The Board of Directors (the “Board” or “Directors”) of TSH Corporation Limited (the “Company”) is committed to maintain a high standard of corporate governance within the Company and its subsidiaries (the “Group”). Good corporate governance establishes and maintains an ethical environment in the Group, which strives to enhance the interests of the shareholders of the Company (the “Shareholders”).
The Company has adopted the Code of Corporate Governance issued on 6 August 2018 (the “2018 Code”), with the aim to enhance board quality and create value for the Company by strengthening board independence and diversity and encourage better engagement between the Company and all stakeholders. The 2018 Code aims to promote high levels of corporate governance by putting forth Principles of good corporate governance and Provisions with which companies are expected to comply. The Practice Guidance complements the 2018 Code by providing guidance on the application of the Principles and Provisions and setting out best practices for companies.
At the extraordinary general meeting held on 25 January 2019, the Shareholders have approved, amongst others, the proposed acquisition of the entire issued share capital of Sloshed! Pte Ltd (the “Acquisition”), the proposed share consolidation of every twenty (20) existing shares into one (1) consolidated share and the proposed allotment and issue of an aggregate of 32,333,333 ordinary shares in satisfaction of the purchase consideration for the Acquisition (the “RTO”). Accordingly, the conditions for the completion of the Acquisition have been fulfilled and the RTO was completed on 7 February 2019.
This report of corporate governance summarizes the practices of the 2018 Code after the RTO completed on 7 February 2019. The Board confirms that the Company had, for the financial year ended 31 December 2019 (“FY19”), complied with and observed the Principles as set out in the 2018 Code, as required by Rule 710 of the Listing Manual Section B: Rules of Catalist of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) (the “Catalist Rules”) and the Company will explain how its practices are consistent with the intent of the relevant Principles for any deviations of the provisions of the 2018 Code.
The Board’s Conduct of Affairs
Principle 1 : The Company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company.
Provision 1.1 – Principal functions of the Board
The Board recognises that it is collectively responsible for the success of the Group by setting strategic objectives and strives to protect and enhance long-term shareholders’ value. The Directors are fiduciaries who act objectively in the best interests of the Company, and Board works closely with the management (“Management”) and reviews the performance of Management. The Directors monitor Management through various mechanisms, develop organisational culture, set in place a code of conduct and ethics with appropriate tone-from-the-top through conversations in each of the meetings attended by key management personnel and the Directors. Should any conflict of interest arise during the meeting, the particular Director is to disclose his interest and recuse from the discussions and decisions involving the issues of conflict.
- The Board’s principal functions include:
- setting and approving broad policies, strategies and objectives of the Group;
- monitoring and reviewing the performance of Management;
- overseeing and evaluating the adequacy and effectiveness of internal controls, risk management, financial reporting and compliance;
- approving annual budgets, major funding, investment and divestment proposals;
- assuming responsibility for the corporate governance framework of the Group as well as setting the Group’s values and standards; and
- considering sustainability issues as part of its formulation of the Group’s strategic directions.
Provision 1.2 – Directors’ orientation and training
All Directors know the business of the Group and understand their duties and roles as executive, non-executive or independent directors of the Company. Each director exercises due diligence and independent judgement, and is obliged to act in good faith and considers at all times in the best interests of the Group. The Directors attend other trainings, conferences and seminars that have a bearing on their duties and contribution to the Board, organised by professional bodies, regulatory institutions and corporations at the Company’s expense.
A formal letter will be sent to newly-appointed Director upon his/her appointment explaining his/her duties and obligations as a director. New Directors, upon appointment, will also be briefed on the Group’s business and governance practices. After the RTO, Mr Chua Khoon Hui (“Mr Chua”), Chief Executive Officer (“CEO”) and Executive Director, briefed the Directors about the businesses and shared the value he intends to create for stakeholders. The other Directors provided their views and perspectives for strategy development.
Newly-appointed Directors with no prior experience as a director of a listed company in Singapore will undergo training in the roles and responsibilities of a listed company director as prescribed by the SGX-ST in accordance to Rule 406(3) of the Catalist Rules. Mr Chua, who had no prior experience as a director of listed company in Singapore, had attended all the necessary courses on Listed Company Essentials by the Singapore Institute of Directors.
Provision 1.3 – Matters requiring Board approval
The Group has adopted internal guidelines governing matters that require the Board’s approval which has been clearly communicated to Management. The Board approves transactions exceeding certain threshold limits, while delegating authority for transactions below those prescribed limits to the respective Board Committees and specific members of the key management.
Matters which are specifically reserved for the approval of the Board include, among others, any material acquisitions and disposals of assets and major undertakings (other than in the ordinary course of business), approval of financial results and interested person transactions.
Provision 1.4 – Delegation by the Board
Certain functions have been delegated to various board committees, namely, the Audit Committee (the “AC”), the Nominating Committee (the “NC”) and the Remuneration Committee (the “RC”) (individually, the “Board Committee” and collectively, the “Board Committees”), which are governed by their respective terms of references. Further information regarding the functions of the respective Board Committees is set out in the later part of this report.
The Board acknowledges that while these various Board Committees have the authority to examine particular issues and report back to the Board with their decisions and/or recommendations, the ultimate responsibility on all matters lies with the Board.
Provision 1.5 – Board meetings, attendance and multiple commitments
The Board conducts regular scheduled meetings, with Board and AC meetings held at least twice a year, and RC and NC meetings held at least once a year. During FY19, the Board conducted two (2) regular scheduled meetings. Ad-hoc meetings are convened as and when circumstances require. The Company’s constitution (“Constitution”) allows Board and Board Committee meetings to be conducted by way of teleconferencing, provided that the requisite quorum of at least two (2) Directors are present. Minutes of all Board meetings and Board Committee meetings are circulated for review and confirmation, enabling the respective members to keep abreast of the matters discussed at such meetings.
