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Meeting notes show major shareholder’s representative there
By LYNETTE KHOO
11 January 2012
China Sky Chemical Fibre’s latest document defending its non-compliance towards a directive from the Singapore Exchange (SGX) has cast the spotlight on a piece of information that is bound to raise eyebrows.
Meeting notes from China Sky on its confidential meeting with SGX on Dec 24 revealed that ‘a representative of a major shareholder’ was present. This flies in the face of corporate governance guidelines on fair communication of information to all shareholders.
According to China Sky, Rosie Gan - referred to as a representative of a major shareholder - and then-independent director Er Kwong Wah were acting as a go-between and arranged a meeting for SGX and China Sky chief executive Huang Zhong Xuan to resolve the impasse that stemmed from China Sky’s refusal to appoint a special auditor as directed by SGX.
Ms Gan is country head of HL Bank, a member of Hong Leong Group Malaysia, which is in turn the holding company of Guoco Group. The latter is the second-largest shareholder of China Sky with a 10.29 per cent stake. China Sky’s largest shareholder is its CEO Huang Zhong Xuan, with a 37.81 per cent stake in the group.
HL Bank, led by Ms Gan, was the IPO manager and underwriter for China Sky’s IPO in 2005. However, since the listing, HL Bank has not played any active corporate advisory role for the group.
Ms Gan declined to comment when contacted. A Guoco Group spokeswoman declined to comment on Ms Gan’s presence at the confidential meeting. But she said that Guoco Group has written to China Sky as a substantial shareholder to express its deep concern over the recent actions taken by the company in resistance to the directive from SGX.
‘We strongly urge the board to speedily resolve and to comply with the SA (special audit) directive so that the interests of all stakeholders are protected,’ she said.
Lan Luh Luh, deputy director for Commercial Law Studies at the National University of Singapore, noted that as a general principle, information from listed companies should be disseminated fairly to all shareholders even when share trading has been suspended.
‘We are not sure what is the information shared, but since it’s a confidential meeting between SGX and the company on compliance, there may be some issues that may affect the share price,’ Dr Lan said.
Under the Code of Corporate Governance, if there is inadvertent disclosure made to a select group of shareholders, ‘companies should make the same disclosure publicly to all others as soon as practicable’, she added.
David Gerald, president of Securities Investors Association of Singapore (Sias), said that it is unclear if there was any material information shared at the meeting as the full content of the discussion was not made known. ‘We have to know that before we can jump to the conclusion of selective disclosure,’ he said.
The confidential meeting was held after China Sky and its directors were publicly reprimanded by the exchange for its failure to comply with SGX’s directive to appoint a special auditor to investigate certain transactions, including interested person transactions between the company and then-audit committee chairman Lai Seng Kwoon and a botched acquisition of land in Fujian province.
Mr. Lai and two other independent directors (IDs) have since stepped down after failing to persuade the group to comply by the Jan 5 deadline.
Minority shareholder Mano Sabnani felt that ‘it would not be right to have one or two shareholders’ at the confidential meeting unless they had executive roles at China Sky, and expressed disappointment with the resignation of the three IDs.
‘There must be something the exchange can do to disallow the resignations and instruct the directors to remain on board,’ he said. ‘Why are the directors allowed to step down at this crucial juncture?’
‘The way they are playing the game, I don’t think they are going to compromise, so in the end, the shareholders are going to suffer,’ he said.