Updated on June 23, 10.45 am to include the continuing sponsor’s responsibility for these disclosure lapse

By Mak Yuen Teen

Last night (June 22), at 29 minutes to midnight, Healthway Medical Corporation (HMC) issued the following corrigendum to its annual report for the financial year ended December 31, 2019:

https://links.sgx.com/FileOpen/HMC_22.06.20_Announcement_Corrigendum%20to%20AR2019_FINAL.ashx?App=Announcement&FileID=620032

The corrigendum contains significant additional information about the independent chairman, Mr Sin Boon Ann, who is going up for re-election and Ms Poh Mui Hoon, a proposed new independent director, standing for election. In both cases, the additional information relates to the following: “Any relationship (including immediate family relationships) with any existing director, existing executive officer, the issuer and/or substantial shareholder of the listed issuer or of any of its principal subsidiaries”.

The original disclosures had answered “No” for Mr Sin, and “Yes” for Ms Poh. It turns out that the original disclosure for Mr Sin had omitted relationships with both a substantial shareholder and with Ms Poh. A substantial shareholder of HMC has invested in a company, Esseplore Pte Ltd,  where Mr Sin is the Executive Chairman and a shareholder. HMC said that the substantial shareholder is a passive investor, has no board representation and is not involved in operations of Esseplore, and that this relationship is not expected to affect Mr Sin’s independence. The original disclosure also failed to mention that Ms Poh is a shareholder, CEO and co-founder of Esseplore and HMC has now said that this relationship is also not expected to affect Mr Sin’s independence. As a highly experienced lawyer and independent director, one would have expected Mr Sin to be fully aware of his disclosure obligations and to have made the correct disclosures.

For Ms Poh, while the original disclosure had answered “Yes”,  it only mentioned the relationship between Mr Sin and her at Esseplore. It failed to disclose that the substantial shareholder has invested in Esseplore.

These incorrect disclosures are in my view unacceptable but it is just the latest case of companies issuing “corrigenda” or “clarifications” after incorrect disclosures, with no consequences.

There is also the question of whether the continuing sponsor, PrimePartners Corporate Finance, has adequately discharged its responsibility in reviewing the disclosures by the company. This again raises questions of the effectiveness of the sponsor-based regime – a topic to be covered in detail in a forthcoming report.

Although in HMC’s case, the company has issued the “corrigendum” before the AGM to be held tomorrow (June 24) at 2 pm by live webcast, the deadlines for shareholders to register to participate at the AGM and for voting by proxy (to the chairman only) have both passed. Shareholders who have submitted their votes may change their minds now, and those who did not vote may wish to vote now. While HMC believes that the two directors can still be considered independent, shareholders – particularly minority shareholders – may see it otherwise. HMC may also believe that the two directors will be elected anyway. This does not matter because the vote of every shareholder is important.

I believe the AGM should now be pushed back by at least a week to restart the registration and voting process. SGX ought to look into the disclosure lapses.