The number of Board meetings and Board Committee meetings held in FY19 up to 31 March 2020 and the attendance of each Board member at those meetings are as follows:
Attendance Record of the Board and Board Committee Meetings
N.A.: Not Applicable
# No. of meetings held whilst a member.
(1) Mr Chua was appointed as Chief Executive Officer and Executive Director on 7 February 2019.
When a Director has multiple board representations, the NC also considers whether or not the Director is able to and has adequately carried out his duties as a Director of the Company, taking into consideration the Director’s number of listed company board representations and other principal commitments.
Provision 1.6 – Access to information
The Board received management accounts on a half-yearly basis, as well as relevant background information and documents relating to items of businesses to be discussed at Board or Board Committee meetings before the scheduled meeting. These management accounts present a balanced and understandable assessment of the Group’s performance, position and prospects on a half-yearly basis, which has been assessed by the Board to be sufficient. The Board is provided with timely, adequate and complete information. For other matters where the Board is required to make decisions, Directors received sufficient background and explanatory information on financial, business and corporate issues to enable the Directors to be properly briefed on issues to be considered. Any additional materials or information requested by the Directors are promptly furnished.
The Board takes adequate steps to ensure compliance with legislative and regulatory requirements.
Provision 1.7 – Access to Management, Company Secretary and External Advisers
The Directors have separate and independent access to the Company Secretary and Management. The Company Secretary attends all Board and Board Committee meetings. The Company Secretary is responsible for ensuring that the Board procedures are followed and that applicable rules and regulations are complied with.
The Company Secretary and/or their representatives are required to attend all Board and Board Committee meetings and assists the Board and the Board Committees in ensuring that the respective procedures are followed and the applicable rules and regulations are complied with.
Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows with the Board and its Board committees and between Management and independent and non-executive Directors, advising the Board on all governance matters as well as facilitating orientation and assisting with professional development as required.
The appointment and removal of the Company Secretary are subject to the Board’s approval as a whole.
The Board as a whole is updated on risk management and the key changes in the relevant regulatory requirements and accounting standards. In FY19, the Directors were provided with updates on changes in the relevant laws, regulations and Singapore Financial Reporting Standards (International) by the external auditors and the Company Secretary. The Board (whether individually or as a group) has, in the furtherance of its duties, separate and independent access to external advisers for independent professional advice, if necessary, at the Company’s expense.
All Directors are provided with regular updates on changes in the relevant laws, regulations and commercial risks, to enable them to make well-informed decisions and to ensure that the Directors are competent in carrying out their expected roles and responsibilities.
Board Composition and Guidance
Principle 2: The Board has an appropriate level of independence and diversity of thought and background in its composition to enable it to make decisions in the best interests of the Company.
Provision 2.1 – Board Independence
There is a strong and independent element on the Board with Independent Directors making up half of the Board composition. The non-executive Directors make up a majority of the Board. As the Chairman of the Board is independent, Provision 2.2 requiring independent directors to make up a majority of the Board does not apply to the Company. The Group is in compliance with the Catalist Rules, which require the independent directors to make up at least one-third of the Board, which will take effect on 1 January 2022, and the 2018 Code with at least one-third of the Board consisting of independent directors, and non-executive directors making up majority of the Board.
The NC is of the opinion that the Board is able to exercise objective judgement on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.
In assessing and reviewing the independence of the independent Directors, the NC adopts the 2018 Code’s definition of an “independent director” and are satisfied that the independent Directors do not have any relationships with the Company, its related corporations, substantial shareholders or officers, which could interfere or be perceived to interfere with the Directors’ independent judgment.
The Board had also reviewed the independence of the independent Directors based on Rule 406(3)(d) of the Catalist Rules which sets out the specific circumstances in which a director should be deemed non-independent. These circumstances include:
- a Director is employed or has been employed by the Company or any of its related corporations in the current or any of the past three financial years; or
- a Director has an immediate family member who is, or has been employed by the Company or any of its related corporation in the current or any of the past three financial years, and whose remuneration is or was determined by the RC.
Each of the independent Directors has confirmed that they and their respective associates do not have any employment relationships with the Group as stipulated above.
In addition to the above, the items the NC and Board also consider while reviewing the independence of the independent Directors are:
- Whether a Director, or a Director whose immediate family member, in the current or immediate past financial year, provided to or received from the Company or any of its subsidiaries any significant payments or material services (which may include auditing, banking, consulting and legal services), other than compensation for board service. Payments aggregated over any financial year in excess of S$50,000 should generally be deemed significant.
- Whether a Director, or a Director whose immediate family member, in the current or immediate past financial year, is or was, a substantial shareholder or a partner in (with 5% or more stake), or an executive officer of, or a director of, any organisation which provided to or received from the Company or any of its subsidiaries any significant payments or material services (which may include auditing, banking, consulting and legal services). Payments aggregated over any financial year in excess of S$200,000 is deemed significant whether they constitute a significant portion of the revenue of the organisation in question.
- Whether a Director who is, or has been directly associated with, a substantial shareholder of the Company, in the current or immediate past financial year.
Taking into consideration the above factors, the NC had reviewed the declaration of independence of each Independent Director for FY19 and was satisfied that all independent Directors are considered independent for the purpose of Provision 2.1 of the 2018 Code and Rule 406(3)(d) of the Catalist Rules. The Board concurred with the aforementioned independence review of the NC.
Provision 2.2 – Majority independent Directors where Chairman is not independent
Provision 2.3 – Majority non-executive Directors in a Board
Provision 2.4 – Board composition and diversity
The Board comprises four (4) Directors as follows:
Dr Yu Lai Boon (Non-Executive Chairman and Independent Director)
Chua Khoon Hui (Chief Executive Officer and Executive Director) (Appointed on 7 February 2019)
Tan Dah Ching (Non-Executive Independent Director)
Teo Kok Woon (Non-Executive Non-Independent Director)
As the Chairman is independent, Provision 2.2 would not apply to the Company. Nonetheless, the Company has a majority of non-executive Directors on the Board, which complies with Provision 2.3.
