First posted at 11.53 am on 20 May 2021. Updated at 5.30 pm on 21 May 2021 to include a description of the experience of Ms Lian Lee Lee related to the company’s response to SGX that Ms Lian has demonstrated that she acts independently.

By Mak Yuen Teen

On 14 May 2021, G.H.Y Culture & Media (GHYCM) appointed Ms Lian Lee Lee as deputy CEO of the group. The following day, I posted an article on my website titled “G.H.Y. Culture & Media: More Governance Concerns”. In the article, I pointed out that the company has complied with the letter of the undertaking and assurance given in the prospectus for its listing in December 2020 but questioned whether it has complied with the spirit. The undertaking and assurance in the prospectus were as follow:

“Mr John Ho has provided an undertaking to our Company that he will not, and will not procure any of his nominees, to be appointed as a director or executive officer of any entities in our Group for so long as he is named in the directors’ and executive officers’ watchlist of the SGX-ST.” (emphasis is mine)

“Our Nominating Committee will also ensure that none of Mr John Ho and/or his nominees will be appointed as a director or executive officer of any entities in our Group for so long as Mr. John Ho is named in the directors’ and executive officers’ watchlist of the SGX-ST. In the event that any associate of Mr. John Ho proposes to be a Director or Executive Officer of our Company or our Group, our Nominating Committee will assess that such relevant associate possesses the relevant experience, expertise, qualification, character and integrity to perform the proposed role as a Director or Executive Officer and will ensure that an announcement is made on the SGXNET, the web-based platform of the SGX-ST, on the proposed appointment of such relevant associate and our Nominating Committee’s views (including bases), in a timely manner.” (emphasis is mine)

John Ho is a substantial shareholder and group adviser of GHYCM.

When I was writing my first article about GHYCM warning about the governance risks in the company (“Governance Risks and G.H.Y. Culture & Media, 31 January 2021), I read the 700-page prospectus quite thoroughly. The above undertaking and assurance caught my attention, particularly the reference to “nominees” in the first two statements and “associate” in the third statement.

While the first two statements unequivocally rule out the appointment of any nominee of Mr John Ho, the third statement contemplates the possibility that his associate may be appointed. In that event, the Nominating Committee (NC) is required to, inter alia, “assess that such relevant associate possesses the relevant experience, expertise, qualification, character and integrity” of the associate.

Under the listing rules, an “associate” in relation to any director, CEO, substantial shareholder or controlling shareholder (being an individual) is defined to mean “his immediate family”, “the trustees of any trust of which he or his immediate family member is a beneficiary or, in the case of a discretionary trust, is a discretionary object” or “any company in which he and his immediate family together (directly or indirectly) have an interest of 30% or more”.

The third statement led me to consider the strong possibility that one of Mr John Ho’s immediate family members will be appointed after the IPO. This has now indeed happened, five months after the IPO.

In my previous post, I wondered whether SGX would have objected to Ms Lian’s appointment as group deputy CEO if the company applied for listing with this appointment already in place or proposed. If so, with hindsight, SGX should perhaps have insisted that the undertaking and assurance in the first two statements include both “nominees” and “associates”. I also wonder if those involved in undertaking due diligence for the IPO were aware of this scenario that has now played out.

On 18 May 2021, GHYCM issued a 5-page response to queries from SGX Regco regarding the appointment of Ms Lian. SGX Regco’s queries were as follow:

  1. “In view of Ms Lian Lee Lee (“Ms Lian”)’s Appointment and that she is the spouse of Mr Ho, please disclose and provide an assessment as to whether the Undertaking has been complied with.”
  2. “Please disclose the circumstances leading up the Ms Lian’s Appointment, including but not limited to the following:-
    • whether the company was actively looking for a Group Deputy CEO;
    • since when did the search began; and
    • whether there were other potential candidates for the Group Deputy CEO position, and the reasons for choosing her over the other candidates.”
  3. “Please disclose the bases and assessment of the Nominating Committee (“Assessment”) on the appointment of Ms Lian as Group Deputy CEO. In your response, please also provide the Assessment in view that Ms Lian is the spouse of Mr Ho, a substantial shareholder of the Company and is also on the directors’ and executive officers’ watchlist of the SGX-ST.”

The company’s lengthy response can best be described as highly technical, including a detailed discussion of who might typically be deemed a “nominee” of another person. It emphasised the importance of drawing a distinction between an “associate” and “nominee” and explained that “it is not necessarily the case that an associate of a person is a nominee of such a person.”

