First posted on June 21 at 11.45 pm. Updated on June 22 at 7.15 am with an expanded discussion on the appointment of two independent directors at MC Payment and NGSC with a common connection, and to include the latest information about the second EGM to be held on July 30.

By Mak Yuen Teen

Over the past month, a Singapore market which is never short on drama, witnessed yet another boardroom tussle, this time at Catalist-listed MC Payment (MCP). As the row between the two sides escalated publicly, SGX Regco responded with two sets of queries. Meanwhile, the continuing sponsor, ZICO Capital, has – publicly at least – done what most continuing sponsors do in such situations, which is staying out of the fray.

Ousting of directors

MCP first caught my attention when two out of its three directors who stood for re-election at its annual general meeting (AGM) on April 28, 2021were voted out. Both directors, Ng Weng Sui Harry and Shawn Ching Wei Hung, received 56.69% of votes against their re-election.  The third director, independent director (ID) Kesavan Nair, was re-elected with 85.01% of the votes.

Three months earlier, MCP had become the first digital payments service firm to be listed on SGX following the acquisition of all the ordinary shares and convertible bonds of Mobile Credit Payment Pte Ltd (MCPPL) by Artivision Technologies in a reverse takeover (RTO). The RTO was approved at an extraordinary general meeting (EGM) on January 22, 2021. ZICO Capital, which has been Artivision’s continuing sponsor since November 2016, acted as the financial adviser, while RHT Capital was the independent financial adviser.

Mr Shawn losing his directorship at the AGM was a surprise because he had been appointed at the EGM just three months earlier with 100% of the votes. Further, he is the son of Ching Chiat Kwong, MCP’s controlling shareholder, who owns 27.06% of the shares. The only other substantial shareholder of MCP, Koh Beng Kiok Anthony, owns just 5.88%. Mr Koh was the co-founder of MCPPL, together with Kim Moon Soo. Mr Ng was the incumbent Non-Executive Director and Chairman at Artivision and did not stand for election at the EGM.

Re-election process

Following the EGM, MCP’s board had seven directors. Other than Mr Ng and Mr Shawn, the other five directors were: Mr Koh, who became Executive Director (ED) and CEO after the RTO; Albert Saychuan Cheok, who took over as Independent Chairman;  Mr Kim, an ED and COO; and two other IDs –  Dr Lillian Koh and Mr Kesavan, the latter having been an Artivision ID since 2017.

Regulation 111 of MCP’s constitution requires that at each AGM, at least one-third of the directors shall retire from office by rotation and submit themselves for re-election. If their number is not a multiple of three, the number nearest to, but not less than one-third, shall stand for re-election. The directors to retire by rotation shall first include those who wish to retire and not offer themselves for re-election, followed by those who have been longest in office since their last re-election or appointment. Any additional directors necessary to meet the one-third rule would be determined by lot.

Since MCP’s board had seven directors, three directors would have to stand for re-election. Mr Ng and Mr Kesavan had been the longest in office as they were directors at Artivision, while the other five directors were all appointed at the same time at the EGM. Therefore, the three directors to stand for re-election at the April AGM would be Mr Ng, Mr Kesavan and one of the five directors appointed at the EGM. Based on the constitution, this third person would be determined by lot.  As I pondered the events at the AGM, it struck me that Mr Shawn must have been quite unlucky to be picked to stand for re-election.

However, it seems it was not a matter of luck as based on public statements issued by Mr Ching and reported in the media, it has now emerged that Mr Koh was originally supposed to be the third director to stand. According to Mr Ching, Mr Shawn took Mr Koh’s place because the latter said he “was not confident that the shareholders would re-elect him”. It is unclear why he would think that since most directors get voted in by a landslide and he had received 100% of the votes at the EGM just two months earlier. Mr Ching alleged that Mr Koh then proceeded to vote against both Mr Shawn and Mr Ng.

Mr Koh has so far not denied Mr Ching’s account of what happened at the AGM. If this is true, then one can hardly blame Mr Ching for feeling blindsided and betrayed.

Puzzling acquisition target

Other revelations have caused me to have concerns about the incumbent MCP board, notwithstanding its claims in its June 19 announcement that “it is well familiar with the principles of good corporate governance – and has consistently striven to ensure that the Company complies strictly with them”.

