Fu Yu receives letters of demand from fired CEO seeking S$2 million over salary and alleged defamation
The sum claimed by David Seow includes over S$1.8 million in salary and S$200,000 in damages
[SINGAPORE] Fu Yu has received two letters of demand from fired chief executive officer David Seow, claiming about S$2 million in total over alleged wrongful termination and defamation.
The mainboard-listed manufacturer of plastic and metal components and products said in a bourse filing on Thursday (Nov 6) that it had received a letter of demand dated Tuesday, in which Seow sought S$1,853,548.39 in salary.
Seow separately sent a letter of demand dated Wednesday to Fu Yu, its independent directors and corporate secretary, alleging defamation and demanding that a bourse filing on Nov 1 announcing his firing be retracted. Fu Yu added that Seow also demanded a signed apology to be published on SGXNet and damages of S$200,000, among other things.
Fu Yu said it is obtaining legal advice; it believes that the letters and any potential legal proceedings “will not affect” its continued business operations.
It also set out the reasons for firing Seow, and said the 40-year-old “had breached his fiduciary duties owed” to the company, including his duty to “act bona fide in its best interests”. Instead, Fu Yu said, he had “(used) his position and office to gain advantages for himself”.
Fu Yu said Seow’s termination was the result of an investigation that was initiated after shareholders raised concerns at the company’s annual general meeting in June.
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Shareholders had questioned the company’s financial performance and the remuneration granted to directors and key management personnel, which “appeared to be high in contrast to the low revenue of the company”.
The independent directors then initiated an internal audit and review, which led them to discover several matters to suggest “gross default and/or misconduct” on Seow’s part.
The independent directors subsequently engaged third-party professionals, including external legal counsel, who reviewed the matter.
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Fu Yu said Seow was given opportunities on Oct 28 and Oct 29 to address the board’s concerns over the vesting of shares under a restricted share plan, the five year lock-in clause in his service agreement dated Dec 16, 2022, and a six-figure special bonus he had granted to two senior management executives in 2024, despite the company’s poor financial performance.
Letter of award
On the vesting of shares, Fu Yu pointed out that a letter of award dated Nov 14, 2022, granted Seow two categories of shares: Annex A and Annex B shares.
Under Annex A, Seow was awarded five million shares, as well as S$1,012,500 cash in lieu of another five million shares for his past contributions and performance.
The letter of award was issued by then chairman of the remuneration committee, Christopher Huang, and accepted by Seow.
Fu Yu noted that the shares were granted to Seow in addition to his basic salary and performance bonuses for 2022, 2023 and 2024.
Annex B shares were intended as an incentive to reward Seow with additional shares upon achieving targets for the group’s revenue and pre-tax profit.
There was an accelerated reward clause that stated that, irrespective of the group’s actual revenue in 2023, Seow would be rewarded with the shares for 2022 as well as the shares for 2023 in advance, if he met the revenue target of S$237 million for 2023 a year earlier, in 2022.
As Fu Yu’s revenue for 2022 was S$240 million – higher than the target of S$215 million, the remuneration committee awarded Seow four million shares for achieving the vesting conditions for both 2022 and 2023. This was even though revenue for 2023 was only S$190.4 million – below the 2023 vesting condition of S$237 million.
The independent directors noted that, as of early November 2022, Seow and the then board were provided with monthly financial reports. They were already aware of the group’s actual revenue for the year up to October 2022, as well as the group’s revenue forecast for November and December that year.
Also, there was no provision in the letter of award for Fu Yu to claw back shares in the event that the vesting conditions for the following year were not satisfied.
Seow’s explanation, Fu Yu said, was that the letter of award was duly reviewed and approved by the remuneration committee.
Addendum to service agreement
There was an addendum to Seow’s service agreement dated Dec 16, 2022, where the remuneration committee introduced a five-year lock-in clause entitling Seow to his salary for the remainder of the five-year period ending Dec 15, 2027, if he was fired before that.
Fu Yu said that Seow added the same clause to the employment agreements of two other senior management personnel without the company’s knowledge.
The independent directors noted that this “appeared to be in breach of the company’s obligation to disclose material information”.
Fu Yu said that Seow’s explanation, when asked about the clause in his and the two others’ service agreements, was that it had been “duly reviewed and approved” by the remuneration committee.
“Special bonus”
Seow also awarded a “special bonus” to the same two senior management personnel in January 2024, said Fu Yu, with each bonus amounting to six figures. The company said no other personnel were given such a bonus, and noted its “poor financial performance” in 2023.
Fu Yu said Seow’s explanation to the board was that it is the company’s “established and consistent practice to set aside bonus provisions for the purposes of recognising and retaining key personnel”.
Having found his explanations “inadequate and/or unsatisfactory”, the board unanimously decided to show Seow the door.
The board added that Seow’s firing had nothing to do with the investigations into irregularities at its wholly owned supply chain unit Fu Yu Supply Chain.
Fu Yu shares rose 2 per cent or S$0.002 to close at S$0.103 on Thursday, before the news.
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