YuuZoo’s long reply still does not address issues over its response to SGX queries

Published October 13, 2017

Note: Below is my letter responding to YuuZoo COO’s letter in the Business Times on October 12. Investors can read all my articles on YuuZoo on my website and decide for themselves whether the questions I have raised are indeed unfounded as the company says and whether YuuZoo has satisfactorily answered any of the  questions that I have raised. 

I would have much preferred to stop writing about YuuZoo and let a credible independent third party investigate the issues that have been raised. However, when YuuZoo announced on July 17 that it will appoint an independent third party (without identifying who or the terms of reference), it continued to say that my articles made inaccurate or misleading claims. This forced me to post a response on my website detailing each statement that I have made and explaining why they are not inaccurate or misleading as I cannot let the company make such unsubstantiated statements which may undermine my own credibility.

Since the announcement that they will appoint an independent third party, YuuZoo has continued to make announcements and issued responses to queries  and I had been tempted to question some of these too. But I thought I should leave this to the independent third party. However, the company’s sweeping statements when it announced its latest board and management changes (including suggesting that because Singapore is ranked number 17 and Finland number 1 on the World Transparency Index, that adding more directors from Finland will somehow improve YuuZoo’s governance and transparency) and especially its unsatisfactory responses to the queries from SGX about its (restated) 1Q 2017 and 2Q 2017 results announcements and about YuuLog Europe prompted me to write another article. It’s been nearly 3 months since the company said that it will appoint an independent third party, and it has not done so yet. 

If YuuZoo continues to make announcements or issue responses that I think are questionable, I will continue to write about it either on my website or in the media. I am not singling out YuuZoo as I write about other companies too, but as I said, I have never come across a company quite like YuuZoo. Just to clarify again, I am not a shareholder of YuuZoo, just as I am often not a shareholder of other companies I write about. 

As an accounting academic who specialises in corporate governance, I feel privileged to have the academic freedom to write about things that can help ordinary investors and improve the quality of corporate governance in Singapore. I am sure some companies and individuals would prefer that I do not have that freedom.



First published in Business Times on October 13, 2017

THE letter “Repetitive criticism of YuuZoo is far from constructive” (BT, Oct 12) from Mr Mohandas, Chief Operating Officer of YuuZoo Corporation (YuuZoo) in response to my article (“Are things improving at YuuZoo or is it more of the same with no real change?” BT, Oct 6) takes my comments totally out of context, makes incorrect assertions and does not answer the questions I raised.

First, he said that all my four articles in BT repeat the same criticism. This is false.

My first two articles in BT (“YuuZoo Corporation – a governance nightmare”, July 5; “YuuZoo: More troubling issues”, July 6) covered different issues relating to YuuZoo’s corporate governance, disclosures and accounting practices.

The third article (“YuuZoo riddled with contradictions”, July 11) was in response to the company’s responses and statements made by the executive chairman at the company’s AGM that contradicted its announcements and annual reports.

The fourth article was on the board and management changes the company announced on Oct 2, and its responses to SGX queries issued on Sept 25 relating to results and other announcements it made from Aug 14.

Mr Mohandas should not put words in my mouth by saying that I was using YuuZoo’s questionable responses to SGX’s queries on its earnings announcements as proof of the recent board changes not bringing about any improvement. I did no such thing. However, it is certainly doing “more of the same” when it comes to how it responds to queries and questions about its disclosures.

He also said that my reference to the boards of Enron, Satyam and Theranos, three companies guilty of major financial irregularities, is “defamatory and slanderous”.


YuuZoo’s announcement of the board changes said: “We therefore feel that in strengthening our corporate governance we should not only strive to be on par with best corporate governance practices in Singapore – ranked #17 in the World Transparency Index – but on par with the best corporate governance practices in the world. Half of the board, the founder and the chairman of YuuZoo already hail from Finland, ranked #1 in the World Transparency Index. To further expand the Finnish influence to be on par with the world’s best corporate governance practices was against this backdrop a natural choice.”

