By Mak Yuen Teen

On 5 April 2023, I posted an article titled “EGM for ASTI Holdings: An Opportunity Not to Be Missed”. This followed ASTI’s announcement that it had received a letter from four requisitioning shareholders giving notice to the company that they are calling for an extraordinary general meeting (EGM)  pursuant to section 177 of the Companies Act. The EGM was to be held on 5 May 2023.

The purpose of the EGM was to consider and pass resolutions: (a) to remove four out of the five existing directors of the company, including the non-executive non-independent chairman,  the sole executive director, and the two independent directors; (b) to remove any director of the company who may be appointed between 3 April 2023 and the date of the EGM, with effect from the date of the EGM; and (c) to appoint five new directors to the company, including two to be designated as executive directors (one  of whom is one of the requisitioning shareholders), and the other three to be designated as independent directors.

In its announcement, the company disclosed that the board had on 24 March 2023 received a letter from the requisitioning shareholders inviting three incumbent directors to resign and inviting the board to appoint five new directors. It said: “No reasons for any of the above proposals were provided other than that this would purportedly ‘facilitate an overhaul and change of the Company for the betterment of shareholder’s value’.”

In my article, I urged all shareholders to vote in favour of all the resolutions proposed by the requisitionists at the EGM. I said: “I would also hope that the new directors will ensure that there is a thorough review of the actions of the current and former directors to determine whether there have been any breaches in director duties, listing rules, and relevant laws and regulations. Where there have been breaches, they should consider taking action against the relevant individuals on behalf of the company and reporting to the regulators.”

I added: “This is an opportunity for shareholders of ASTI Holdings to hold the current and former directors of the company accountable and have a possible chance to receive an exit offer which has not been forthcoming.”

I have over the past few years written at least six articles on ASTI Holdings and its related companies, Dragon Group International and Advanced Systems Automation, together with a case study which I substantially wrote and edited.

On 20 April 2023, the company posted an announcement declaring in bold that:

“THE PROPOSED EGM (PROPOSED BY THE REQUISITIONING MEMBERS TO BE HELD ON 5 MAY 2023) IS INVALID AND IT DOES NOT AND CANNOT CONSTITUTE A PROPER EXTRAORDINARY GENERAL MEETING OF THE COMPANY.”

“IN THE UNLIKELY EVENT THAT AN ATTEMPT IS MADE TO PROCEED WITH THE PROPOSED EGM AS IF IT WAS A VALID GENERAL MEETING, THE PROPOSED EGM IS AND REMAINS INVALID. EVEN IF ANY SHAREHOLDERS’ RESOLUTION IS PURPORTED TO BE PASSED THEREAT, THE RESOLUTION TOO WILL BE INVALID AND IT WILL HAVE NO EFFECT WHATSOEVER AS A RESOLUTION OF THE SHAREHOLDERS OF THE COMPANY.”

Essentially, the requisitionists have faced hurdles in calling for the EGM.

Sections 176 and 177 of the Companies Act are intended to empower shareholders holding at least 10% of voting shares to requisition or call meetings. The ability of shareholders to do so and to propose resolutions to remove and appoint directors are fundamental shareholder rights. The right to requisition or call meetings to remove incumbent directors and appoint new directors is particularly important in the context of Singapore where directors generally only stand for re-election once every three years, rather than annually as has become the norm in certain countries such as the U.S. (at least for larger companies) and as recommended in the UK Corporate Governance Code.

But as we are seeing in the ASTI case, and other cases before it, minority shareholders often face considerable hurdles in exercising their rights under sections 176 and 177. Regulators have done nothing to clarify the intent of these provisions or taken steps to ensure that minority shareholders are able to exercise those rights as intended by those provisions.

In ASTI’s case, the regulators have stood by silently (at least publicly) while the requisitioning shareholders are rebuffed. I would also add that in ASTI’s case, the regulators have contributed to the predicament of the minority shareholders. Here’s why.

ASTI last held an AGM on 31 May 2021, nearly two years ago. Since then, both ACRA and SGX have approved the company’s application to delay the holding of  its AGM several times. On 13 April 2022, the company announced that ACRA granted it an extension of time to hold its FY2021 AGM, which was due on 30 April 2022, by 29 June 2022. On 9 May 2022, SGX granted approval for an extension of time until 31 May 2022. On 27 May 2022, the company announced it had applied to SGX for a further 1-month extension to 29 June 2022. It did not announce whether SGX had approved that but on 17 June 2022, it announced it was applying for a third extension of another one month to hold its AGM by 31 July 2022. It said it will apply to ACRA for a further extension of time. The third extension of time to 31 July was approved by SGX on 1 July 2022, while the company announced on 6 July 2022 that ACRA approved an extension to 29 July 2022.

On 22 July 2022, SGX approved the company’s application for a fourth extension. It approved an extension until 7 September 2022 even though the company had applied for an extension to 18 August 2022. This was in line with ACRA’s approval for the company’s application for a further extension to 7 September 2022.

Since then, there have been no further announcements about further approvals for extensions of time to hold the FY2021 AGM from both ACRA and SGX. The FY2021 AGM has yet to be held and the FY2022 AGM ought to be due by 30 April 2023.

Since the last AGM on 31 May 2021, ASTI has appointed a new independent director on 30 November 2021, a new executive director on 11 November 2022, and a new non-independent non-executive director on 23 February 2023.

These directors have not been subjected to election at any AGM because there has been none since 31 May 2021 and there are no indications that either the FY2021 or FY2022 AGMs will be held. Shareholders have not been able to vote on the appointment of these directors. None of the other directors has also stood for re-election since the last AGM.

Without an AGM, minority shareholders are also unable to exercise their right under section 183 of the Companies Act allowing shareholders holding not less than 5% of the voting rights to requisition the company to include resolutions at the AGM. Such resolutions could include resolutions to remove the existing directors (which would require special notice) or to appoint new directors.

I wonder if regulators have considered that not holding AGMs can be a way of oppressing minority shareholders and that they have contributed to shareholders being unable to exercise their rights.

I would urge the regulators to order the company to convene an AGM, and to ensure that minority shareholders are able to propose resolutions to remove the existing directors and to appoint new directors, which shareholders holding at least 5% of the voting shares are perfectly entitled to do. It’s the least the regulators can do to help put things right.