The current size of the Board is appropriate to facilitate effective decision making. The Board is of the opinion that the current Board size of four (4) Directors is appropriate and provides sufficient diversity of expertise and knowledge in leading and governing the Group effectively. The Board will continue to review the size of the Board on an ongoing basis.
The Board has always placed diversity as an agenda in strengthening the performance of the Board and its Board Committees. The Company’s board diversity policy provides a framework to promote diversity in the Board with the objective to utilise diversity practices through the effective blend of competencies and extensive experiences of the Directors who are prepared to navigate diverse cultures, geographies and markets to make decisions in the best interests of the Group. The NC will also consider the benefits of all aspects of diversity, including diversity of background, experience, gender, age and other relevant factors, as and when appropriate.
Provision 2.5 – Meeting of non-executive Directors without Management
The non-executive Directors constructively challenge and assist in the development of proposals on strategy, review the performance of Management on a regular basis. The non-executive Directors, lead by the independent Chairman, meet regularly without Management’s presence in order to facilitate a more effective check on Management, and provides feedback to the Board as appropriate.
Chairman and Chief Executive Officer
Principle 3 : There is a clear division of responsibilities between the leadership of the Board and Management, and no one individual has unfettered powers of decision-making.
Provision 3.1 – Separation of the role of the Chairman and the CEO
Provision 3.2 – Role of the Chairman and the CEO
The roles of the Chairman of the Company and the CEO were separate and their responsibilities were clearly defined to ensure an appropriate balance of power and authority within the Company.
Dr Yu Lai Boon (“Dr Yu”) was appointed as the Non-Executive Chairman on 16 November 2018. As the Chairman of the Company, Dr Yu is responsible for, among others, leading the Board to ensure its effectiveness on all aspects of its role, setting the agenda and ensuring that adequate time is available for discussion of all agenda items, promoting a culture of openness and debate at the Board, exercising control over the quality, quantity and timeliness of the flow of information between Management and the Board, ensuring effective communication with the Shareholders encouraging constructive relations within the Board and between the Board and Management, facilitating the effective contribution of non-executive Directors and promoting high standards of corporate governance. The Board continues to be responsible for the overall strategic initiatives and directions of the Group.
Mr Chua was appointed as the CEO and Executive Director upon completion of the RTO on 7 February 2019. He is responsible for formulating corporate strategies for the Company and the Group as well as being in-charge of the day-to-day management, ensuring that its operations run smoothly and overseeing the business development activities, sales and marketing and procurement and supply functions of the Group.
Upon Mr Chua’s appointment, the roles of the Chairman and CEO were separated to ensure an appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The responsibilities of the Chairman and CEO are clearly defined above to ensure an appropriate balance of power and authority within the Company.
Provision 3.3 – Lead Independent Director
There is a balance of power in the Board with each Board Committee chaired and led by independent Directors. As there is separation in the roles of the Chairman and CEO to preserve effective corporate governance, the appointment of a Lead Independent Director as set out in Principle 3.3 of the 2018 Code is not necessary. Independent Directors met regularly without the presence of other Directors. Independent Directors are available to the Shareholders where they have concerns and for which contact through the normal channels of communication with Management is inappropriate or inadequate.
Principle 4 : The Board has a formal and transparent process for the appointment and reappointment of Directors, taking into account the need for progressive renewal of the Board.
Provision 4.1 and 4.2 – Roles and composition of the NC
Recommendation for nominations of new Directors and retirement of Directors are made by the NC and considered by the Board as a whole.
As at the date of this report, the NC comprises the following members, majority of whom including the
Chairman of the NC are independent Directors:
Tan Dah Ching (Chairman)
Teo Kok Woon (Member)
Dr Yu Lai Boon (Member)
The key terms of reference of the NC are summarised as follows:
- Reviews and makes recommendations to the Board on all Board appointments and re-appointments of Directors;
- Reviews of succession plans for Directors, in particular the CEO and Management;
- Reviews the Board structure, size and composition and makes recommendations to the Board with regards to any adjustments that are deemed necessary;
- Determines the independence of the Board;
- Recommends the process and criteria to assess the effectiveness and performance of the Board, its Board Committees and contribution of each Director; and
- Reviews training and professional development programmes for the Board.
Provision 4.3 – Board Renewal
During FY19, the NC performed the aforementioned activities. The NC will review succession plan annually to ensure continuity of leadership. For new appointments to the Board, the NC will consider the current size, composition and diversity of the Board, and decide if the candidate’s background, expertise and knowledge will complement the skills and competencies of the existing Board. The candidate must be a person of integrity and able to commit sufficient time and attention to the affairs of the Group, especially if he has multiple Board representations and/or principal commitments.
If a vacancy arises under any circumstances, or where it is considered that the Board would benefit from the services of a new Director, the NC, in consultation with the Board, will determine the selection criteria taking into consideration the aforementioned and select the appropriate candidate for the position.
In its search and nomination process for new Director, other than through a formal search process via external search consultants, if required, the NC will also tap on to the resources of the Directors’ personal contacts and their recommendations for potential candidates. The NC will shortlist and interview potential candidates with the appropriate profile to assess his/her suitability before nominating the most suitable candidate to the Board for approval and appointment as a Director.
Provision 4.4 – Independence review of Directors
Based on Rule 720(4) of the Catalist Rules, a listed issuer must have all Directors submit themselves for re-nomination and re-appointment at least once every three years. In accordance with the Constitution, one-third of the Directors shall retire from office at every Annual General Meeting of the Company (“AGM”) and a retiring Director shall be eligible for re-election at the said AGM. All Directors shall retire from office at least once every three (3) years. Newly appointed Directors are required to submit themselves for re-nomination and re-election at the next AGM following their appointment. Each member of the NC shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as a Director.
