Tan Ging Hoon v MMI Holdings: Employee Share Options Dispute After Subsidiary Sale

Tan Ging Hoon and several former employees of Alliance Contract Manufacturing Sdn Bhd (ACM), a Malaysian subsidiary of MMI Holdings Ltd, sued MMI Holdings in the High Court of Singapore, alleging breach of contract regarding employee share options after MMI Holdings sold its stake in ACM. The plaintiffs claimed they were entitled to exercise unvested share options. Lai Siu Chiu J dismissed the suits, finding that the terms of the share option scheme (the Rules) governed the options and that MMI Holdings' Remuneration Committee had properly exercised its discretion in disallowing the early exercise or retention of unvested options.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Suits dismissed with costs to the defendants.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Former employees sued MMI Holdings over share options after a subsidiary sale. The court ruled against the employees, upholding the company's discretion.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Tan Ging HoonPlaintiffIndividualClaim DismissedLost
MMI Holdings LtdDefendantCorporationJudgment for DefendantWon
Ong Chuan HoPlaintiffIndividualClaim DismissedLost
Alliance Contract Manufacturing Sdn BhdOtherCorporation

3. Judges

Judge NameTitleDelivered Judgment
Lai Siu ChiuJudgeYes

4. Counsels

Counsel NameOrganization
Foo Maw ShenRodyk & Davidson LLP
Daryl OngRodyk & Davidson LLP
Yeoh Mun ShernRodyk & Davidson LLP
Ang Cheng HockAllen & Gledhill LLP
Ramesh SelvarajAllen & Gledhill LLP

4. Facts

  1. Tan and other plaintiffs were employees of ACM, a subsidiary of MMI Holdings.
  2. MMI Holdings granted share options to ACM employees under a share option scheme.
  3. Tan sold his shares in ACM to Alliancecorp, after which ACM ceased to be a subsidiary of MMI Holdings.
  4. The plaintiffs attempted to exercise their unvested share options after ACM ceased to be a subsidiary.
  5. MMI Holdings refused to allow the plaintiffs to exercise their unvested options.
  6. The Remuneration Committee of MMI Holdings decided not to allow the plaintiffs to retain their unvested options.
  7. The plaintiffs sued MMI Holdings, claiming they were entitled to exercise their unvested options.

5. Formal Citations

  1. Tan Ging Hoon v MMI Holdings Ltd and Another Suit, Suit 176/2007, 177/2007, [2008] SGHC 57

6. Timeline

DateEvent
MMI Holdings Ltd listed on the main board of the Singapore Exchange
Tan Ging Hoon commenced employment with MMI Holdings Ltd
Alliance Contract Manufacturing Sdn Bhd incorporated
Circular issued to shareholders of MMI Holdings Ltd providing information on the Scheme
The Scheme obtained approval from the defendants’ shareholders
MMI Holdings Ltd issued the first letter of offer to Tan Ging Hoon
MMI Holdings Ltd approached Tan Ging Hoon to inquire if he was interested to buy over their stake in ACM
MMI Holdings Ltd issued the second letter of offer to Tan Ging Hoon and a common letter of offer to the plaintiffs
Tan Ging Hoon purchased MMI Holdings Ltd’s 55% shareholding in ACM through Alliancecorp Manufacturing Sdn Bhd
Plaintiffs attempted to exercise the options
Lily Ong, the Human Resource Manager of MMI Holdings Ltd, emailed Chong Saw Leng stating that the grantees could only exercise those options that had already vested
Shermin Fock informed Tan Ging Hoon that the options offered on 30 January 2004 and 3 January 2005 were not exercisable by ACM’s staff
Deadline to exercise vested options under cl 9 of the Agreement
Moneys paid were refunded to the plaintiffs
Saw wrote a letter to B L Teh requesting that MMI Holdings Ltd reconsider its decision not to allow the plaintiffs to exercise the options granted in 2004 and 2005
Teh replied to Saw’s letter informing him that the RC was responsible for all policies under the Scheme
Ong convened a meeting of the RC to consider the issues raised in Saw’s letter
Teh sent a letter to Saw informing Saw that the RC had met and considered his request and it had been rejected
Saw sent a reply to Teh seeking clarification on one point
Ong responded to Saw in his capacity as chairman of the RC
Saw expressed disappointment in the RC’s decision in an email that he sent to Ong
Ong replied to reject Saw’s request
Saw responded to Ong by email expressing unhappiness over the RC’s refusal to give the grounds for its decision
Ong replied to Saw’s email again rejecting his request
The plaintiff’s solicitors wrote to the defendants to state that the latter’s stand amounted to a breach of contract
The defendants’ solicitors responded reiterating the defendants’ stand that the plaintiffs were not entitled to exercise the unexercised options that had not yet vested
Tan and the plaintiffs in the second suit filed these actions against the defendants
MMI Holdings Ltd delisted from SGX
Judgment reserved

7. Legal Issues

  1. Exercise of Share Options
    • Outcome: The court held that the plaintiffs were not entitled to exercise the unvested options.
    • Category: Substantive
    • Sub-Issues:
      • Early exercise of options
      • Lapse of unvested options
      • Interpretation of share option scheme rules
  2. Discretion of Remuneration Committee
    • Outcome: The court found that the Remuneration Committee had properly exercised its discretion.
    • Category: Substantive
    • Sub-Issues:
      • Proper exercise of discretion
      • Reasonableness of decision
      • Consideration of relevant factors
  3. Interpretation of Contractual Terms
    • Outcome: The court interpreted the relevant clauses in the share option scheme rules and the sale and purchase agreement.
    • Category: Substantive
    • Sub-Issues:
      • Ambiguity in contract language
      • Intention of parties
      • Effect of clause in sale and purchase agreement

8. Remedies Sought

  1. Declaration that each plaintiff was entitled to exercise the unexercised options
  2. Direction that the defendants allot the applicable number of shares to each of the plaintiffs

9. Cause of Actions

  • Breach of Contract

10. Practice Areas

  • Commercial Litigation

11. Industries

  • Manufacturing

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Thompson v Asda-MFI Group PLCEnglish Court of AppealYes[1988] Ch 241England and WalesCited to support the principle that the company owed no duty to the plaintiffs not to sell ACM at the expense of the latter’s options.
Mallone v BPB Industries plcEnglish Court of AppealYes[2002] EWCA Civ 126England and WalesCited by the plaintiffs to argue that the RC failed to exercise its discretion in a reasonable and proper manner. Distinguished by the court.

13. Applicable Rules

Rule Name
No applicable rules

14. Applicable Statutes

Statute NameJurisdiction
Companies Act (Cap 50, 2006 Rev Ed)Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Share options
  • Vesting
  • Remuneration Committee
  • Employee Share Option Scheme
  • Subsidiary
  • Rules
  • Alliance Contract Manufacturing Sdn Bhd
  • MMI Holdings Limited
  • Exercise period
  • Discounted options
  • Market price options

15.2 Keywords

  • share options
  • employee
  • subsidiary
  • vesting
  • contract
  • MMI Holdings
  • Alliance Contract Manufacturing

17. Areas of Law

Area NameRelevance Score
Share Options80
Company Law75
Contract Law60
Employment Law50

16. Subjects

  • Share Options
  • Contract Law
  • Companies Law