SGX pins up blacklist of errant former directors

The 10 should not be hired as directors of listed firms without SGX permission

By JAMIE LEE
14 April 2010

In a rare name-and-shame move, the Singapore Exchange (SGX) has published a blacklist of 10 former company directors who have breached listing rules.

The 10 – from Oriental Century, China Printing and Dyeing Holding, Oculus, Advance Modules Group, Automated Touchstone Machines and Zhongguo Jilong – should not be hired as directors of current listed companies without SGX permission.

Among these companies – some of which have either been renamed or de-listed – only Oculus is a home-grown firm. Five of them are S-chips.

‘The exchange is not satisfied that the persons named have demonstrated the qualities expected of directors and management,’ SGX said. ‘SGX-listed companies should consult the exchange before they appoint any of these persons as a director or member of their management.’

SGX does not have the power to prosecute the directors, but it can prompt the Monetary Authority of Singapore and the Commercial Affairs Department to look into possible breaches.

While embroiled in different corporate scandals and problems, all 10 former directors ended up with the two same failings.

They failed to act in the interest of shareholders as a whole, under rule 103(5), and they did not ensure their company announced information needed to avoid establishing a false market in its stock or that would likely materially affect its value, under rule 703(1).

Except for Zhongguo Jilong’s former managing director Song Zhixing and the husband-wife duo from China Printing and Dyeing, the remaining directors failed on a third count – ensuring the accuracy of the information submitted to SGX, under rule 114.

Oculus’s former executive director Low Shiong Jin was found to have breached five SGX rules.

Besides failing in the first three areas, he did not ensure the company announced interested party transactions promptly.

Under listing rules 905 and 906, a company must immediately announce an interested party transaction that represents 3 per cent or more of its latest audited net tangible assets.

The company must also get shareholders’ approval for an interested party transaction that represents at least 5 per cent of its net tangible assets either on its own or when added to other transactions involving the same party in the same financial year that have not been approved.

Trouble at Oculus – which has shed its old skin to become Annica Holdings – began two years ago when it was found that controlling shareholder Ariel Singapore had used $15 million raised through a share placement for personal investments, with the knowledge of Mr. Low.

Mr. Low was also an executive director and the majority shareholder of Ariel.

Others on the SGX blacklist include the husband-wife duo of Tao Shoulong and Yan Qi from China Printing and Dyeing, who disappeared after the parent company went bust.

Reports from 2008 said the duo, who managed the company, have since been arrested in China. The firm was de-listed this year without offering any cash to shareholders.

Another name on the blacklist is that of the former CEO of Oriental Century Wang Yue-an, who stunned the market last year when he admitted having cooked the books for several years.

The company – a subsidiary of Raffles Education – signed a transaction agreement in March with international school operator ISS Holdings to have ISS issue new shares to creditors and shareholders. ISS is seeking a Catalist listing.

The former managing director of Advance Modules, Vincent Tan, and the company’s former chief financial officer, Roger Koh, are also on the SGX blacklist.

Advance Modules made headlines in end-2008 after auditors found it made up sales records to meet a profit target for fiscal 2005. The company has since been de-listed.

The name-and-shame move by SGX could help deter future breaches, said Securities Investors Association of Singapore chief David Gerald. ‘This puts retail investors on their guard,’ he said. ‘A pat on the back to SGX.’

Associate professor Mak Yuen Teen of NUS Business School said it is ‘an excellent move to make directors accountable’.

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