The company goes on to say (and this statement is not easy to understand): “Whether a person is an associate or a nominee of another person should be assessed on a case by case basis, and based on the facts on hand. This is particularly relevant, given that if such were the case, the intent of the Undertaking (as explained above, to guard against the risk that a person who is on the SGX-ST’s watchlist appoints another person who acts in accordance with his directions in order to circumvent the SGX-ST’s watchlist) would not be achieved because, such other person who is not an associate could potentially be a nominee and a person who is on the SGX-ST’s watchlist could then potentially appoint a nominee who is not an associate as a director or an executive officer.”

I believe no one would disagree that someone who is not an associate can still be a nominee. I also do not disagree that an “associate” may not necessarily be a “nominee” although, in my opinion, it should be a rebuttable presumption that an “associate” is a “nominee”, especially when it comes to the appointment of a director or executive officer. I am glad that the company believes that “whether a person is an associate or a nominee of another person  should be assessed on a case by case basis” as the context and whether the person in fact acts independently matter. In this case, the context is that Mr John Ho is a substantial shareholder and group adviser of GHYCM –  and therefore has close connections with the company – and Ms Lian is his spouse.

The company said that “it would not be reasonable to restrict the  ability of Mr Ho’s immediate family members to be appointed as directors or executive officers of the Group solely on the basis that he is named in the SGX-ST’s watchlist”. It is indeed unfair to penalise an immediate family member of someone who is on the watchlist by not allowing  such family member to be appointed as a director or executive officer of any SGX-listed company. However, this is not a case of someone being appointed to just any company – but a company where the spouse who is on the watchlist is a substantial shareholder and group adviser. Clearly, we also need to avoid a scenario where a watch-listed person directs or manages through his or her immediate family member.

Which brings me to the NC’s assessment of whether Ms Lian acts independently and is a nominee of her spouse. In the announcement of Ms Lian’s appointment, the company said that the NC had, inter alia, “assessed that Ms Lian acts independently and does not act under the direction, control or influence of any party, including Mr John Ho, a substantial shareholder of the Company and is further, not a nominee of any party, including Mr John Ho”.

In the response to SGX Regco’s queries, the company reiterated: “As stated in the announcement dated 14 May 2021, the NC had conducted an interview with Ms Lian and assessed that she acts independently and does not act under the direction, control or influence of any party, nor is she a nominee of any party, including Mr Ho.”

However, the company did not explain how the NC could have reached that conclusion on the basis of an interview or by whatever other means. Perhaps the NC could shed more light on this, which I had also asked in my previous post, including what steps have the NC and board taken to ensure that this is the case and continues to be so?

The company also said: “…she (Ms Lian) has demonstrated that she acts independently. This is evidenced by her vast working experience, which includes having more than 25 years of experience in the media and entertainment industry in Singapore and the region, with a deep understanding of the Southeast Asian markets. She held the position of events director in other media and entertainment companies and was entrusted with leadership roles and responsibilities such as managing teams within the corporations, as well as events and projects.”

The appointment template for Ms Lian shows her working experience for the  last 10 years. Two of these were events director positions – at Multimedia Entertainment Pte Ltd from April 2014 to August 2017 and at Bestin Entertainment Pte Ltd from July 2018 to October 2019. Both companies are currently struck off based on ACRA’s records. Ms Lian’s spouse, Mr Ho, owned 10% of Multimedia Entertainment, and the former Head of Rental Licensing at Scorpio East, where both Mr Ho and Ms Lian were directors, was one of the two directors of Multimedia Entertainment. As for Bestin Entertainment, it was wholly owned by Mr Ho who was also the sole director. The other appointments of Ms Lian over the past 10 years were executive director and non-executive director positions at Scorpio East and the wholly-owned Singapore subsidiary of GHYCM. Ms Lian could of course have other experience before the past 10 years that are in unrelated entities. Regardless, it is difficult to see how her experience over the past 10 or 25 years helps demonstrate that she can act independently at GHYCM.

The company also said; “The Nominating Committee (“NC”) comprises Mr Yeo Guat Kwang, Mr Guo Jingyu and Dr Jian Minghua, who are reputable and experienced individuals, and who have independently and objectively reviewed the appointment of Ms Lian as the Group Deputy CEO”.

Mr Guo is described in the prospectus as a notable producer, director and scriptwriter in the PRC with more than 25 years of experience. However, until his appointment as GYYCM’s executive chairman and group CEO, he has no experience as a director or CEO of a public-listed company. Dr Jian is a professor of Peking University, Guanghua School of Management, where he teaches the Marketing and Brand Management courses. The prospectus said that he too had no prior experience as a director of public listed companies in Singapore. While these two individuals may be “reputable and experienced” in their respective fields, their reputation and experience are not particularly relevant to the issue at hand – the assessment of whether Ms Lian should be deemed a nominee of Mr Ho.

In my view, GHYCM’s response to the SGX Regco’s queries leaves unanswered questions.