagreement and explain why the current board is reluctant for its controlling shareholder - who holds more than 27 per cent of the company - to have any board representation.
Acquisitions
Mr Ching also alleged in a statement that MC Payment passed a directors' resolution - just two days after the AGM - for Mr Koh to enter into a term sheet for the acquisition of at least 51 per cent of NGSC.
The transaction was not disclosed by MC Payment prior to the statement, and in response to queries from SGX RegCo, MC Payment has said that it was in "exploratory talks" that concluded with no outcome, and that no "binding term sheets" were entered in relation to any acquisition of NGSC.
But MC Payment's board should clarify whether there was any term sheet, binding or otherwise.
Even though its response to SGX RegCo appears to play down the discussions with NGSC as "exploratory talks", the fact remains that the board was considering a deal with NGSC and shareholders deserve to know why.
MC Payment's board should also provide shareholders with an account of the matters relating to the proposed transaction, including the timeline, rationale and which board members were involved.
NGSC is an investment holding company with subsidiaries in the business of providing satellite-based services and telecommunication solutions in China and Indonesia. An explanation on how this will tie in with MC Payment's current business plans would be helpful.
In addition, it would also be useful if MC Payment's directors disclose why they assessed NGSC - a company that has been on the SGX watch-list, suspended from trading and issued with a notice of delisting - to be a prudent investment.
Although it is par for the course for all companies to consider mergers and acquisitions from time to time, MC Payment has only just listed and its payments business appears to be in a relatively nascent stage of development. Shareholders will certainly want to know how the NGSC discussion fits into the company's strategy.
What's next?
As the extraordinary general meetings draw closer, questions remain on what the future holds for MC Payment less than six months after it went public following a reverse takeover of Artivision Technologies.
MC Payment has four regional payment licences, and it previously said its goal is to become a leading digital payments player in South-east Asia.
Shareholders need to think carefully when voting, as this will affect control of the board and the company's future.
Over 100 million MC Payment shares were traded on Friday and Monday combined - more than 1.5 times' the total volume in all the preceding days since MC Payment was listed - and the shares rose 77.3 per cent over the two days.
MC Payment's board has got one thing right in a shareholders' letter dated June 14: "The board believes that the MC Payment's limited time and resources are best spent on advancing the interests of the shareholders. The spotlight should be on creating growth and economic value for the shareholders."
If the board is serious about this, it should start with addressing the concerns of its largest shareholder with greater transparency as these issues affect all shareholders.
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