By Mak Yuen Teen

On September 23, 2020, Khua Kian Kheng Ivan resigned from Catalist-listed No Signboard, citing “current and future business and other commitments, which may be difficult for him in the future to devote the time and commitment required as an independent director of the Company”. Khua was the lead independent director, chairman of the remuneration committee, and a member of both the audit and remuneration committees.

His sudden resignation with immediate effect left the company with only two non-executive directors (both independent) on the audit, remuneration and nominating committees, and non-compliant with the listing rules and Code for these committees. It also left the company non-compliant with the Code’s provision that there should be a lead independent director where the chairman is not independent, which is the case for No Signboard. The company said it will endeavour to fill the vacancy in the audit committee within the prescribed time limit under the Catalist rulebook.

It is curious that Khua resigned so suddenly from No Signboard when the cessation announcement cited difficulty in devoting time and commitment in the future. What is also curious is that he has 10 other current directorships in listed and unlisted companies, including two SGX-listed companies, KSH Holdings and MoneyMax Financial Services. Mr Khua has not so far not resigned from those other listed boards.

The continuing sponsor, RHT Capital, said that it had “conducted an exit interview with Khua and is satisfied that save as disclosed in this announcement, there are no material reasons for the cessation of Khua as the Lead Independent Director, Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee”. Did the sponsor ask Khua whether he was also resigning from other companies, particularly KSH Holdings and MoneyMax Financial Services, and if no, why did he choose to resign only from No Signboard?

No Signboard has been another disastrous Catalist listing. It listed on November 30, 2017, issuing 65,734,500 issued shares at S$0.28 per share and raised S$18.7 million. It last closed at S$0.032. Its predicament has much more to do with its own poor corporate governance and management than COVID-19 as it had already fallen to less than S$0.06 by December 2019.

On April 24, 2019, CAD launched a probe into the share buyback by its executive chairman and CEO, Lim Yong Sim. Lim’s passport was surrendered to CAD. On April 30, 2019, Lim was arrested under reasonable suspicion of breaches of Sections 197 and 218 of the Securities and Futures Act. He has not been charged with any offence and was subsequently released on bail.  Today, he remains as executive chairman and CEO despite being under investigation.

No Signboard also had serious financial reporting issues. On July 2, 2019, it  announced that it had, in consultation with SGX Regco and its sponsor, appointed Nexia TS Public Accounting Corporation as an independent reviewer, based on SGX Regco’s directive.

On April 29, 2020, No Signboard announced the findings of the independent review. The findings were damning as they concluded that the company changed from the use of Merger Accounting Principles, which was used in preparing its financial statements in its IPO offer document, to Actual Accounting Principles for Q1, Q2 and Q3 of FY2018 following its listing, and then back to Merger Accounting Principles again for its full year financial results for the financial year ended 30 September 2018. It had done so without applying the same to the previous corresponding financial quarters. This resulted in non-compliance with FRS for the relevant quarters. It also resulted in, among others, “non-comparability of the financial statements and double-counting of the same financial information in two consecutive accounting periods due to a restructuring exercise undertaken in conjunction with its IPO”. SGX Regco said that it “will be reviewing the Nexia report very carefully for possible breaches of the listing rules”.

Given the circumstances faced by the company, one must question Khua’s decision to suddenly resign while keeping his directorships in the other companies. Should a director who resigns under such circumstances be considered suitable to be a director of a listed company? Of course, the fact that Khua has resigned does not lessen his responsibility, should SGX Regco finds that the board should be held accountable for the company’s debacles, especially with regards to the financial reporting issues.