At the forthcoming AGM, Mr Teo Kok Woon (“Mr Teo”) and Mr Chua will be retiring pursuant to Regulation 107 of the Constitution. Mr Teo and Mr Chua, being eligible for re-election, have each offered himself for re-election. Please refer to the disclosure of information on directors seeking re-election at the AGM found after the Notice of AGM.
The NC had recommended to the Board that Mr Teo and Mr Chua be nominated for re-appointment at the forthcoming AGM. In making their recommendations, the NC evaluated contributions of Mr Teo and Mr Chua to the Group and their performance in the Board and Board Committees, where applicable, their participations, candour and special contributions. Further details of Mr Teo and Mr Chua can be found in the “Board of Directors” section of the annual report.
The NC is responsible for determining annually, or as and when circumstances require, whether a Director is independent, with reference to the guidelines set out in the 2018 Code and the Catalist Rules. Further details on the NC’s assessment in respect of the independence of the independent Directors have been set out under Principle 2 of this Report above. Each NC member does not take part in determining his own re-nomination or independence. Each Director is required to submit a return of independence to the Company Secretary as to his independence, who in turn submits the returns to the NC. The NC reviews the returns and determines the independence of each of the Directors and makes its recommendation to the Board. An independent Director shall notify the NC immediately if, as a result of a change in circumstances, he no longer meets the criteria for independence. The NC shall review the change in circumstances, and make its recommendation to the Board.
The NC has assessed the independence of the Directors, namely Mr Tan Dah Ching (“Mr Tan”) and Dr Yu Lai Boon (“Dr Yu”) based on the criteria of independence defined in the 2018 Code and Rule 406(3)(d) of the Catalist Rules. The NC is satisfied that there are no relationships or circumstances which were likely to interfere, or could appear to interfere the independent business judgement of Mr Tan and Dr Yu with a view to the best interests of the Group or which would deem him not to be independent. Mr Tan and Dr Yu had abstained from deliberations in respect of assessment of their own independence.
Provision 4.5 – Duties and obligations of Directors
The NC ensures that all newly-appointed Directors are aware of their duties and obligations. Although some of the non-executive Directors hold multiple directorships in other companies or principal commitments, the Board is of the view that such multiple board representations or principal commitments do not hinder them from carrying out their duties as Directors of the Company. The NC has determined that the maximum number of listed company board representations and principal commitments which any Director of the Company may hold should not be more than four (4). As the date of this Report, the number of listed company directorships and principal commitments held by the Directors is within the maximum limit.
The NC, together with the Board, is satisfied that the Directors have discharged their duties diligently, given that sufficient time, attention, resources and expertise has been given by the Directors to the affairs of the Group, notwithstanding that some of the Directors have multiple board representations as well as any other principal commitments.
Please refer to the “Board of Directors” section in the annual report for the profile of the Directors, including the listed company directorships and principal commitments of each Director. The shareholdings of the individual Directors of the Company are set out in the Directors’ Statement of the annual report.
Principle 5 : The Board undertakes a formal annual assessment of its effectiveness as a whole, and that of each of its Board Committees and individual Directors.
Provisions 5.1 and 5.2 – Board Evaluation Process
A formal assessment of the effectiveness of the Board as a whole, the Board Committees and the contribution of each Director to the effectiveness of the Board is conducted annually by having the Directors complete a questionnaire. The process and criteria set out in such questionnaire is recommended by the NC and approved by the Board. The findings are analysed and discussed with a view to implement certain recommendations to further enhance the effectiveness of the Board.
For FY19, the NC, in assessing the contribution of each Director, had considered the attendance and participation at Board and Board Committee meetings, the qualifications, experience, expertise, the time and effort dedicated to the Group’s business and affairs, including Management’s access to the Directors for guidance or exchange of views as and when necessary.
Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as Director.
In assessing the effectiveness of the Board and Board Committees, the criteria including the size, composition, processes of the Board and Board Committees, Board’s and Board Committees’ access to information, strategic planning and accountability were taken into consideration.
The Board has not engaged any external consultant to conduct an assessment of the performance of the Board, Board Committees and each individual Director for FY19. Where relevant, the NC will consider such an engagement.
Procedures for Developing Remuneration Policies
Principle 6 : The Board has a formal and transparent procedure for developing policies on Director and executive remuneration, and for fixing the remuneration packages of individual Directors and key management personnel. No Director is involved in deciding his or her own remuneration.
Provisions 6.1 and 6.2 – Composition of the RC
As at the date of this report, the members of the RC comprise the following non-executive Directors, majority of whom including the Chairman are independent:
Tan Dah Ching (Chairman)
Teo Kok Woon (Member)
Dr Yu Lai Boon (Member)
The Chairman of the RC, Dr Yu, has a good working knowledge of human resource and executive compensation from his many years of general management experience.
The functions of the RC contained in its written terms of reference include, among others,
- the review of a framework of remuneration and implementation of formal and transparent processes by which the remuneration packages of all the Executive Directors (in the form of service agreements) and at least the key management personnel (in terms of aggregate remuneration) for recommendation to the Board;
- the review and recommendation to the Board on specific remuneration packages for each director and key management personnel; and
- to consider long-term incentives schemes for Executive Directors and key management personnel and review their eligibility for benefits under the schemes.
In FY19, the RC has duly performed the aforementioned activities.
Provision 6.3 – Remuneration framework
In their review, the RC considers all aspects of remuneration, including termination terms, to ensure they are fair. The RC also reviewed the remuneration packages of employees who are immediate family members of a Director, CEO or substantial shareholder.
