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3 former Camsing Healthcare independent directors explain why they resigned
THE three former independent directors of Camsing Healthcare on Friday night explained to the Singapore Exchange RegCo why they resigned when the company's audit matters had yet to be resolved.
In a 12-page filing, Messrs Lau Chin Hock Kenneth Raphael, Ong Wei Jin and Maurice Tan Huck Liang detailed, among other things, the company management's tardy approach relating to the discovery made by the auditors that certain China customers were unable to sell goods previously purchased from the company's subsidiary Nature's Farm and that they had entered into an agreement to consign the goods back to Nature's Farm.
The three independent directors (IDs) had formed Camsing's previous audit committee.
They highlighted several key considerations that led to their decision to resign on Mar 20 this year.
"We were of the opinion that management did not take the audit matters seriously," the three former IDs said.
From as early as Dec 7, 2018, the auditors already had concerns with the audit, which were conveyed to Mr Lau. Up until a special board meeting on Mar 8 this year, the management had more than ample time of about three months to resolve the auditors' concerns. "Yet, we understand from the auditors that the management had either not responded or only given partial responses."
Furthermore, executive chairperson Lo Ching and executive director Liu Hui did not attend a special board meeting convened on Mar 8 solely to address the auditors' concerns. Neither did the duo attend a second special board meeting on Mar 13 on the same matter, despite "having been warned about the seriousness of the auditors' concerns".
The former IDs also said they were of the opinion that management did not take corporate governance seriously. "We formed this opinion based on our past experience with management, where we faced resistance when we urged them to take steps that would enhance corporate governance."
For instance, in October 2018, the former IDs discovered that the company's chief executive officer, Hua Min, on behalf of Nature's Farm, had entered into a transaction to purchase from Global Biotech Medical Inc 5,000 brainwave-detecting headbands, made by a company called BrainCo.
That deal drew the former IDs' attention because the company had paid Global Biotech the full contract sum of HK$15.6 million (about S$2.8 million at the time) shortly upon signing the agreement, even before the first batch of goods was received. Moreover, publicly available information indicated that those BrainCo devices were being trialled in China and it was unclear whether they had commercial potential.
"To us, this was most imprudent," said the former IDs.
Following the audit committee's conference call and meeting with Mr Hua last November, he eventually agreed to change the terms of the deal via a supplemental agreement and get a 90 per cent refund on the HK$15.6 million full contract sum. However, as at the date of the IDs' resignation on Mar 20, the company had yet to receive the 90 per cent refund under the supplemental agreement signed on Jan 12.
Despite the IDs' warnings to Ms Lo and Ms Liu on Mar 13 and Mar 20 that they would resign if management failed to provide the auditors with a satisfactory explanation to address their concerns, the duo still failed to satisfy the auditors on Mar 20.
"... the issue we faced was this: do we resign to show that we meant what we said, or do we resile? We felt that we could not resile. If we resiled and remained as IDs, management would be even less inclined to listen to us and we would be ineffective as IDs."
After "careful deliberation and much debate, we decided that we should resign to force management to deal with the issues that they had been avoiding for months".
The three former IDs concluded: "With the benefit of hindsight, we should have consulted SGX RegCo, and we apologise for not having done so."