SEC advises NCL shareholders to vote on compensation payment to early retiring senior executive, deemed inappropriate for ratification by IFA

SEC advises NCL shareholders to vote on compensation payment to early retiring senior executive, deemed inappropriate for ratification by IFA

Bangkok, 10 April2024- The Securities and Exchange Commission (SEC) is encouraging the shareholders of NCL International Logistics Public Company Limited (NCL) to study information and exercise their voting right at the annual general shareholders meeting (AGM) on 19 April 2024 regarding the company's approval of early retirement of a senior executive and a subsequent compensation payment of 38.55 million baht. In this regard, the independent financial advisor (IFA) opines that the amount of the compensation paid to the senior executive who is a connected person is inappropriate. Therefore, the shareholders are advised against the ratification of the compensation agreement for now.

NCL has approved the early retirement and the compensation payment to Mr. Kitti Phuathavornskul, a major shareholder and senior executive, at the amount of 38.55 million baht to cease the inconsistency in business management and reduce the chance of a labor dispute from the unfair termination of his employment. On 28 December 2023, NCL paid for the compensation without disclosing relevant information, and proposed the agenda item to a shareholders meeting to seek approval of such transaction. The NCL Board of Directors Meeting No. 2/2567 dated 27 February 2024 therefore passed a resolution to propose the agenda item to the shareholders meeting for consideration for approval of ratifying the compensation agreement.

In this regard, the IFA is of the opinion that the shareholders should not ratify the agreement for the compensation payment to the connected person at this time based on the assessment that the transaction lacks reasonableness, and the compensation amount of 38.55 million baht exceeds an appropriate level when evaluated against the Labor Protection Act B.E. 2541 (1998) and labor dispute resolution guidelines of the Labor Court. The IFA suggests that a more appropriate amount of compensation should be 19.56 million baht. Additionally, if the AGM does not ratify the connected transaction, the inconsistency of business management between Kitti and some of the management executives will not be resolved. Yet, the IFA views that Kitti and the management team consisting of directors and/or executives of listed companies and public limited companies are required to perform duties in compliance with the Securities and Exchange Act B.E. 2535 (1992) and the Public Limited Companies Act B.E. 2535 (1992). These laws mandate the duty performance with responsibility, due care, and integrity as well as compliance with governing laws, the company's objectives and articles of association, and the resolutions of the Board of Directors and the shareholders meetings.

Nevertheless, the NCL Board of Directors and the Audit Committee opine that the early retirement and the subsequent compensation payment to Kitti are justified, claiming that this decision will help resolve ongoing management conflicts and prevent potential labor disputes that could arise from unfair termination of employment. Moreover, Kitti's continuous contributions have significantly spurred the company's growth. In addition, the Board of Directors considered the company's financial health, operating results and cashflow of NCL before reaching the conclusion that the early retirement and the compensation would not adversely affect the company.

The compensation payment is a connected transaction involving Kitti's early retirement, who was a major shareholder of NCL. As such, this proposal requires approval by at least three-fourths of the votes of the attending shareholders eligible to vote at the meeting, excluding the votes of persons with a conflict of interest. If the shareholders do not approve, NCL will cancel the transaction and negotiate with Kitti on three alternative approaches, as follows:

1. Inviting Kitti to resume his position as an NCL employee, which will not resolve the inconsistency of business management, and requiring him to return the compensation received from NCL, while canceling the termination of his employment;

2. If Kitti does not wish to resume his role as an NCL employee and insists on the early retirement, the company will negotiate for the return of the compensation payment; and

3. If Kitti does not wish to resume his role as an NCL employee and insists on early retirement and refuses to return the compensation as the termination of employment agreement has been signed, there is a chance that a lawsuit on unfair termination of employment would be pursued.

NCL shareholders are advised to study information carefully and exercise their rights to protect their own interests, as well as seek further clarifications from NCL executives to obtain comprehensive details for making a voting decision at the AGM.

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