KLW Holdings' largest single stakeholder on Monday won his bid to replace a majority of directors with his own nominees as the company sought police help in investigating alleged unauthorised transactions by its managing director.
At an extraordinary general meeting requisitioned by Quek Chek Lan and another shareholder, stockholders of the door maker supported Mr Quek's bid to appoint Wong Joo Wan, Lim Jit Siew and Nicholas Narayanan as directors, and to remove managing director Lee Boon Teck and independent directors Teo Hin Guan and Low Hai Lee.
All motions were carried by more than 98 per cent of shares present in a poll vote.
Mr Quek, who acquired the bulk of his 19.4 per cent stake from Mr Lee on Aug 26 for about 0.41 Singapore cent per share, withdrew his motion to elect himself because of age restrictions under the Companies Act.
The meeting was a subdued affair, with only a handful of questions asked by shareholders. Lead independent director Ho Pong Chong chaired the meeting, while KLW chairman Abdul Qawi, Mr Teo, Mr Lee and Mr Lim were not present.
After the meeting, Mr Quek, Mr Wong and Mr Narayanan agreed to meet with The Business Times.
Mr Quek said he was approached by Mr Lee about buying Mr Lee's stake after allegations were made that Mr Lee had entered into certain unauthorised transactions for the company. KLW in May announced that the company had paid S$16.2 million of commitment fees without directors' knowledge as part of term sheets agreed to by Mr Lee. Only S$9 million has been recovered so far. The episode led to the commissioning of a special audit.
"There's an opportunity for me to come in," Mr Quek said. "The core business is still making money according to its reports and the company still has some cash."
Mr Quek said that, with the new board's approval, he might retain Mr Lee in the less senior position of general manager for the door business since Mr Lee is still significantly involved in that business segment.
Mr Wong said the new directors' first priorities would be to "stabilise" the core business and to study and understand the current special audit and its underlying issues.
Mr Low told shareholders on Monday that special auditor PwC submitted a draft report to the independent directors and Singapore Exchange on Oct 2, and the final version is expected by the end of the month.
KLW also announced on Monday morning, before the meeting, that it had received a counterclaim from one Michael Chan Ewe Teik, whom KLW is suing to claim S$7 million that had been paid by KLW as part of those term sheets.
In his counterclaim, Mr Chan is seeking about S$3.45 million that he alleges KLW owed him from agreements between him and the company through Mr Lee, KLW said.
Mr Low told shareholders at the meeting that the directors decided to refer the case to the police's white-collar crime unit, the Commercial Affairs Department (CAD), because the company itself lacked investigative powers.
"Further investigations may offer the company with certain options to assist in recovery," Mr Low said.
Mr Low and Mr Teo, who had wanted to stay until the completion of the special audit, had raised questions about the independence of Mr Quek's nominees. Mr Wong, Mr Lim and Mr Narayanan had all worked with Mr Quek while he was a director at Teledata.
Mr Wong and Mr Narayanan rejected any suggestions that they were not independent.
"We are definitely independent, and I think we did not appreciate the insinuation that we were not independent in the first place," Mr Narayanan said. "During our time as independent directors at Teledata, we worked very well with all the shareholders and management at a material time."
Mr Narayanan, a lawyer, added that there were no mandates of any sort for the new directors to vote with Mr Quek, and that his firm is not being hired by Mr Quek on any matters at the moment.
Asked if there were any further changes coming for KLW's board, Mr Wong said: "Except for Mr Quek at the next AGM, we would like to put him up to be a director, other than that there's no immediate plans."
The board may face a decision in the middle of 2016 that could affect Mr Quek's control of the company.
KLW chairman Abdul Qawi, who acquired a 9.3 per cent stake in the company through a placement in 2014, has a call option to buy up to two billion new KLW shares at two Singapore cents apiece by June 2016. If he does not call any or all of those options, KLW has put options that will require Mr Abdul Qawi to buy up the remainder of those shares at the same price.
With KLW shares closing at one Singapore cent on Monday, those put options may be attractive for the company if KLW shares remain below two Singapore cents, effectively letting the company raise S$40 million by selling shares at a premium.
What might make sense for the company may not make sense for Mr Quek, however, because exercising those options will cost him his position as the largest single shareholder of the company, in favour or Mr Abdul Qawi.
How will the new board handle the options?
"We will consider that at that point," Mr Wong said. "That, in line with the fact that whether the company needs fundraising, or are we just raising funds for the sake of raising funds?" Mr Wong said. "The purpose of the funds, whether there's a need, whether there's a desire. The short answer is we're not going to shoot it down immediately."