By Mak Yuen Teen
On April 26, SGX issued a Notice of Compliance (NOC) to Trek 2000 International (Trek 2000). This follows the completion of the reviews of interested person transactions and various suspicious transactions by RSM Corporate Advisory and the release of its forensic accountants’ report on April 23. The report was released the day before Trek 2000’s AGM.
In the NOC, SGX highlighted “immediate and serious concerns” about the suitability of Mr Tan Henry (or Henn Tan), the chairman and CEO, to continue as a director and officer of the company, and Mr Foo Kok Wah, as an executive officer of the company, having regard to the integrity and character of directors and executive officers under the listing rules. SGX notified the company that it objects to Mr Tan’s and Mr Foo’s continuing appointment as director and/or executive officer of any issuer for a period of three years (SGX also issued the same objections to two former executive directors, Mr Poo Teng Ping and Mr Gurcharan Singh).
SGX directed the company to convene an EGM as soon as practicable to vote on the continuing appointment of Mr Tan and Mr Foo. All the persons implicated in the report and their associates must abstain from voting on the resolutions.
On April 2, SGX had issued an NOC to Midas Holdings. In that NOC, SGX objected to the continuing appointment of two individuals, one as a director and/or executive officer and the other as an executive officer, of any issuer for three years. The company was not told to convene an EGM to vote on their continuing appointment in this case. The executive chairman and director resigned on the date of the NOC while on April 6, the company announced that the executive officer had completed the documents to relinquish his appointments as legal representative.
This raises the question as to why different approaches were taken by SGX for the two NOCs. It would seem to me that if SGX deems an individual to be unsuitable to be a director or executive officer because of concerns about integrity and character and objects to his continuing appointment, the continuing appointment should not then be subject to a vote by shareholders. Doing so would suggest that shareholders can decide to retain a director whom SGX has effectively considered as not meeting the “fit and proper” criteria expected of a director or executive officer.
Mr Tan owns about 31.4 percent of the shares of Trek 2000. There are three other unrelated substantial shareholders who together have direct and deemed interest of 33.6 percent of the ordinary shares. At the AGM on April 24, about 149 million shares were voted, or 46 percent of the shares. In other words, not all the substantial shareholders voted at the AGM. Mr Tan was required to abstain from voting on the resolutions for the share option scheme and the share buyback, and the number of shares voted for those resolutions were 10 million or fewer shares. This suggests that Mr Tan voted on the other resolutions.
At the AGM, 99.54 percent of the shares voted in favour of the re-election of Mr Chay Yee Meng, the chairman of the audit committee and nominating committee. In contrast, 99.52 percent voted against the re-election of Mr Neo Gim Kiong. Mr Neo was the chairman of the risk review committee and a member of the audit committee. In the cessation announcement, it was indicated that Mr Neo “had a difference in opinion with certain board member over the process involving the RSM Corporate Advisory Pte Ltd’s report.” It would seem he disagreed with the way the report was handled and he was removed by Mr Tan and other shareholders who voted. Two other directors retired at the AGM, including another independent director.
It remains to be seen whether the substantial shareholders who did not vote at the AGM will vote at the EGM for the continuing appointment of the two individuals, or how shareholders who are not required to abstain will vote. It may be that shareholders will feel that one or both individuals are so critical to the future of the company that they will vote to retain them. Given the seriousness of the findings in the RSM report and the serious concerns of SGX about their suitability, what does it say about the sustainability of the company if shareholders feel that the company cannot do without one or both of them? What does it say about tone at the top and about “key man risks” and succession planning? Is there really a need to retain Mr Tan as a director, for instance, or should other options for his continuing role in the company be explored? If there is further action by other regulators, it is far from clear that he can continue to have an active role in the company.
In my view, if an individual is considered by SGX to be unsuitable to be a director or executive officer of a listed company, that should be the end of the matter. It should not left to shareholders to decide whether to keep that individual. Wider public interest and the integrity of our market must come before the wishes of shareholders of a particular company.
