Questions over dividends after Imperium Crown loss

Firm posts $13m full-year loss; is seeking legal advice on possible dividend irregularities

The full-year net loss of $12.5 million racked up by property investment firm Imperium Crown means it may be in trouble for paying out dividends without generating the profits to foot the bill.

Its external auditors told the board last week of "possible irregularities" relating to the authorisation and payment of $489,000 in interim dividends in February. The Companies Act allows dividends to be paid only out of profits already generated. But Imperium Crown gave shareholders interim dividends of 0.1 cent per share, despite a net loss from continuing operations of $880,000 in the six months ended Dec 31.

The company may have been in the clear if it was expecting a strong turnaround in the second half, but an outlook statement from the directors then suggested otherwise, with reference to a "challenging" global economic climate. And last night's statement of loss for the 12 months to June 30 affirms this.

The last time that Imperium Crown - formerly known as Communication Design International - paid a dividend was in 2006, according to SGX StockFacts. It does not have a fixed dividend policy.

In February, chairman and chief executive Mark Lim was the largest shareholder with a 30 per cent stake. He sold his shares and resigned in April. Shareholders later voted to replace the rest of the board, including founder David Bay, at an extraordinary general meeting in June. Mr John Lyn then emerged as the new chief executive, but departed on Tuesday after less than two months in the job, "to pursue personal interests". He is replaced by Mr Wan Jinn Woei, a director of Third Rose Asia, which is the largest stakeholder in Imperium. Mr Wan is also business development director of Megaharta Real Estate.

Imperium Crown said last night that it is still seeking legal advice on possible dividend irregularities, including its right of recourse.

But dividend irregularity cases tend to be tricky. Ms Andrea Chee, partner at law firm Shook Lin & Bok, told The Straits Times: "The rule is that no dividends are payable except out of profit. The problem is that the Companies Act doesn't define profit."

A version of this article appeared in the print edition of The Straits Times on August 27, 2016, with the headline 'Questions over dividends after Imperium Crown loss'. Print Edition | Subscribe