SGX backs down from court action against China Sky
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Both sides’ lawyers have met but China Sky directors were absent at hearing
By LYNETTE KHOO
17 January 2012
The Singapore Exchange has executed a dramatic U-turn, backing away from its unprecedented court application against China Sky Chemical Fibre.
SGX said yesterday that it had withdrawn its originating summons filed with the High Court on Jan 6 in its entirety. It had wanted the courts to enforce its directives for China Sky to appoint special auditors to look into certain areas of concern and to appoint at least two independent directors (IDs), after all three IDs of the group stepped down.
The about-face followed a closed-door hearing before Justice Philip Pillai yesterday in which the China-based directors of China Sky did not show up.
No further reasons were given by SGX on why the application was withdrawn and SGX did not respond to BT queries by press time. China Sky management also could not be reached for comment.
According to the courts’ hearings schedule, China Sky was unrepresented at the court hearing, which probably meant that its lawyers, Asia Ascent Law Corporation, did not receive instructions from the company on the matter.
Lawyers at the hearing yesterday were under a gag order, prohibiting them to speak to the media. SGX was represented by Joy Tan, WongPartnership deputy head of commercial and corporate disputes practice.
SGX said separately that its lawyers and China Sky’s lawyers met yesterday and that Asia Ascent was seeking further instructions in view of the group’s announcement on Jan 6 that ‘the company will continue to communicate with SGX to resolve the impasse expediently’.
These brief announcements set market watchers speculating about whether a compromise has been reached between SGX and China Sky.
Some lawyers believe that the courts would not pass an order that could not be policed over China Sky, which is incorporated in the Cayman Islands with three operating subsidiaries in Fujian province held under a BVI (British Virgin Islands) company.
One shareholder of China Sky noted that another possibility was that the company may have shown signs of acceding to SGX’s directive to appoint special auditors.
SGX first directed China Sky on Nov 16 to appoint special auditors to look into certain transactions, including the interested party transactions between China Sky and its then-audit committee chairman Lai Seng Kwoon, the aborted acquisition of land in Fujian province and certain repairs and maintenance costs.
But China Sky has resisted the directive and levelled accusations at SGX when the company and its directors were publicly rapped by the exchange.
All three IDs stepped down when the group failed to meet the final deadline to appoint special auditors, even though the IDs had apparently approached some audit firms.
SGX then sought a court order to compel compliance by the defiant S-chip, with the court application made against China Sky and its directors, Huang Zhong Xuan (CEO), Cheung Wing Lin (non-executive chairman), Song Jian Sheng (executive director) and Wang Zhi Wei (non-executive director).