A case of disclosure lapse by CNQC?
CNQC (South Pacific), known for developing mass-market
condominiums and executive condominiums in Singapore under the “Qingjian
Realty” brand, underwent a backdoor listing in Hong Kong without any apparent
glitch this month.
Comments
Lynette Khoo
22 October 2015
CNQC (South Pacific), known for developing mass-market condominiums and executive condominiums in Singapore under the “Qingjian Realty” brand, underwent a backdoor listing in Hong Kong without any apparent glitch this month.
The exercise saw Hong Kong-listed building contractor CNQC International making a reverse takeover of CNQC (South Pacific) and its subsidiaries from Guotsing Holding (South Pacific) Investment Pte Ltd or in short, Guotsing SG.
But there appears to be a major omission in the disclosures by CNQC International, relating to an ongoing law suit in Singapore involving Qingjian Realty and other affiliated parties suing two Singaporeans for defamation.
This begs the question of why the litigation was left out in the disclosures and whether shareholders of CNQC International were duly informed before they voted on the proposed RTO on Oct 14.
Prior to the RTO, CNQC (South Pacific)’s Beijing parent group Guotsing PRC had in March last year acquired a 75 per cent stake in Sunley Holdings and renamed it as CNQC International. It soon embarked on restructuring its Singapore subsidiaries with the view of consolidating them into the Hong Kong listed platform.
Under the new corporate structure, CNQC (South Pacific) owns 100 per cent of Qingjian Realty, Qingjian Holding, Qingdao Construction, Qingjian International, and Max Marine.
There were no obvious road bumps to the backdoor listing, or so it seems. But sources told BT that during the restructuring and internal audits, some senior executives in Singapore were asked to leave. Queries from BT to the firm drew a blank.
In May, CNQC International announced its plans to acquire the Singapore businesses of Guotsing SG via the issuance of convertible preferential shares (CPS). This constituted a RTO, with the resulting enlarged entity holding CNQC International’s construction business in Hong Kong and Macau as well as CNQC (South Pacific)’s development and construction businesses in Singapore.
Meanwhile, court hearings on the defamation suit commenced last month in Singapore’s High Court. The five plaintiffs are Qingdao Bohai Construction Group; Qingjian Group; Qingjian Realty (South Pacific); Du Bo, a director of all three companies; and Yuan Hongjun, chairman of Qingdao Bohai.
Mr Du, a Singapore permanent resident, is also chairman and major shareholder of Guotsing PRC and a director of Guotsing SG.
The plaintiffs are suing Singaporeans Goh Teck Beng and Ng Teck Chuan for defamation, claiming that the cousins were behind a series of online articles and two articles in Taiwanese newspapers that accused the plaintiffs of wrongdoing involving some China assets.
The alleged defamatory content was said to have caused grave injury to the reputation and the business development of the plaintiffs. At least one business associate was said to have found the allegations serious enough to avoid initiating new joint ventures and two banks, United Overseas Bank and OCBC, withheld their credit lines.
Qingjian Group’s original plan to list its Singapore operations on the Singapore mainboard by 2014 was also scuttled after the underwriter of the intended IPO and other IPO consultants learnt about the defamatory statements, according to court documents.
Given the gravity of the alleged defamatory content disputed by the plaintiffs, it is hence surprising that there was no mention of this law suit in the circular issued by CNQC International to its shareholders last month.
Arguably, CNQC International - where Mr Du sits as chairman of the board - might have erred in the belief that the lawsuit would not have any material and adverse effect to the business, operations or financial condition of the companies.
But one cannot dismiss the reputational risks posed to the companies involved, especially Qingjian Realty, a well-known developer of executive condominiums and private condominiums in the suburban areas in Singapore.
Now that the backdoor listing of CNQC (South Pacific)’s businesses is completed, the enlarged CNQC International will have to take disclosures concerning all its businesses spanning Singapore, Hong Kong and Macau more seriously. The stakes are high if timely disclosures are found wanting.