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One ID says he did not approve statements relating to SGX’s reprimand
By LYNETTE KHOO
23 December 2011
The Singapore Exchange (SGX) has declined China Sky Chemical Fibre’s request to lift the suspension of share trading, citing ‘circumstances of the suspension, including the persistent non-compliance with the exchange’s direction to the company to appoint a special auditor’.
Trading of shares in China Sky has been suspended since Nov 17 at the request of China Sky, following SGX’s directive to appoint immediately a special auditor to probe certain transactions.
But China Sky has resisted the directive and when publicly rapped by SGX for failing to comply with the directive, defended its position with a string of allegations against SGX.
It has now turned out that one of the independent directors, Er Kwong Wah, had not approved the announcements made by the group in response to SGX’s reprimand.
Mr Er said yesterday that he was travelling overseas and had not seen any drafts of the group announcements made on Wednesday and Thursday. Announcements by listed companies, in practice, need to be approved by all directors before being issued to the public.
‘My stand has always been to comply with the directive in the best interest of the shareholders,’ Mr Er said, adding that he had conveyed his views to the board, both in writing and verbally at a board meeting after the company received the SGX directive on Nov 16.
Mr Er’s statement yesterday was posted by the SGX. He was said to have approached the company secretary for help to release the announcement but was told that ‘since the announcement is from an individual and not from the contracting company, he was not allowed to make use of their facility’.
Another ID, Yeap Wai Kong, who later released his statement on SGXnet via the corporate secretary, noted that the incident encountered by Mr Er ‘appeared to have arisen from a miscommunication’. He said that he has and will continue to encourage the board to work closely with the exchange.
SGX wants the special auditor to investigate a botched land acquisition in Fujian province, purchase of new production facilities, certain repairs and maintenance costs, as well as interested person transactions that the group has with independent director Lai Seng Kwoon.
Mr Lai, while he was audit committee chairman, had provided accounting-related services to China Sky through his firm SK Lai & Co from 2008 to 2010.
Late last night, Mr Lai made an announcement as independent director to support Mr Yeap’s statement. He said: ‘I make this statement to record that I align myself with Mr Yeap Wai Kong and adopt the contents of his statement. I also record the continuing position of the directors to work in the best interest of the company and the stakeholders.’
China Sky, which has resisted the directive to appoint a special auditor, had instead appointed Asia Ascent Law Corporation as its legal adviser.
When reprimanded by SGX, China Sky said that the directive was ‘unwarranted, issued without any merit and clearly showed a total disregard of the interest of the shareholders’.Â
SGX, on the other hand, said that the group had made contradictory statements and disclosures which were not substantiated when queried by the exchange.
The Monetary Authority of Singapore (MAS), when contacted by BT, said that it was aware of the developments relating to China Sky.
It would not comment on specific entities as a matter of policy but said that it expects ‘all listed companies to adhere to SGX listing rules and work closely with SGX to address any queries or concerns that may be raised by the exchange’.
China Sky reiterated yesterday in its announcements that the usual reasons giving rise to the need for a special auditor ‘are clearly absent’ and urged SGX to justify its directive to the group.
On Wednesday, China Sky also released a string of exchanges with the exchange to the public.
Among the 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 was said to have told Mr Huang that China Sky would be ‘punished’ for its ‘disobedience’ unless it complied with the SGX directive, and that the law firm Asia Ascent had caused China Sky to be in breach of SGX rules by not advising the group to comply immediately with SGX’s directive.
Since a string of S-chip scandals broke in 2008, SGX has issued directives to more than 10 Chinese companies ordering special audits and most have complied.