No RC member or any Director is involved in deliberations in respect of any remuneration, compensation, options or any form of benefits to be granted to himself, except for providing information and documents specifically requested by the RC to assist it in its deliberations.
Directors’ fees are recommended by the RC and submitted for endorsement by the Board. Directors’ fees are subject to approval by the Shareholders at the AGM.
Provision 6.4 – Remuneration consultant
No remuneration consultants were engaged by Company in FY19.
Level and Mix of Remuneration
Principle 7 : The level and structure of remuneration of the Board and key management personnel are appropriate and proportionate to the sustained performance and value creation of the Company, taking into account the strategic objectives of the Company.
Provisions 7.1 and 7.3 – Remuneration of Executive Director and KMPs
In setting the remuneration packages of the Executive Director and key management personnel, the RC ensures that remuneration packages of the Executive Director and key management personnel are comparable within the industry as well as with similar companies. Accordingly, a significant and appropriate proportion of the remuneration packages of the Executive Director and key management personnel is structured to link rewards to corporate and individual performance, whereby the performance-related remuneration is aligned with the interests of the Shareholders and link rewards to corporate and individual performance so as to promote the long-term sustainability of the Group.
The RC considers the Group’s relative performance, the contributions and responsibilities of the individual Executive Director and key management personnel in its review and recommendation of their remuneration. The RC also takes into consideration the criteria such as leadership, people development, commitment and teamwork in assessing the individual’s performance.
In connection with the RTO, the Company entered into a service agreement (the “Service Agreement”) with Mr Chua, CEO and Executive Director of the Company. The Service Agreement took effect upon completion of the RTO and shall continue for an initial period of three (3) years and upon the expiry of such period, the employment of Mr Chua shall be automatically renewed on a year-to-year basis on such terms and conditions as the parties may agree. The remuneration of Mr Chua includes, among others, a fixed salary and a variable performance bonus at the discretion of the RC, taking into account his performance as well as the performance of the Group, and there are no onerous compensation commitments on the part of the Company in the event of an early termination of the service of Mr Chua.
The remuneration package of the key management personnel comprises a basic salary component and a variable component which is the annual bonus, based on the performance of the Group as a whole and their individual performance.
Provision 7.2 – Remuneration of non-executive Directors
The non-executive Directors (including independent Directors) do not have any service agreements with the Company. Independent Directors are paid a basic fee for sitting on any of the Board Committees and an additional fee to reflect their added responsibility as Chairman of the respective Board Committees, where applicable. Save for the Directors’ fees, which have to be approved by the Shareholders at every AGM, the non-executive Directors do not receive any remuneration from the Group. The remuneration of the non-executive Directors is appropriate, having taken into consideration the level of contribution, as well as effort, time spent and responsibilities of the non-executive Directors.
Provision 7.3 – Long Term incentives
The NC is of the view that the current remuneration framework as discussed in Provisions 7.1, 7.2 and 7.3 is appropriate to attract, retain and motivate the directors to provide good stewardship of the Company and key management personnel to successfully manage the Group for the long term.
The Group has no share-based compensation scheme or any long-term scheme involving the offer of shares or option in place.
The Group does not use contractual provisions to allow the Group to reclaim incentive components of remuneration from the Executive Director and key management personnel in exceptional circumstances of misstatement of financial results, or of misconduct resulting in financial loss to the Group. The Executive Director owes a fiduciary duty to the Company. The Company should be able to avail itself to remedies against the Executive Director in the event of such breach of fiduciary duties. The RC would review such contractual provision as and when necessary.
Disclosure on Remuneration
Principle 8 : The Company is transparent on its remuneration policies, level and mix of remuneration, the procedure for setting remuneration, and the relationships between remuneration, performance and value creation.
Provision 8.1 – Disclosure of remuneration
A breakdown of the level and mix of remuneration paid/payable to each Director and key management personnel in remuneration bands of S$250,000 for FY19 are as follows:
(1) Mr Chua was appointed as Chief Executive Officer and Executive Director on 7 February 2019.
- The Directors’ fees is subject to approval by the Shareholders at the forthcoming AGM.
- Provision 8.1 of the 2018 Code recommends that the Company should disclose the names, amounts and breakdown of remuneration of each individual Director and the CEO.
(b) Key Management Personnel
Notes: Provision 8.1 of the 2018 Code recommends disclosure of remuneration of the top five (5) key management personnel (who are not Directors or the CEO) on a named basis and in bands of S$250,000.
The Company only has one (1) key management personnel who is not a Director or the CEO.
The Company has disclosed its key management personnel’s remuneration in bands of S$250,000 as well as a breakdown in percentage terms. There are no termination, retirement and post-employment benefits that may be granted to the key management personnel.
As the Company only has one (1) key management personnel who is not a Director or the CEO, it is not in the best interests of the Company to disclose the aggregate remuneration paid to the key management personnel.
Provision 8.2 – Remuneration of related employees
Ms Ng Pei Wah, the Head of Human Resources and Administration of the Group, is the spouse of Mr Chua, CEO and Executive Director. Her remuneration for FY19 is in the bands of S$150,001 to S$200,000. The remuneration of such employee will be reviewed annually by the RC and Board to ensure that their remuneration packages is in line with the Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibilities. Any bonuses, pay increases and/or promotions for these related employees will also be subject to the review and approval of the RC and Board.
Save as disclosed above, there are no other employees who are substantial shareholders of the Company, or are immediate family members of a Director or the CEO or a substantial shareholder of the Company, and whose remuneration exceeds S$100,000 during the financial year.
Provision 8.3 – Forms of remuneration and details of employee share schemes
Details pertaining to the form of remuneration and other payments and benefits of Directors and KMPs are disclosed under Provisions 8.1 and 8.2 above. The Company currently does not have any employee share schemes in place.
