You are here

Allied Tech clarifies escrow account fund flows following disappearance of funds and JLC lawyer

lwx_jlc_250519_2.jpg
Catalist-listed precision engineering firm Allied Technologies on Wednesday night responded to Singapore Exchange (SGX) RegCo queries on the flow of funds from its escrow account with law firm JLC Advisors.

CATALIST-LISTED precision engineering firm Allied Technologies on Wednesday night responded to Singapore Exchange (SGX) RegCo queries on the flow of funds from its escrow account with law firm JLC Advisors. 

The queries pertain to S$33.4 million of net proceeds raised in 2017, its S$30 million acquisition of a 51 per cent stake in Asia Box Office (ABO), a S$25.2 million acquisition of a 51 per cent stake in Activpass Holdings, its disposal of equity in two companies, and S$1.2 million in compensation to former CEO and group managing director Hsu Ching Yuh. 

This follows the disappearance of JLC lawyer Jeffrey Ong, along with S$33.2 million held in the escrow account.

The escrow account was first created to hold its 2017 fundraising exercise proceeds.

sentifi.com

Market voices on:

Allied Tech initially considered Elitaire Law, which handled the placement exercise, as an escrow agent for the proceeds. But as the proceeds were sizeable, the board thought it was more prudent to engage a sizeable law firm and engaged JLC, which Elitaire had recommended.

The board had the same rationale for sums received from the disposal of its subsidiaries - Allied Machineries (Shanghai) Co (S$12.3 million) and Allied Technologies (Suzhou) Co (S$23 million), placing both receivables in the escrow account.

Allied Tech also said that Elitaire had not explicitly recommended Mr Ong, who was the only JLC employee Allied Tech dealt with at all material times.

As for proof of monies in the escrow account during Allied Tech's financial reporting periods, such as quarterly results, Allied Tech said that Mr Ong had provided notices of balance available in the account after every transaction, and that the group had periodically checked the account's balance against the notifications received.

APPOINTMENT OF JLC PARTNER AS DIRECTOR

Allied Tech said, in response to the appointment of JLC partner Pok Mee Yau as its independent director on Oct 31, 2017 - after the escrow agreement started on Oct 23, that while it was aware of Ms Pok's position, the board had "already finalised JLC’s engagement as the escrow agent, and the signatories for the escrow agreement had already been decided".

The group clarified that Ms Pok’s then position as a partner of JLC did not pose any concern to the board and that she was not a signatory for the release of escrow monies to be placed with the law firm. 

Ms Pok and Mr Ong were in charge of legal documentation for Allied Tech's failed acquisition of a stake in payment solutions company 8travelpay Intelligence & Technology (Shanghai) Co, for which JLC was paid S$105,745.

ABO ACQUISITION

With regard to the S$30 million acquisition of a 51 per cent stake in ABO, Allied Tech clarified that the amount was paid to Platform Internet Capital (PIC), which owned ABO, on April 4, 2018.

Before Kenneth Low Si Ren joined Allied Tech as an executive director on June 27, 2018, he bought - on June 5 - a 49 per cent stake in PIC and effectively ABO, two months after Allied Tech acquired the majority stake in ABO.

ABO TRANSACTIONS

Allied Tech responded that there was no formal agreement for the S$3.6 million inter-company loan to ABO. The loan was for working capital requirements as ABO had just completed a major project and was pending account receivables from it.

ABO had also transferred US$500,000 received from a booking agent refund to the JLC escrow account despite not having a formal agreement with JLC. 

Allied Tech said it was because ABO did not have a US dollar denominated bank account yet, and asked JLC to receive the funds on behalf of ABO.

More ABO transactions were later held in trust by JLC, most of which were done prior to Allied Tech's acquisition of ABO.

As at end-2018, JLC held S$1.1 million on behalf of ABO, and as at April 2, 2019, the ABO monies had been fully returned to the ABO.

FORMER CEO COMPENSATION

Allied Tech said that the S$1.2 million compensation to former CEO and group managing director Hsu Ching Yuh was part of a termination agreement with Mr Hsu, who held these posts from May 2003 to December 2017.

The company added that the compensation was reflected in its FY2017 balance sheet, with the payment made over four quarters.