Axington, Loh cousins potentially in breach  of listing rules over a share placement issue

CATALIST-LISTED Axington Inc may have breached Catalist rules on corporate disclosures and internal controls over a placement announcement in 2020, according to an independent review released on Monday (Jun 27).

The company may also have potential claims against its former directors Marjory Loh and Michael Wong, and the Loh cousins of scandal-hit Bellagraph Nova Group, over breaches of duties, said the review by TSMP Law Corp.

However, commencing civil action against these individuals would not be meaningful or in the best interests of its minority shareholders, Axington’s board said in a Monday filing accompanying TSMP’s report.

The review is related to the S$750,000 outstanding from an entity called Kerrigan Medical Supplies, which was part of a placement exercise announced on Jul 28, 2020. Despite the sum being unpaid, Axington announced the completion of the placement on the SGX website on Aug 18, 2020.

This is a potential breach of listing rules, as the public may have been misled that Axington had received the full consideration from the placees, TSMP’s report noted. In addition, Axington did not appear to have any internal controls in place, another potential breach of the rules.

The report added that there may have been a potential breach of duties by 4 individuals: the cousins Nelson Loh and Terence Loh, who were the owners of Axington’s major shareholder Dorr Global Healthcare International, as well as Axington’s sole executive director Marjory Loh and non-executive, non-indepedent director Wong. Marjory Loh is the sister of Terence Loh.

Nelson and Terence Loh became involved with Axington when Dorr Global acquired 92.53 per cent of Axington via a mandatory unconditional cash offer announced in June 2020. Axington subsequently appointed Marjory Loh and Wong to the board.

However, the Loh cousins were swept into turmoil in August 2020, shortly after the placement completion was announced. It emerged that another company they were involved in, Bellagraph Nova Group, had doctored photos of former US president Barack Obama with the Lohs. Bellagraph Nova’s business claims were also thrown into doubt. Following the debacle, Marjory Loh and Wong resigned from Axington.

TSMP’s review found that despite being the sole executive director of Axington, Marjory Loh did not appear to ever be involved in the discussions relating to the placement. She was also not copied in any of the email correspondence provided to the reviewers and was unaware that the outstanding amount was unpaid at the time the SGX announcement was released.

Marjory Loh had worked for Nelson and Terence Loh at another company, NOVU Aesthetics, and was in charge of day-to-day operations, the review found based on an interview with her.

“She had taken up the role of executive director at the instruction of Nelson Loh, and admitted that she would only take a cursory reading of any announcements or documents that were sent to her for her approval, and that she would sign any document without question if instructed to do so by Nelson Loh,” the report said.

The reviewers were unable to contact Terence Loh, Nelson Loh and Wong for an interview, as well as the cousins’ business partner and former Axington chairman Shen Che.

Subject to proving that Terence Loh, Nelson Loh or Wong knew that the S$750,000 was unpaid when the placement completion was announced, Axington may have a potential claim against each of them as well as Marjory Loh.

That said, it does not appear that Axington suffered material financial loss as a result of the breaches, the report added. It is also unlikely that Terence, Nelson and Marjory Loh would have sufficient assets to satisfy a judgement obtained against any of them, given bankruptcy proceedings concluded against them.

In its Monday filing, Axington’s current board likewise noted that civil proceedings would not be meaningful, given the absence of material financial loss. The company has also engaged with the authorities on the potential statutory breaches.

Axington’s board added that since its reconstitution in Nov 2020, it has established a system of internal controls, which include obtaining the unanimous approval of members for any payments and announcements made.

“The board continues to assess the company's risk management and internal control systems on an ongoing basis and will ensure the adequacy of such systems in the event there is any change in the business of the company,” it added.

Shares of Axington last traded at S$0.19 before suspension.