ACCOUNTABILITY AND AUDIT
Risk Management and Internal Controls
Principle 9 : The Board is responsible for the governance of risk and ensures that Management maintains a sound system of risk management and internal controls, to safeguard the interests of the Company and its Shareholders
Provision 9.1 – Nature and extent of risks
The Board as a whole undertakes the oversight responsibilities for risk governance of the Group and determines the nature and extent of risks which the Company is willing to take in achieving its strategic objectives and value creation. Based on the Group’s business and operations, the Board agreed that a separate Board Risk Committee will not be effective to preserve corporate governance. However, the Board regularly reviews the Group’s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. The Company’s outsourced internal auditors was tasked to review all significant control policies and procedures and highlight all significant matters to the AC and the Board.
Provision 9.2 – Assurance from the CEO, Group CFO and KMPs
For the financial year under review, the CEO and Group CFO have provided assurance to the Board on (i) the financial records have been properly maintained and the consolidated financial statements of the Group give a true and fair view of the Group’s operations and finances, and (ii) the adequacy and effectiveness of the Group’s risk management and internal control systems.
The Board and the AC will continue to review such risk management and internal control systems at least on an annual basis.
With the concurrence of the AC, the Board is of the opinion that the system of internal controls and risk management processes throughout the financial year are adequate for the Group. The AC constantly reviews the effectiveness and adequacy of internal controls and the risk management processes adopted by the Group. The Board, with the concurrence of the AC, is satisfied that the Group has a robust internal control systems (including financial, operational, compliance and information technology) and risk management which is adequate and effective as at the date of this report to meet the needs of the Group in its current business environment.
Principle 10 : The Board has an Audit Committee which discharges its duties objectively.
Provisions 10.1, 10.2 and 10.3 – Composition of the AC
Provision 10.4 – Internal audit function
Provision 10.5 – AC activities during the year
The AC comprises three (3) non-executive Directors, majority of whom including the Chairman are independent. Majority of the AC possess recent and relevant accounting experience and/or related financial management expertise. The members of the AC as at the date of this report are as follows:-
Dr Yu Lai Boon (Chairman)
Tan Dah Ching (Member)
Teo Kok Woon (Member)
The AC has explicit authority to investigate any matter within its terms of reference. It has full access to, and the co-operation of, Management and full discretion to invite any Director or Management to attend its meetings. The AC has adequate resources to enable it to discharge its responsibilities properly. The AC also does not comprise former partners or Directors of the Company’s external auditors, Ernst & Young LLP.
The responsibilities of the AC contained in its written terms of reference include:
- reviewing the half-year and full year financial statements and results announcements before submission to the Board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, and compliance with accounting standards, the Catalist Rules and any other relevant statutory or regulatory requirements;
- reviewing the significant financial reporting issues and judgements so as to ensure the integrity of the consolidated financial statements of the Group and any announcements relating to the Group’s financial performance;
- reviewing the independence, scope, results and the adequacy and effectiveness of the external audit and internal audit functions, and to evaluate, with the assistance of internal auditors, the adequacy and effectiveness of the Group’s internal controls and risk management systems;
- reviewing the assurance from the CEO and the Group CFO on the financial records and financial statements;
- reviewing the cost effectiveness of the external audit and, where the external auditors provide a substantial volume of non-audit services to the Company and/or the Group, to review the nature, extent and costs of such services so as to avoid an erosion of the independence and objectivity of the external auditors;
- recommending to the Board the nomination for appointment, re-appointment and removal of the external auditors and the terms of engagement and their level of audit fee;
- reviewing the policy and arrangements for concerns about possible improprieties in financial reporting or other matters to be safely raised, independently investigated and appropriately followed up on; and
- reviewing the interested person transactions, and improper activities of the Group, if any.
In FY19, the AC met two (2) times. Details of the members’ attendance at AC meetings in FY19 are provided under Principle 1 of this report.
The Company has put in place a whistle-blowing policy, endorsed by the AC, where employees of the Group and any other persons including members of the public may, in confidence, raise concerns about the possible corporate improprieties in matters of financial reporting or other matters. Details of the whistle-blowing policy are disseminated to the employees of the Group, and is available on the Company’s website. Employees and any other persons including members of the public may direct their concerns directly to the AC Chairman at email address email@example.com. The AC’s objectives are to ensure that arrangements are in place for the independent investigation of such matters and for appropriate follow-up action.
The AC performed the following functions in FY19:
(a) External Auditors
The AC reviewed together with the external auditors:
- the audit plan (including, among others, the nature and scope of the audit before the commencement of audit and the risk management issues of the Group);
- the consideration of financial controls in areas which could have a material impact on the financial statements;
- the audit report;
- the assistance given to them; and
- the financial statements of the Group.
The AC is kept abreast by the external auditors of changes to accounting standards, Catalist Rules and other regulations which could have an impact on the Group’s business and financial statements. Where the external auditors raise any significant issues (e.g. adjustments) which has a material impact on the interim financial statements or financial updates previously announced by the Company, the AC will bring this to the Board’s attention, and the Board will then consider whether an immediate announcement under Rule 703 of the Catalist Rules is required. The AC will also advise the Board if changes are needed to improve the quality of future interim financial statements or financial updates. In the report to the AC in relation to the
FY19 audit results presented by the external auditors, there was no significant issue which has a material impact to the financial results of the Group raised by the external auditors except for a Key Audit Matter (“KAM”) which had been included in the Independent Auditor’s Report for FY19.
The AC constantly bears in mind the need to maintain a balance between independence and objectivity of the external auditors and the work carried out by the external auditors based on value for money considerations. The aggregate amount of fees payable to the external auditors for audit and non-audit services for the financial period from 1 January to 31 December 2019 amounted to S$102,130 and S$4,600 respectively.
The AC conducted a review of the nature and extent of non-audit services provided by the external auditors to satisfy itself that such services do not prejudice the independence and objectivity of the external auditors before confirming their re-nomination.
