On February 14, Datapulse posted an update about the forthcoming EGM on SGXNET where it said: “The Board wishes to inform Shareholders that, based on current progress, the Board estimates that the Company will be able to hold the extraordinary general meeting (“EGM”) to consider the Proposed Business Diversification and the Proposed Change of Board by 27 April 2018. Further details on the Proposed Business Diversification, Proposed Change of Board and the EGM will be set out in a circular to be dispatched to Shareholders in due course.”
Earlier, on February 8, 2018, I had posted an article on my website titled “Datapulse Technology Board needs to get on with the ‘Change of Board’ EGM”. In that article, I said: “Shareholders can requisition or call meetings, and propose resolutions, subject to the requirements of the Companies Act. Directors of a public company can be removed without cause….Therefore, the Board should not be linking the EY review or their own EGM to the EGM being requisitioned by shareholders to remove them. There’s no such thing as ‘let’s do the EY review first, then our EGM, then yours’.
Further, on February 12, the Business Times report “SGX sets precedent with requirement of advance notice from Datapulse”, quoted the CEO of SGX Regco, Mr Tan Boon Gin as follows: “Mr Tan said that the SGX will require the shareholder requisition matter to be resolved ‘before we will allow the company’s proposal to diversify its business to go to shareholders….And we will ensure all material information is included in the circular to shareholders so they can make an informed decision.”
Shareholders first requisitioned the EGM in a notice dated December 26, 2017, which was received by the company the following day. The company then announced on January 8, 2018 that it was convening its own Business Diversification EGM. The latter will now only be convened when the EY review is completed.The company should not delay the EGM requisitioned by shareholders. Shareholders should be given the opportunity to vote on the resolutions proposed by the requisitioning shareholders as soon as possible.
On February 15, I posted a response to the company’s February 14 update giving my views about the resolutions proposed by the requisitioning shareholders and by the board. I also expressed concern that the company appears to be planning to hold the EGM(s) during the peak AGM season.
In that article, I also referred to earlier articles where I had pointed out that when Mr Low was appointed to the boards of Datapulse, Fuji Offset Plates Manufacturing and Lian Beng, he failed to disclose regulatory actions by SGX and MAS against China Yongsheng, where Mr Low was its lead independent director. I also mentioned that Mr Low had failed to disclose a creditor’s winding-up petition against a company where Mr Low was a director until his resignation in December 2016. That should have been disclosed when Mr Low was appointed to the boards of Fuji Offset and Datapulse in 2017.
Datapulse has now issued a further corrigendum on February 15, confirming the incorrect information disclosed in the announcement template when Mr Low was appointed to the board. This means that there were two incorrect disclosures made in that template (Datapulse had corrected the one on regulatory action earlier). On February 15, Lian Beng issued a corrigendum on both matters. Fuji Offset has remained silent at the time of writing this.
Mr Low stood for re-election at Lian Beng’s AGMs on September 30, 2015 and September 29, 2016 based on incorrect information about the regulatory action disclosed at the time of his appointment. He had been appointed earlier in July 2015 as one of two new independent directors after the then two independent directors had resigned over a dispute about the remuneration of the executive directors.
At Fuji Offset, he has not yet stood for election because the company appointed him as an independent director just five days after its AGM. From a corporate governance standpoint, I consider it to be bad practice for a company to appoint a director immediately after an AGM unless there are exceptional circumstances (like the sudden resignation of another director). This is because shareholders would have to wait almost a year before they would have a chance to vote on his appointment. In Fuji Offset’s case, I did not see any exceptional circumstances that warrant an appointment immediately after the AGM. As mentioned, Fuji Offset has not yet corrected the incorrect disclosures. Interestingly, Lian Beng appointed a third independent director on October 12, 2016, just 13 days after Lian Beng’s 2016 AGM, with no apparent exceptional circumstances. This again raises the question as to why this particular director was not appointed earlier and put up for election at the 2016 AGM.
I believe that the information in the appointment template should be disclosed not just at the time of first appointment of a director to the board, but each time a director is proposed for re-appointment (in the notice of AGM). This is to ensure that shareholders voting on the re-election of a director have the most updated information, including on any regulatory action relating to the director since his initial appointment.
I hope that there will be regulatory action in due course on the incorrect disclosures that occurred at the three companies. Otherwise, the market will perceive that there are no consequences from incorrect disclosures and all that is needed is for a company to issue a “clarification” or “corrigendum”.
