China Sky hits out again at SGX
In a dramatic show of defiance, China Sky Chemical Fibre has come out swinging in a strongly worded defence against a Singapore Exchange (SGX) reprimand over its failure to get a special auditor.
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By Jonathan Kwok
22 December 2011
In a dramatic show of defiance, China Sky Chemical Fibre has come out swinging in a strongly worded defence against a Singapore Exchange (SGX) reprimand over its failure to get a special auditor.
The mainboard-listed, China-based company last night released a string of exchanges with the SGX, and levelled accusations against the bourse operator, with whom relations have sunk to a new low.
It said the reprimand, issued last week, was ‘unwarranted, issued without any merit and clearly showed a total disregard of the interest of the shareholders’.
China Sky added that its shares, suspended from trading since last month, will resume trading today.
Among the released documents was a letter from China Sky’s lawyers to SGX deputy chief regulatory officer Richard Teng, complaining about his conduct during a phone call with China Sky chief executive Huang Zhong Xuan.
Mr Teng allegedly told Mr Huang that China Sky would be ‘punished’ for its ‘disobedience’ unless it complied with the SGX directive. The letter also said that when Mr Teng was asked about the details of the threatened punishment, he refused to elaborate, but continued to repeat the threat to Mr Huang. Mr Teng had expressed surprise that China Sky had not immediately complied with the directive ‘like all the other (Chinese) companies’, added the letter.
Mr Teng is also alleged to have said the company’s lawyers, Asia Ascent Law Corp, were not qualified to act as legal counsel and criticised their failure to advise it to comply with the directive.
Before joining the SGX, Mr Teng was director of the corporate finance division at the Monetary Authority of Singapore, and was also secretary to the Securities Industry Council at the same time.
The saga began on Nov 17, when China Sky suspended share trading after getting an SGX directive to immediately appoint a special auditor to probe the company.
The SGX was concerned, for example, over events surrounding a planned land acquisition in Fujian province that was later cancelled. The SGX also wanted a probe of the deals the company did with independent director Lai Seng Kwoon.
The saga was ratcheted up a notch last Friday, when the SGX officially reprimanded China Sky for dragging its feet and failing to appoint a special auditor by the Dec 8 deadline.
The SGX said ‘the company persistently failed to comply despite every opportunity offered to the company and its board’. The SGX also took issue with a demand by China Sky that it communicate with the company only via its lawyers.
On Monday, China Sky issued its first defiant statement, saying that the reprimand was ‘wholly unjustifiable and issued without any merit’.
The company also said yesterday, in its second rebuttal to the SGX, that its demands that the SGX communicate with it through its lawyers were ‘attempts in establishing an effective channel of communication with the SGX’.
It added that it was ‘shocked’ by the directive to appoint a special auditor, as it had responded to a series of demands for information from the SGX in recent years. The documents included a detailed rebuttal of the various allegations of its breaking of listing rules.
One document said that as the company grew, resource constraints led to inadvertent disclosure lapses. But when it found out, it voluntarily made public announcements though the SGX, and never intended ‘to hide or deliberately misinform the investing public’.
The SGX did not respond by last night to the latest salvo from China Sky.
The Securities Investors Association of Singapore (Sias) yesterday urged the company to comply with the SGX directive and appoint a special auditor.
Before China Sky’s statement, Sias president David Gerald released a statement saying that ‘the directive clearly appears to Sias as a reasonable request and in the interest of all shareholders’.