By Mak Yuen Teen

On March 14, Datapulse Technology will hold an EGM to consider seven resolutions. Minority shareholders should carefully study the circular and consider voting against 1, 2 and 7 which relate to the expansion of the business to hotels and hospitality assets, the acquisition of the hotel in Seoul for KRW35 billion (about S$42.7 million or  57% of the cash balance based on the FY2019 Q1 results), and the interested person transactions (IPTs) with ICP Group.  They should also consider voting against the change of name of the company to Capiti Property Partners Ltd under resolution 4 as that is part of sealing the fate of the company in a business that I believe it is highly unlikely to succeed in.

In my opinion, they should vote for resolution 3 to approve the disposal of Wayco Manufacturing, the onerous acquisition made by the previous board. It should not have been bought in the first place – a fact that many shareholders knew but the then board thought otherwise, and the proposed hotel acquisition may be deja vu with a different board.

As for resolution 5, which relates to the adoption of a new constitution, I have not gone through the new constitution being proposed. I would like to see strict provisions in the constitution dealing with situations where directors have a personal interest in transactions, beyond just disclosure and abstention from voting. This is because there is already going to be a resolution relating to interested person transactions (IPTs) and shareholders cannot rule out recurring situations of directors having interests in transactions. The constitution should require directors with a direct or indirect interest in any shape or form to disclose, abstain and recuse. Better still if they completely avoid such conflicts – but I think that may be expecting too much as the chairman is already having an interest in two companies that will be transacting with each other.

For resolution 6 on the proposed change of external auditors from KPMG LLP to EY LLP, I am ambivalent about retaining KPMG. They have been auditors since 1993 and the partner-in-charge did not even acknowledge an email and a reminder I sent to her asking some questions as a shareholder. While I understand external auditors often see themselves as working for the company – and in effect the board which is often appointed by controlling shareholders – they are appointed by and report to members of the company. I will have more to say on this issue in a later post, especially why I think we should look to the laws in Australia which make external auditors much more accountable to shareholders generally.

However, I am not convinced that Ernst & Young LLP (EY) is the right choice because EY did substantial work for the company in reviewing its entry into the haircare business and the financial and tax due diligence on the Wayco acquisition. They must have earned substantial fees from such work and developed a close relationship with the company – even if it was a different part of the firm which did that work and EY may claim “Chinese walls”. Certainly, shareholders should question the fees earned from those services and whether the work that has been done poses a conflict to its role as external auditors going forward. Given the recent breakdown in trust in external auditors, particularly the Big 4 firms, external auditors more than ever need to be whiter than white. EY (Singapore) is of course the auditor under scrutiny for the audit of the Noble Group subsidiary here.

I hope to post a series of short articles on my website about some of the resolutions closer to the EGM although I cannot promise. I also plan to write an article summarising all that have gone wrong at Datapulse based on the more than 20 articles I have written, the rules that I believe have been bent or broken, and the regulatory responses or lack thereof thus far. The proposed title of this article? “Why minority shareholders don’t stand a chance”. Sadly, this really applies to the market here as a whole.