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Broadway Industrial served 2 writs of summons, statements of claim

BROADWAY Industrial Group announced on Sunday that it has been served two writs of summons and statements of claim in relation to the sale of its foam plastics solutions and flow control device businesses, with the aggregate minimum amount of claims amounting to approximately S$9.3 million.

The first was served on the company by Broadway Holding III Limited, an investment vehicle wholly owned by US private equity firm Platinum Equity, while the other was served by two subsidiaries of the purchaser, namely Compart Precision (Shenzhen) and its parent company, Compart Systems.

They alleged that the company breached certain warranties in the sale-and-purchase agreement and is liable to provide an indemnity for certain losses.

In particular, Compart Precision (Shenzhen) and Compart Systems had claimed for an indemnity of approximately 2.5 million yuan (S$500,000) or damages to be assessed, which is premised on the company's alleged failure to ensure that certain Chinese firms sold to the purchaser had fully paid their liability for social security insurance and housing fund contributions prior to the sale of such companies.

In addition, Broadway Holding III Limited had claimed for breach of warranties and/or indemnities for losses arising from the liabilities of certain Chinese companies sold to various Chinese government authorities. While the claim had not been quantified, the minimum claim is expected to be at least approximately 25.7 million yuan plus approximately S$3.7 million based on the total amount of alleged losses accrued to date.

As such, the aggregate minimum amount of claims is approximately S$9.3 million, comprising at least 28.2 million yuan plus S$3.7 million.

The company is in consultation with its advisers including the auditors to assess the potential financial impact to the group arising from such claims.

Broadway Industrial Group said that it intends to defend the claims vigorously and is taking legal advice.