Sample Proposal - How can YOU create a proposal?

Published: 28th January 2011
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1. SUMMARY



1.1 OBJECTIVE



To seek Board’s approval:



1.1.1 To transfer ABC Enterprise (ABCE) shareholding in ABC Agencies (ABCA) of 5.605 million ordinary shares to ABC LTD (ABCL) at the NTA value of the company as at the date of transfer, which is expected to be on 31 March 2004.



1.1.2 To authorise the transfer of all other remaining agencies from ABCE to become subsidiaries/associates of ABCA on similar terms, i.e. NTA.



1.1.3 To authorise the MD/CEO to sign all documents relating to the transfer.



1.2 CRITICAL ISSUES



ABC will gain better control, as well as enhance efficiency and cost effectiveness of its shipping agencies, through the establishment of an independent unit to consolidate and strategically manage the main network of ABCA’s agencies worldwide.



1.3 PROPOSAL



1.3.1 In line with ABCE Board’s decision on 2 October 2003, the Management Committee of ABCL had approved that ABCA will be a holding company, responsible in managing the activities of the shipping agencies both locally and overseas. ABCA shall be a full subsidiary of ABCL, managed by a General Manager directly reporting to the MD/CEO of ABCL.



1.3.2 To achieve the above objective, it is proposed for the entire shareholding of 5.605 million ordinary shares in ABCA by ABCE to be transferred to ABCL. The purchase considerations for the transfer is proposed at the NTA value of the company as at the date of transfer, which is expected to be on 31 March 2004.



1.3.3 Upon a successful transfer of ABCA to ABCL, ABCE shareholdings in the foreign shipping agencies shall also be transferred to ABCA, as approved by the Board of ABCE on 2 October 2003. With this transfer, ABCA will be responsible to consolidate and manage the main network of ABC agencies worldwide.



1.4 RECOMMENDATION



Members are kindly invited to consider and if deemed fit:



1.4.1 Approve the transfer of ABCE shareholding in ABCA of 5.605 million ordinary shares to ABCL at the NTA value of the company as at the date of transfer, which is expected to be on 31 March 2004.



1.4.2 Authorise the transfer of all other remaining agencies from ABCE to become subsidiaries/associates of ABCA on similar terms, i.e. NTA.



1.4.3 Authorise the MD/CEO to sign all documents relating to the transfer.



1.5 NEXT STEPS



To commence the share transfer exercise of ABCA from ABCE to ABC, to be completed by 31 March 2004.



2. BACKGROUND



2.1 ABCL, via its wholly owned subsidiary, ABCE, owns a total of 6 shipping agencies dedicated to solely servicing ABCL as a principal. The structure of ABCE shareholdings in the shipping agencies are as follows:



Company ABCE Share

Holding %

[ABCA] 100%

[ABCAN] 100%

[ABCAL] 100%

[ABCAU] 100%

[ABCJ] 100%

[ABCAT] 49% (direct) 11% (indirect)





2.2 Each agency is managed by a General Manager, reporting to their respective Chairman. Apart from periodically monitoring the agents’ financial performance, ABCE does not play an active role in the management of these agencies.



2.3 Currently, ABCL’s shipping agencies are more focused on servicing the Logistics Business Unit. ABCL, in its efforts to improve its control and utilisation of the agents, as well as grow the agency business, recognises the need for a shift in this current business focus. It is viewed that the agencies should look into providing services across the business units of ABCL, in order to expand their customer base and leverage on their costs.



2.4 ABCL also believes that an appropriate infrastructure needs to be put in place, to oversee the strategic and business development aspects of the agency business, as well as promote closer liaison between ABCL and the agents. This would help to enhance the agent’s strategic growth as well as increase their level of transparency in business dealings.



2.5 Furthermore, ABCL is of the view that the current level of value-added services provided by the agencies, such as inland transportation and warehousing, could be further improved. ABCL would like to develop this component of the agency business, inclusive of a plan to provide agency services to third party customers, to enhance value creation of the agents.



2.6 To improve agents’ service utilisation, achieve cost effectiveness and enhance value creation of the agents, it is imperative for ABCL to establish an independent unit to consolidate, strategically manage and monitor the entire network of ABCL’s agencies worldwide.



3. PROPOSAL



3.1 In line with ABCE Board’s decision on 2 October 2003, the Committee had approved that ABCA will be a holding company, responsible in managing the activities of the shipping agencies both locally and overseas. ABCA shall be a full subsidiary of ABCL, managed by a General Manager directly reporting to the MD/CEO of ABCL.



3.2 To achieve the above objective, it is proposed for the entire shareholding of 5.605 million ordinary shares in ABCA by ABCE to be transferred to ABCL. The purchase considerations for the transfer is proposed at the NTA value of the company as at the date of transfer, which is expected to be on March 31 2004.



3.3 Subsequent to this transfer, ABCE shareholdings in the foreign shipping agencies shall be transferred to ABCA, as approved by the Board of ABCE on 2 October 2003. The purchase considerations are based on the NTA value of each agency as at the date of transfer, except for ABCJ, which shall be transferred at the cost of investment due to its current negative NTA value.



3.4 ABCA shall finance the purchase of the foreign agencies via an inter-company loan from ABCL, with interest rate and repayment terms to be negotiated later.



3.5 After the successful completion of the above exercise, ABCA will become a wholly owned subsidiary of ABC whereas the rest of the existing shipping agencies will become direct subsidiaries and associates respectively under ABCA’s investment portfolio.



3.6 With this transfer, ABCA will be responsible to consolidate and manage the main network of ABCL agencies worldwide.



3.7 Internal preliminary review has been carried out by Legal and Corporate Departments of ABCL to assess the foreign legal and tax implications arising from the transfers. Based on the legal review, it is envisaged that there may not be major legal changes as a direct consequence of the restructuring exercise largely due to the fact that the beneficial ownership ultimately still rests within ABCL’s corporate framework. Likewise, the tax review suggests no adverse tax implication arising from the transfer of the foreign agencies to ABCA.

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