By Mak Yuen Teen
Since my last article on Datapulse Technology, there have been several further developments:
(a) The EGM requisitioned by shareholders will now take place on April 20 (which I will attend).
(b) The SIAS dialogue session between the company and shareholders will now take place on March 26 (which I will not attend because I will be overseas, but would not have even if I am here because there is nothing to talk to the board about when it was appointed under such questionable circumstances and made a highly questionable acquisition immediately after its formation).
(c) SGX has issued a notice of compliance to the company, requiring it to appoint an independent third party to, among other things, review the acquisition of Wayco Manufacturing and the board appointment process. The independent third party is supposed to report its findings to the audit committee and SGX. Obviously, only the reporting to SGX is meaningful as reporting to the audit committee is “ownself report to ownself”, since the audit committee is just the board minus the newly appointed executive director/CEO and the board’s actions are being scrutinised.
(d) A few other minority shareholders are trying to rally other minority shareholders to support the efforts of the requisitioning shareholders.
(e) The company has filed a defamation suit against Ascapia Capital, one of Datapulse’s shareholders. My opinion is that the board should use its own money to do so. Perhaps we should start pushing for company constitutions to require shareholders’ approval for company funds to be used for defamation suits. There is a risk of lawsuits limiting further comments on a company or its board because of uncertainty as to whether such comments are considered “sub judice”.
(f) Ascapia Capital has said that it is mulling a partial offer for the company and apparently has been given the go-ahead by the Securities Industry Council to do so.
The main purpose of this article is to discuss what options there are for shareholders if the resolutions to remove the directors fail and the company is able to pass its diversification resolution. Even though the controlling shareholder holds only 29 percent of the shares, it is still considerably more than what is held by the requisitioning shareholders. So unless a significant number of minority shareholders vote their shares or give their proxies to others to do so, to support the resolutions proposed by the requisitioning shareholders, the current board will remain in place and can proceed with its diversification plan. While SGX should continue to monitor the actions and disclosures by the company, shareholders can also do their part. So what should they do?
(a) They can try again. That is , they can requisition another EGM to try to remove the directors again, especially if questionable decisions continue to be made or the performance of the company suffers. The power of shareholders to requisition and call meetings is an important check and balance provided by the Companies Act and shareholders should be prepared to do so.
(b) They should monitor every announcement by the company, including the results announcements.
(c) They should scrutinise every acquisition and disposal by the company, including finding out about the counter-parties involved in these transactions. The hasty acquisition of Wayco raised immediate questions, but it was the further research into the target, vendor, and the relationship between the vendor and the controlling shareholder and management, that revealed that it was in substance no different from an interested person transaction (IPT) but did not have to meet the SGX rules for IPTs.
(d) At the next AGM, all the directors will have to stand for election. Shareholders should turn out in force to grill the qualifications and independence of the directors. In particular, as Mr Low Beng Tin, the chairman, did not make proper disclosures about regulatory actions against one of his companies and a petition for insolvency relating to another company, shareholders should question why. Of course, it is hoped that by that time, SGX would have taken some action for the disclosures which were clearly wrong (and repeated in other companies where Mr Low was appointed). Shareholders should also pay particular attention to the financial statements and the remuneration to be paid to directors. They should also ask if directors received payments for other services provided.
(e) Shareholders should prioritise the AGMs and EGMs of Datapulse when deciding which shareholder meetings to attend. In general, despite Mr Jamie Dimon recently saying that shareholder meetings are a waste of time, shareholder meetings are really the only avenue that small shareholders in particular have for holding the board and management accountable. They should make every effort to attend shareholder meetings. However, it is often impossible for shareholders to attend all shareholder meetings because they tend to be bunched up, or clustered, around certain periods. The good news is that Datapulse does not have a December year end so the general clustering of AGMs is not as bad when it is holding its AGM. Shareholders should adopt a “risk-based” approach when deciding which AGM to attend – and Datapulse should be high in terms of “risk”.
In summary, I hope that the resolutions proposed by the requisitioning shareholders are passed. However, if they are not, shareholders should not give up.