According to media reports, Mr Ching has discovered that two days after the AGM, a directors’ resolution was passed authorising Mr Koh to enter into a term sheet for the proposed acquisition of 51% of Mainboard-listed NGSC based on a valuation of $9.6 million through the issue of new shares in MCP. There was no announcement by MCP about this proposed acquisition. However, on June 11, MCP responded to SGX queries asking the company to clarify the status of the acquisition, whether the company had entered into any term sheets or agreements on the proposed acquisition, and whether there were any announcements by the company.

MCP said that the board’s authorisation was for Mr Koh to engage in exploratory talks with NGSC and that the talks had concluded with no outcome. It added that the company had not entered into any binding term sheets or agreements, and therefore no announcements were made. It did not say if it had signed any non-binding term sheet, even though SGX’s query asked about “any term sheets”, not just “any binding term sheets”. SGX did not query further to assess if an announcement ought to have been made.

Interestingly, on June 17, MCP had no hesitancy in announcing the receipt of a letter of intent (LOI) from Indonesian-based payments and remittance firm OY! “to explore investment opportunities by taking a strategic equity stake in MC Payment”. It says that OY! “intends to turn the LOI into a term sheet or memorandum of agreement”. It seems our regime is a discretionary disclosure regime rather than a continuous disclosure regime.

I was stunned by the revelations that MCP had considered acquiring NGSC as the latter’s problems go back a long way. It entered the SGX Watchlist based on financial criteria way back on December 3, 2008 and the original end of its cure period was December 2, 2010. For reasons that are difficult to fathom, it took SGX nine years after the end of the original cure period to tell the company that it would be delisted. Trading has been suspended since January 3, 2020 and it is now attempting to satisfy the listing requirement for an exit offer to be made to shareholders.

Since its entry into the watchlist, it has attempted all sorts of corporate actions to exit from it without any success. Its litany of problems is “hall of shame” stuff, including statutory demands, legal proceedings, police reports against former directors, alleged irregularities, receipt of letter from ACRA regarding non-compliance with accounting standards, and questionable director appointments and resignations.

Contentious director appointment

On May 8, NGSC appointed Mahtani Bhagwandas as an ID. His appointment template includes an annexure which disclosed that Mr Mahtani has faced disciplinary proceedings as a lawyer and regulatory action as a director.

In 2018, the Disciplinary Tribunal (DT) of the Law Society dismissed a complaint against him for allegedly acting for a client whilst in a position of conflict of interest and/or allegedly preferring the interest of another party over the client. In 2020, he was in front of the DT again for acting for a client against a former client who had passed away, despite having acquired confidential information about the former client, and not making a timely disclosure to the administrators of the former client’s estate about his conflict of interest. It was not second time lucky as he was found guilty.

At the time of his appointment to NGSC, he had already been found guilty by the DT which had referred the matter to the Court of 3 Judges. A notice of compliance (NOC) issued by SGX to NGSC on May 18 covering a number of matters asked the company to disclose the board and nominating committee’s assessment of his suitability as an ID and audit committee (AC) chairman of NGSC. By that time, the Court of 3 Judges had already suspended Mr Mahtani from legal practice for two years.  That same day, the company announced that the board and NC still considered him to be suitable as an ID. On May 21, NGSC also responded to the direction in SGX’s NOC regarding  Mr Mahtani’s appointment. It listed the factors considered by the board and NC with regard to his suitability, including the fact that Mr Mahtani had earlier been an ID and AC chair at NGSC  from 1 April 2007 to 25 March 2009, and that no other suitable candidate was willing to accept the ID position at NGSC.

In addition to the disciplinary proceedings, it was also disclosed that in 2019, SGX had referred all of the directors of an SGX-listed company, including Mr Mahtani, to the Listings Disciplinary Committee (LDC) for regulatory action. The LDC found the IDs guilty on two of the four charges that SGX proceeded with. It decided that the matter was to be kept private and confidential in so far as the IDs were concerned and that any publication of the ruling will have the names of the company and the IDs redacted/removed. A public reprimand was imposed only on the ED. However, the case remains in limbo as SGX has appealed the LDC ruling to keep the reprimand against the IDs private, while the ED has also appealed the ruling against him. So, at the moment, Mr Mahtani has  at least been privately reprimanded. As an aside, this case reinforces my point about the toothless enforcement regime for directors in Singapore – it is bewildering why the LDC saw fit to keep the reprimands against the IDs private.