The AC, having reviewed all non-audit services provided by the external auditors to the Company, is satisfied that the nature and extent of such services would not affect the independence of the external auditors.
The AC shall continue to monitor the scope and results of the external audit, its cost effectiveness and the independence and objectivity of the external auditors. For FY19, the AC also received the Audit Quality Indicators as presented by the external auditors. The AC gives its recommendations to the Board and the Company regarding the appointment, re-appointment or removal of the external auditors. The AC is satisfied that the Company’s external auditors are able to meet the audit requirements and statutory obligation of the Group. The AC has recommended to the Board the re-appointment of Ernst & Young LLP as the Company’s external auditors at the forthcoming AGM.
The AC is satisfied that the Company is in compliance with Rule 712 and 715 of the Catalist Rules.
(b) Review of financial statements
For FY19, the AC reviewed the half-year and full year financial statements of the Group, including announcements relating thereto, to the Shareholders and the SGX-ST.
(c) Review of interested person transactions and material contracts
Review of interested person transactions and material contracts
In FY19, the Company entered into a contract to purchase the entire share capital of Sloshed! Pte Ltd for a purchase consideration of S$19.4 million from the vendors, of which two (2) of them are Mr Teo and Mr Chua. The purchase consideration of the Acquisition, which was completed on 7 February 2019, was satisfied by the allotment and issue of 32,333,333 ordinary shares of the Company at the issue price of S$0.60 for each ordinary share. Other than the aforementioned and the Service Agreement entered into between the Company and Mr Chua on 21 December 2018 which took effect upon the completion of the RTO, there were no material contracts entered into by the Group involving the interests of the Directors or controlling shareholders for FY19.
The Group monitors all its interested person transactions and ensures that all transactions with interested persons are reported in a timely manner for review by the AC and that the transactions are conducted on an arms’ length basis.
(d) Internal auditors
The Board believes in the importance of maintaining a sound system of internal controls to safeguard the interests of the Shareholders and the Group’s assets. The system of internal controls provides reasonable, but not absolute assurance that the Group will not be adversely affected by any event that could be reasonably foreseen as it strives to achieve its business objectives.
The Company outsources its internal audit function to Foo Kon Tan LLP. The primary reporting line of the internal auditor is to the AC and the AC decides on the appointment, evaluation, termination and remuneration of the internal auditors. The internal auditor has unfettered access to all the Group’s documents, records, properties and personnel, including access to the AC.
The AC has reviewed and confirmed that Foo Kon Tan LLP is a suitable professional service firm to meet the Group’s internal audit obligations, having regard to the adequacy of resources and experience of the firm and the assigned engagement director, number and experience of supervisory and professional staff assigned to internal audits. The internal auditors is guided by the International Standards for the Professional Practice of Internal Auditing (IIA Standards) issued by the Institute of Internal Auditors.
The AC reviews and approves the internal audit scope and plan to ensure that there is sufficient coverage of the Group’s activities. It also oversees the implementation of the internal audit plan and ensures that Management provides the necessary co-operation to enable the internal auditors to perform its function.
The internal auditors completed the review during FY19 in accordance with the internal audit plan approved by the AC. The Board has adopted the recommendations of the internal auditors set out in the internal audit report.
The AC is satisfied that the internal audit function is independent, effective and adequately resourced (being outsourced to a reputable professional service firm). Hence, it has appropriate standing within the Group.
During FY19, the AC met once with internal and external auditors without the presence of Management. The AC will meet with them at least once annually.
SHAREHOLDER RIGHTS AND ENGAGEMENT
Shareholder Rights and Conduct of General Meetings
Principle 11 : The Company treats all the Shareholders fairly and equitably in order to enable them to exercise shareholders’ rights and have the opportunity to communicate their views on matters affecting the Company. The Company gives the Shareholders a balanced and understandable assessment of its performance, position and prospects.
Provisions 11.1, 11.2, 11.3 and 11.4 – Conduct of general meetings
The Shareholders are encouraged to attend the general meetings of the Company to participate effectively in and vote at such general meetings, to ensure a high level of accountability and to stay informed of the Company’s strategy and goals. The Shareholders are also informed of the rules and voting procedures governing such meetings. Notice of the AGM is despatched to the Shareholders together with explanatory notes or a circular (if necessary), at least fourteen (14) calendar days or twenty-one (21) calendar days (as the case may be) before the meeting. The Board welcomes questions from the Shareholders who have an opportunity to raise issues either informally or formally before or at the general meetings of the Company. The Chairmen of the AC, RC and NC will be available at the meeting to respond to those questions relating to the functions of the Board Committees. The external auditors will also be present to address the Shareholders’ queries on the conduct of audit and the preparation and content of the auditor’s report.
The Company ensures that there are separate resolutions at general meetings on each substantially separate issue unless the issues are interdependent and linked so as to form one significant proposal. Where the resolutions are “bundled”, the Company explains the reasons and material implications in the notice of meeting.
To enhance shareholder participation and in adherence of the Catalist Rules, resolutions put forth at the forthcoming AGM and at all future general meetings will be voted by poll. Voting results of all votes cast for and against each resolution and the respective percentages will be announced via the SGXNet.
On 3 January 2016, the legislation was amended, among other things to allow certain members, defined as “relevant intermediary” under Section 181(1C) of the Companies Act, Chapter 50, to attend and participate in general meetings without being constrained by the two (2)-proxy requirement. Relevant intermediary includes the provision of nominee and custodial services and CPF Board which purchases shares on behalf of the CPF investors. As a result, the relevant intermediaries are entitled to appoint more than two (2) proxies to attend, speak and vote at the Company’s forthcoming annual general meetings. As the authentication of the Shareholders’ identity information and other related integrity issues still remain a concern, the Company has decided, for the time being, not to implement voting in absentia by mail or electronic means as required by Provision 11.4 of the 2018 Code. The Board will review its Constitution from time to time. Where amendment to its Constitution is required to align the relevant provisions with the requirements of the Catalist Rules, the Shareholders’ approval will be obtained.
