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Board tussle at SBI Offshore as PwC submits troubling report

Findings by PwC on transactions involving a past associate reveal possible breach of securities rules
Friday, September 9, 2016 - 05:50
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SBI Offshore (SBIO) is facing turbulent times as its founder and its chief executive lock horns amid a yet-to-be released audit alleging possible breach of securities laws in past transactions involving an associate company.

Singapore

SBI Offshore (SBIO) is facing turbulent times as its founder and its chief executive lock horns amid a yet-to-be released audit alleging possible breach of securities laws in past transactions involving an associate company.

The firm, which counts the son of Malaysia's former premier Mahathir Mohamad as chairman, will be holding an extraordinary general meeting (EGM) next Friday requisitioned by several shareholders including its largest shareholder Tan Woo Thian - SBIO's founder and CEO up until March this year - to force out Chan Lai Thong, the firm's current CEO and Mr Tan's successor, from the board and appoint four new directors.

The shareholder challenge by Mr Tan and his business partner-turned-rival, according to observers, and now evidently friendly again, Hui Choon Ho, comes four months after a board revamp at the ailing offshore firm that is banking on its new solar energy business to yank it out of the doldrums. Mr Tan and Mr Hui own nearly 14 per cent and 12 per cent respectively of the company, according to Bloomberg data.

Dr Mahathir's eldest son Mirzan Mahathir, who emerged as a substantial shareholder of SBIO two years ago following a private share placement and owns 11.6 per cent currently, was appointed chairman in March. It was also announced that Mr Chan had relinquished his chairman position to take over the CEO post from Mr Tan, who stepped down from the post he had held since 1997.

The requisitioning shareholders face some hurdles in their pursuit of the board changes.

In what is quite possibly a rarity in corporate Singapore, SBIO's board, in a letter to shareholders dated Sept 1, had raised doubts on the suitability of two of the four individuals - Mr Hui and Lau Yoke Mun - that the requisitioners are seeking to place on the board and recommended that shareholders vote against their appointments to an executive position.

SBIO's board also called on shareholders to vote against the removal of Mr Chan from the board after it discovered nothing adverse from findings by PricewaterhouseCoopers (PwC) on several allegations that were levelled against him.

Following its receipt of the requisition notice, the board claimed that Mr Hui, who resigned as the firm's executive chairman and CEO four years ago, had interfered in the company's business and affairs, causing "confusion" and disrupting its operations which has affected staff morale.

As for Mr Lau, the group's service provider who was designated as vice-president (finance & corporate) of its wholly owned Solar Energy's South African unit, the board opined that he had not "sufficiently discharged" his duties as vice-president and has no experience as a director in a Singapore-listed firm.

The company's Catalist sponsor, Prime Partners Corporate Finance, on the other hand, holds a differing view and has advised the board that "nothing materially adverse has come to its attention that would prevent the appointment" of these proposed directors.

These events have caused anxiety among some minority shareholders who have reached out to the Securities Investors Association of Singapore (SIAS). When contacted, SIAS president and chief executive officer David Gerald confirmed that the advocacy group for minority rights received written complaints in relation to the potential board changes and that he too, has "serious concerns" over the matter.

Mr Gerald said he was "baffled" by the sponsor's advice, particularly given the board's remarks about the two prospective directors and that in fact, the EGM should not be allowed to proceed by the board.

All that, however, may soon be overshadowed by a report that has been done, dusted and only two days ago submitted by PwC to SBIO's audit and risk management committee (ARMC).

In the letter to shareholders, it was disclosed that the ARMC had instructed PwC to review the firm's transactions - some of which involved Mr Hui - involving Jiangyin Neptune Marine Appliance Co (NPT), a China-incorporated company that manufactures lifeboats and davits.

Based on a copy of the report that was obtained by BT, PwC has recommended that SBIO's board seek legal advice to review its findings which point to the existence of two sets of conflicting agreements each (in terms of the sums involved and the dates) on the acquisition of a 35 per cent stake in NPT in 2009 and subsequent disposal of the stake in August 2015.

SBIO's IPO prospectus stated that the stake in NPT was acquired in 2009 for US$1.75 million. Last year, the firm announced that it sold the stake for US$3.5 million.

Depending on which agreement is deemed valid, the report flagged that it could raise the issue of possible misstatement in the firm's prospectus and questions on whether Singapore's securities and listing rules may have been breached.

It is believed that another copy of the report has also landed on Singapore Exchange for further action.

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