TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
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Felda Chay
06 July 2011
With minority shareholders often handed the shorter end of the stick in mandatory delistings, Singapore Exchange (SGX) should give more thought and explore all possible options before taking away a firm’s status as a public listing.
That is the view that some market watchers have after a statement from the regulator was interpreted by them to mean that it had the rule in place requiring an exit offer to be made for involuntary delistings, but appeared to be unable to enforce the regulation if a company chose not to buy out its smaller investors.
SGX, in a letter to BT, said that 12 of the 15 mandatory delistings that occurred since January last year were allowed to happen, even though an exit offer was not made, because their board of directors said they were in negative equity positions. Two firms that were struck off put an offer on the table.
Only one company, General Magnetics, was in a positive equity position. The company, however, ‘did not make an exit offer despite repeated communications from SGX’, the exchange said. Still, it was delisted on schedule.
The exchange’s letter was in response to commentaries in BT on how firms were removed from public listings even though they did not provide an exit offer to minority stakeholders.
‘It may appear to be like a doctor who is slow to treat but ready to turn off the life support system,’ said Mak Yuen Teen, an associate professor at the National University of Singapore who comments on corporate governance issues in a letter to BT.
‘The SGX’s willingness to enforce mandatory delistings without doing more to press companies to comply with other conditions for such delistings, coupled with its lack of monitoring and enforcement of its listing rules in other areas (such as the ‘comply or explain’ requirement for the code of corporate governance)’, may lead to questions on what drives its actions, said Prof Mak. He added that the exchange, as a listed company with commercial and regulatory roles, ‘must be especially consistent and transparent in its regulatory actions’.
Under SGX rules, companies fall into the watch-list if they clock up pre-tax losses for the three preceding fiscal years and their market cap falls below $40 million over the last 120 trading days.
They have two years to exit from the list or risk delisting. To be removed from the watch-list, a company needs to report a pre-tax profit for the most recently completed financial year and to have an average market cap of at least $40 million in the last 120 trading days.
Noting that 12 of 15 companies were allowed to delist without an exit offer because their boards said they were incapable of making one, Prof Mak said: ‘. . . not doing anything more just because the company says it is unable to provide an exit offer is just not good enough, especially when the SGX rules promise more’.
He suggested that SGX direct these troubled companies to appoint an independent party to give an opinion on the fair value of the company, and to advise minority shareholders on their options should an exit offer not be forthcoming.
If the board refuses to comply with this direction, then the SGX should consider reprimanding the directors, he said.
‘In a mandatory delisting, the SGX has effectively taken away that right of shareholders to approve the delisting. While I am not against the SGX using a mandatory delisting as a last resort, it is important for the SGX to enforce its rules.’
In its letter, SGX also said that ‘under the law, it is only creditors and shareholders who have the powers to liquidate or wind up companies, and distribute the assets to shareholders’.
Yap Wai Ming, a partner at Stamford Law, noted that minority shareholders can try to wind up a company, but they are still unlikely to walk away with a payout. This is because a special resolution needs to be passed with 75 per cent of shareholders in favour of liquidating the firm - which has to be solvent.
‘If the company is insolvent, there is no point winding up the firm at all because the minority shareholders won’t get anything. The creditors will come first, and the minority shareholders are last in line.’
Mano Sabnani, chief executive of business advisory Rafflesia Holdings and a minority shareholder of several firms, believes that the SGX should not be so quick to delist these troubled companies if the safeguards it has in place for minority shareholders cannot be put into practice.
‘If that is the case, and I can understand why companies cannot give an offer, why rush to delist the companies? They can be suspended, and some of them may be able to afford to continue paying listing fees.
‘Allowing them to stay listed a while longer means that there is a chance they can be revived. An RTO (reverse takeover) offer may come along the way, or a new investor may want to come in to take the company forward.’
The SGX can also consider beefing up its current rules by getting a company on its watch-list to regularly remind shareholders that it may get delisted, said Drew & Napier’s director of corporate & finance Marcus Chow.
‘As many of the investors who are stranded may be ‘mom and pop’ investors who may not be too savvy, perhaps rules can be enhanced to ensure watch-list companies step up mailed, written communication to its shareholders on a regular basis, informing them of the company’s status once the company is on a watch-list,’ said Mr. Chow.
‘Such regular communication allows the retail shareholders to take calculated positions from time to time. Ample time and communication prior to a suspension of a counter will allow retail investors to trade out their shares, and I am assuming here there will be buyers,’ said Mr. Chow.