Best World confirms CEO's brother-in-law owns main customer in China, discloses other connections

BEST World has confirmed allegations that its chief executive's brother-in-law is the owner and legal representative of its primary import agent in China. It also revealed other connections between the two companies.

However, the company's board did not give a clear answer to queries by the Singapore Exchange (SGX) about whether import agent, Changsha Best Commodity Trading Co, is considered an independent party.

In its response on Monday, Best World's board laid out management's position that Changsha Best is independent despite the revealed connections. 

Best World had said that Koh Kim Chuan, brother-in-law of chief executive Dora Hoan, and the sole shareholder and legal representative of Changsha Best, was a passive investor, and neither he nor his wife Mary Huan - sister of Ms Hoan - was responsible for the management and business operations of Changsha Best.

Mr Koh had provided US$100,000 worth of seed funding to Changsha Best when it was incorporated in July 10, 2014 as a "personal investment", the filing said. He was introduced by Jansen Tang, the nephew of Dora Hoan and Mary Huan, who is also the group's senior country manager, China and Hong Kong.

"Koh Kim Chuan and Mary Huan had never been involved in the management or business operations of the primary import agent or the group," Best World said.

Changsha Best, meanwhile, was incorporated by Yan Weijun and his team of executives, who took on the role of general manager of Changsha Best, and was responsible for its business operations.

As part of the group's transition to the franchise model, Changsha Best's distribution agreement with Best World was terminated on Sept 30, 2018.

Mr Yan and his team of executives joined BWL China to allow for a "seamless transition from the export model to the franchise model", given their familiarity with the group's operations under the export model.

Mr Yan is the marketing director of BWL China, responsible for marketing and branding for the group in China. His spouse also owns a franchisee under Best World's standard franchise arrangement, the company said.

Best World told The Business Times that Mr Yan and the executive team left the employment of Changsha Best following the termination of the distribution agreement, and do not have any further business or any other form of engagement, dealings or involvement with Changsha Best or its owner after the termination.

"Mr Yan and his team no longer have any access to any information regarding any matter in Changsha Best after they left the company," it said. 

Best World added that its relationship and transactions were governed by terms the distribution agreement struck on Aug 1, 2015 with Changsha Best, agreed on a willing-seller and willing-buyer basis after discussions conducted at an arm's length basis. It was also conducted by Huang Ban Chin, director and chief operating officer of Best World. 

The distribution agreement allowed Best World to advise on the overall marketing strategy for the products in China, provide product and sales management training to Changsha Best employees and distributors and provide promotional materials regarding the products. 

It also said that Ms Hoan was not involved in the company's decision to partner Changsha Best, or "save as disclosed", in the group's dealings with Changsha Best. Other than through her shareholding interest in the company, Best World said that Ms Hoan "had no personal interest whatsoever" in the sales by the group to Changsha Best and received no financial benefits from the primary import agent. 

"Dora Hoan has personally affirmed to the company that, to the best of her knowledge and belief, the primary import agent is independent of the group, as disclosed in this announcement, and that she has no financial or shareholding interest in the primary import agent," the group said. 

The board of directors added that "save as disclosed" in the announcement, Changsha Best is independent of the group, its directors, substantial shareholders and their associates for the reasons set out under its assessment of independence, Ms Hoan's affirmation, and confirmations from Mr Koh, Mr Tang and Mr Yan that the statements made in the announcement relating to each of them are "true and accurate".

Best World added that it would make the distribution agreements entered with Changsha Best available for its independent review with PwC. It would also procure all necessary records from Jan 1, 2017 to May 31, 2018 from Changsha Best for PwC's review of the group's sales to Changsha Best during that period.

"The company regrets the confusion and unease caused by its failure to provide a fuller picture of the ownership of the primary import agent. However, the management of the company has dealt with the primary import agent as an independent third party at all times, and believes that the primary import agent is independent of the group for the following reasons," it said.