SINGAPORE - Metal-stamping firm CFM Holdings on Tuesday (June 5) announced that its subsidiary, Cheong Fatt Holdings, has entered into a sale and purchase agreement with CFM CEO and executive director, Janet Lim, to dispose of 99.99 per cent of the issued and paid-up share capital in its Malaysian subsidiary CFM Precision Tooling Sdn Bhd (CFM Precision).

Ms Lim will purchase 499,999 ordinary shares (sale shares) that Cheong Fatt Holdings hold in CFM Precision for a nominal consideration of S$1.

The proposed disposal will result in CFM Precision ceasing to be a subsidiary of parent company CFM Holdings.

As CFM Precision holds about 84.7 per cent of shareholding interests in PT Hantong Precision Manufacturing Batam (PT Hantong) as at June 5, CFM Holdings will also cease to have any indirect interest in PT Hantong following the disposal.

In addition, CFM Holdings has decided to write off its 14.7 per cent interest in PT Hantong which "would not have any value" since the current liabilities of PT Hantong exceed its assets, CFM Holdings said. The remaining stake in PT Hantong is held by Ms Lim.

The consideration of S$1 was arrived at by taking into account that the net asset value and net tangible asset (NTA) of the sale shares was negative S$714,000, and that the aggregate amount of losses attributable to the subsidiaries (CFM Precision and PT Hantong) was S$290,000 for the financial year that ended on June 30, 2017.

In an exchange filing released on Tuesday after market close, CFM Holdings said it intends to liquidate or strike off these two subsidiaries as CFM Precision has been dormant since March 2016. Moreover, PT Hantong has been at a loss-making position for two years, and CFM Holdings deems that there are no prospects of recovery for it.

To facilitate the liquidation of its subsidiaries, and for the company to save on the cost of liquidation, Ms Lim has offered to buy the sale shares on the basis that she will start liquidation of CFM Precision within 180 days, as well as the liquidation of PT Hantong within one year of completion of sale and purchase of the sale shares.

PT Hantong's realisable assets principally comprises of S$132,000 in cash, against total liabilities of S$1.6 million. In view of this and the expenses to be incurred prior to the liquidation, the company has decided to impair a further loan amount of S$80,000 owed by PT Hantong to CFM Holdings. PT Hantong's total impairment as at June 30 last year was S$728,000.

As the purchaser Ms Lim is a controlling shareholder, CEO and executive director of the company, the proposed disposal would amount to an interested party transaction.

However, as the consideration of S$1 represents less than 3 per cent of the latest audited NTA of the group of S$10.4 million as at June 30, 2017, and is less than the threshold amount of S$100,000, approval from the company's independent shareholders is not required for the disposal, CFM Holdings noted.

The counter last traded at S$0.021 apiece on Monday, down 40 per cent.