YuuZoo also mentioned the impressive profiles of the two new directors.

I was using those three companies to emphasise that good corporate governance is not just about adding board members with impressive profiles. For example, Enron had six chairmen or former chairmen and/or CEOs of large companies plus a renowned professor of accounting from a top Ivy League university on its board.

Before the addition of the two new directors from Finland, the half-Finnish board had led YuuZoo to a long series of unanswered questions about its corporate governance, disclosures and accounting practices, and a ranking of 603 out of 606 on the 2017 Singapore Governance and Transparency Index (SGTI) and 627 out of 631 on the 2016 SGTI.

Mr Mohandas also proceeded to take an article I had written on culture and corporate governance out of context. In that article, I had argued that societal culture plays an important role in corporate governance and that an egalitarian culture may be more conducive to corporate governance.

Since Finland ranks highly on egalitarianism, it may indeed be more conducive to good corporate governance. However, I also urged caution about stereotyping. More importantly, I also said that the internal corporate culture of companies, and not just societal culture, also matters and that what determines the internal corporate culture are the people at the top – the major shareholders, the board chairman and the CEO.

Mr Mohandas then asked: if I did not want to contribute to improving corporate governance at YuuZoo, why was I criticising in the first place? It is to alert existing and potential investors to the corporate governance risks in YuuZoo.


He also said that YuuZoo’s public responses have already shown that my public criticism is largely unfounded. YuuZoo have so far either avoided answering questions raised or issued contradictory responses. This is why an independent third party review with wide terms of reference is so important.

He said that my “unfounded” public criticism was eroding investor confidence and resulted in a significant loss of shareholder value. On July 4 this year, the day before my first commentary, YuuZoo’s shares were trading at 8 cents – a far, far cry from its share price of 50 cents at the time of listing in September 2014. Today, it is trading at about 6 cents. YuuZoo has never paid a dividend since its listing.

If I had indeed contributed to a loss of shareholder value, which is highly debatable, my contribution is negligible compared to YuuZoo’s management.

Mr Mohandas then takes recent articles I have posted on my website and said that I said foreign companies are risky and Singaporean investors should be wary of them. I stand by my view that foreign companies are generally riskier and the articles I have posted explain this. In fact, YuuZoo is Exhibit A.

To further illustrate: recently, a shareholder wrote to me saying that the company had made two issues of “drawdown shares” to GEM Global Yield Fund, one involving 53.452 million shares at S$0.1359 per share in January 2017 and another involving 7.5 million shares at S$0.0585 per share on Aug 14, 2017, both at a 10 per cent discount from their recent closing bid prices.

The shareholder pointed out that YuuZoo’s shares have a par value of US$0.10 per share and that the issue prices for both issues were below the par value based on the prevailing exchange rates at that time.

YuuZoo is incorporated in Bermuda. Unlike the Singapore Companies Act, the Bermuda Companies Act requires all shares to have a par value and does not permit the issue of shares below par value. Therefore, it appears that YuuZoo has breached the Bermuda Companies Act.

I suggested that the shareholder write to the relevant authorities in Bermuda to seek clarification. However, I would not expect the Bermuda authorities to do anything because YuuZoo is listed here. The Singapore Companies Act, which contains core corporate governance requirements such as those relating to directors’ duties and shareholders’ rights, does not apply to YuuZoo.

For this reason, when I evaluate the corporate governance of companies listed on SGX, two of the factors I consider is where the company is incorporated and the rule of law in the company’s principal place of business.

The “good news” from an investor’s standpoint for companies such as YuuZoo is that its principal place of business is Singapore which has a strong rule of law, so investors should be able to expect effective regulatory enforcement when the rules that do apply are broken.

Finally, Mr Mohandas’ long letter focuses on one issue discussed in my Oct 6 article – the recent board changes – while totally ignoring much of the crux of that article which was about its response to SGX queries regarding its (restated) Q1 2017 and Q2 2017 results and the incorporation of YuuLog Europe. However, based on its past responses, this is hardly surprising.

Mak Yuen Teen


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