Provision 11.5 – Minutes of general meetings
Minutes of general meetings include substantial and relevant queries or comments from the Shareholders relating to the agenda of the meeting and responses from the Board and Management would be available to the Shareholders upon their request. The Company publishes minutes of general meetings of the Shareholders on its corporate website as soon as practicable.
Provision 11.6 – Dividend policy
The Board notes that Provision 11.6 of the 2018 Code sets out that the Company should have a dividend policy and communicates it to the Shareholders. However, the Group does not have a concrete dividend policy at present. Nonetheless, the Company is of the view that the following disclosure would constitute a balanced and understandable assessment of its position on a dividend policy, and such practice is consistent with the intent of Principle 11 of the 2018 Code. Additionally, the Company also discloses the reasons for the decision of the Board not to declare or recommend a dividend, together with the announcement of the financial statements, which is in line with Rule 704(23) of the Catalist Rules.
The form, frequency and amount of dividends declared each year will take into consideration the Group’s profit growth, cash position, positive cash flow generated from operations, projected capital requirements for business growth and other factors as the Board may deem appropriate.
Engagement with Shareholders
Principle 12 : The Company communicates regularly with its Shareholders and facilitates the participation of the Shareholders during general meetings and other dialogues to allow the Shareholders to communicate their views on various matters affecting the Company.
Provisions 12.1, 12.2 and 12.3 – Stakeholder engagement
Information is communicated to the Shareholders on a timely basis and in an accurate and comprehensive manner, through annual reports that are issued to all Shareholders within the mandatory period, half-year/ full year announcements, disclosures to the SGX-ST via SGXNet and other announcements, where required, under the provision of the Catalist Rules. The Company adopts the practice of regularly communicating major developments in its businesses and operations through SGXNet and, where appropriate, directly to the Shareholders other investors, analysts, the media, the public and its employees.
The Company does not practice selective disclosure of material information. Material information is excluded from briefings with investors or analysts, unless it has been publicly released either before, or concurrently with, such meetings. The Board provides the Shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects on a half-yearly basis. Such responsibility is extended to the other price-sensitive public reports and reports to regulators (if required).
Provisions 12.2 and 12.3 of the 2018 Code sets out that the Company has in place an investor relations policy allows for an ongoing exchange of views so as to actively engage and promote regular, effective and fair communication with the Shareholders and the mechanism through which the Shareholders may contact the Company with questions. However, the Company does not have a standalone investor relations department, and there is no investor relations policy. Based on the current size and operations of the Group, the Board is of the view that the current practices and the disclosure of information to the Shareholders as set out above is in line with the intention of Principle 12. Further, the Shareholders can send questions to the Company’s email at firstname.lastname@example.org and the Company will respond to such questions. Where required, the Company may, on an ad-hoc basis, hold media and analysts’ briefings and publish press releases of its financial results.
MANAGING STAKEHOLDERS RELATIONSHIPS
Engagement with Stakeholders
Principle 13 : The Board adopts an inclusive approach by considering and balancing the needs and interests of material stakeholders, as part of its overall responsibility to ensure that the best interests of the Company are served.
Provisions 13.1, 13.2 and 13.3 – Stakeholder engagement
The Company engages its material stakeholders through different engagement channels to establish, address and monitor the material environmental, social and governance (“ESG”) factors of the Group’s operation and its impact on them. Such stakeholders include employees, community, government, regulators, the Shareholders and investors.
Engagement channels and frequencies are reviewed periodically to ensure that they are sufficient to deal with current identified stakeholders’ ESG-related issues.
Notwithstanding that the Company has not issued its sustainability report, the Company remains committed to staying abreast of new trends or developments that may affect the sustainability standing of the Group, and eventually devise corresponding measures to resolve ESG issues.
As the Company had completed its RTO on 7 February 2019, the Company will issue its first sustainability report for the first full financial year of listing, being the financial year ending 31 December 2020, by 31 December 2021. Accordingly, for more information on the Company’s approach to stakeholder engagement and materiality assessment, please refer to the Company’s Sustainability Report 2020 which will be available by 31 December 2021.
The Company also maintains a corporate website to communicate and engage with stakeholders at www.tshcorp.com.sg.
Please refer to the Review of Interest Person Transactions and Material Contracts (in page 35 of this report) for the material contracts entered into by the Group in FY19.
DEALINGS IN SECURITIES
The Company has adopted and implemented policies in line with the SGX-ST’s best practices in relation to the dealing of shares in the Company. The Company’s policies on share dealings have been issued to all Directors and employees of the Group. The Company has informed its Directors and employees not to deal in the Company’s shares on short term considerations or whilst they are in possession of unpublished material price sensitive information and during the period commencing one (1) month before the half year and full year announcement of the Group’s financial results and ending on the date of the announcement of such financial results. In addition, the Directors and employees of the Group are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period.
Catalist Rule 711A requires every listed issuer to prepare an annual sustainability report, which must describe the issuer’s sustainability practices with reference to the primary components set out in Catalist Rule 711B on a ‘comply or explain’ basis.
The Board recognises its responsibility to provide a strategic direction, specifically considering sustainability issues as part of its strategic formulation. The Board also believes that to grow sustainably as a forward-looking entity, the Group has to regularly reach out and work with its stakeholders, from its employees to the community, and be a responsible steward to the natural environment. The Company will issue a sustainability report in compliance with Rule 711A of the Catalist Rules by 31 December 2021.
Non-sponsor fee paid/payable to its Sponsor, SAC Capital Private Limited, for acting as its financial adviser in relation to the RTO during the financial period from 1 January to 31 December 2019 was S$59,000.