According to page 281 of GHYCM’s prospectus dated 11 December 2020, GHYCM entered into a service agreement with Mr Yeo Guat Kwang on 1 September 2017 for the provision of advisory services to the group for the period from 1 September 2017 to 31 December 2018. This was subsequently renewed for another one-year term from 1 January 2019 to 31 December 2019. He received a monthly fee of S$10,000 in respect of such advisory services and was paid S$40,000 in FY2017, S$120,000 in FY2018 and S$120,000 in FY2019. Mr Yeo was then appointed to the board of GHYCM on 23 November 2020, and is its lead independent director and chairman of the Nominating Committee (NC).
Page 234 of the prospectus said that the advisory services “related primarily to his business and working experience, as our Group had sought to tap into his business network and contacts in Singapore to facilitate and to act as a springboard, where relevant, for the business operations of our Group in Singapore”. Mr Yeo is of course well known, having been a Member of Parliament from 1997 to 2015, active in the labour movement, and served on many boards of listed companies in Singapore.
In G.H.Y Culture & Media (GHYCM) annual report for the financial year ended 31 December 2020, the Corporate Governance Report disclosed the following under “Provision 4.4 – Independence review of Directors”: “As at the date of this report, there is no relationship or circumstance set forth in Provision 2.1 of the Code which puts the independence of the Independent Directors in question.” Provision 2.1 contains a principle-based definition of an “independent director”, and in footnote 6, specifically states that a director who falls under the circumstances described under Rule 201(5)(d) of the Mainboard Rules or Rule 406(3)(d) of the Catalist Rules is not independent. These circumstances relate to employment and family relationships, and a director who has served more than 9 years and whose continued appointment as an independent director has not been approved by a two-tier vote.
However, Provision 4.4 also states that: “…Directors disclose their relationships with the company, its related corporations, its substantial shareholders or its officers, if any, which may affect their independence, to the Board. If the Board, having taken into account the views of the NC, determines that such directors are independent notwithstanding the existence of such relationships, the company discloses the relationships and its reasons in its annual report” (emphasis mine). Footnote 14 states: “Such relationships include business relationships which the director, his or her immediate family member, or an organisation which the director, or his or her immediate family member is a substantial shareholder, partner (with 5% or more stake), executive officer or director in has with the company or any of its related corporations, and the director’s direct association with a substantial shareholder of the company, in the current and immediate past financial year. Where the director or his or her immediate family member, or a company that he, she or they are a substantial shareholder in, provides to or receives from the company or its subsidiaries any significant payments or material services, the amount and nature of the service is disclosed “(emphasis mine).
Practice Guidance 2 states that where a director himself or herself provides services other than service as a director, “payments aggregated over any financial year in excess of S$50,000 should generally be deemed significant” (emphasis mine).
Since Mr Yeo provided advisory services for FY2019 and was paid S$120,000, why was this not disclosed? Why did the company only consider the relationships and circumstances in Provision 2.1 but not what is referred to in Provision 4.4 and the associated footnote?
Since the AGM held on 29 April 2021 was the first AGM after the company’s listing, all the directors including Mr Yeo stood for re-election without his recent business relationship being disclosed in the annual report. While the advisory services he provided was disclosed in the prospectus, the prospectus runs to nearly 700 pages. I had just noticed the advisory services and I wonder how many shareholders knew about this. In any case, the Code states that such relationships should be disclosed in the annual report, and the company should have explained why he was still deemed independent notwithstanding this relationship.