Other board issues at NGSC

On April 20, an ID resigned from NGSC, citing time commitment issues, inadequate resources to assist directors and “disagreement with management’s practice to favour a certain shareholder”. On April 30, the company announced that it had received a requisition notice from 21 minority shareholders and NGSC’s controlling shareholder, Telemedia Pacific Group (TPG), requesting the company to convene an EGM to remove an ID, Ng Yoke Ling, Pauline. Three weeks later, NGSC provided an update on the requisition and included a four-page representation letter from Ms Ng in which she said that no reason had been given for her removal, and providing information on the background to her appointment, resignation of fellow IDs, and how she had properly and conscientiously discharged her duties. She also said that she had not received any financial remuneration from the company. Ms Ng eventually resigned on June 16 rather than face removal at the EGM. It is ironic that NGSC cited the difficulty in finding a suitable candidate when appointing Mr Mahtani who has faced disciplinary and regulatory actions as a lawyer and director, yet the controlling shareholder saw fit to requisition to remove Ms Ng, a retired partner of the largest law firm in Singapore.

One of the directors of TPG is Hady Hartanto. Mr Hartanto was a former ED of NGSC who resigned in October 2011 after he was reprimanded for his concurrent ED role at Scorpio East. Mr Hartono’s sister, Sri Tjintawati Hartono, is a non-executive non-independent director of NGSC. The recent NOC from SGX mentioned that she was involved in a past investigation conducted by Ernst & Young into certain significant questionable transactions and cash transfers involving the company, which was disclosed in 2014.

More intrigue

The intrigue does not end there. On May 25, MCP announced that it had appointed David Ong Kim Huat as an ID. Mr Ong was a former PAP MP who suddenly resigned from the Bukit Batok SMC in March 2016. According to a Straits Times report, he allegedly had an affair with a grassroots leader in his ward.

It turns out that both Mr Ong and Mr Mahtani were appointed together as IDs on January 23, 2020 to a Cayman-incorporated Singapore company called Hon Corporation, listed on GEM in Hong Kong. Each signed a one-year letter of appointment but both resigned on September 30, 2020. The day before their appointment, the HK Securities and Futures Commission had ordered a securities firm to freeze six client accounts involving H$170 million assets for links to suspected market manipulation in the shares of the company.

While Mr Ong’s appointment at Hon Corporation was disclosed when he was appointed to MCP, Mr Mahtani’s appointment at the same company was not included in the list of 17 past directorships, and neither was his past directorship at Natural Cool Holdings. However, when he retired from Natural Cool in April 2021, his past directorship in Hon Corporation was disclosed. As I said, it is a discretionary disclosure regime after all.

For Mr Ong, MCP is the first board of  an SGX-listed company he is serving on, with HK-listed Hon Corporation being the only other listed company he has served on, based on the disclosure on his appointment.

Was the appointment of the two directors with a common association at Hon Corporation –  a Singapore company listed in HK – at around the time when MC Payment was considering acquiring a majority stake in NGSC a mere coincidence?

Coming EGMs

On June 30, MCP will convene an EGM requisitioned by Mr Ching to consider the appointment of five directors to the board, including Mr Ching himself, Mr Ng and Mr Shawn. This EGM was requisitioned on May 4. This will be followed by a second EGM requisitioned on May 31, also by Mr Ching, which will be held on July 30. This second EGM will consider the removal of five out of the current six directors, other than Mr Kesavan. Ideally, the resolutions for the proposed removal and appointment of the directors should be considered at the same EGM. However, MC Payment has deemed it appropriate to have a separate EGM at the later date to consider the proposed removal of directors on the basis that directors who are proposed to be removed should be given the opportunity to make representations and therefore more time is needed.

Shareholders of MCP should carefully consider the resolutions at these EGMs and vote their shares to protect their interest, as they will not be able to count on SGX or the continuing sponsor to do so. While it would be clear from this article that I have concerns with the current board of MCP, boardroom tussles such as the one we are seeing at MCP rarely produce effective boards. Good director candidates often avoid being dragged into such tussles and those who get involved are often aligned with one side or the other, which is not ideal to produce a truly independent and competent board.

In my view, further board changes are likely needed to take the company forward, regardless of the outcomes of these EGMs.