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Darco fields disclosure and conflict-of-interest questions from minority shareholders
DARCO Water Technologies, in a regulatory filing on Wednesday, addressed issues raised by minority shareholders amid concerns that the company has lost its direction following a surprise change in leadership.
This comes after The Business Times (BT) reported on Tuesday that shareholders who own a combined 15 per cent stake in Darco were pressing for a special audit of internal controls and a review of potential conflicts of interests at the board level.
Shareholders had raised questions over Darco's venture into an Indonesia waste-management project, in which the seller is a unit of Hong Kong-listed Yunnan Water Investment Co. Wang Zhi, who had become Darco's controlling shareholder through a placement in 2018, was previously a director of one of its subsidiaries, Yunnan Water International.
Darco said in its regulatory filing that the seller of 75 per cent (sale shares) of the Indonesia waste-management project is Emsus Co, a South Korean-incorporated consultancy company, the sole director of which is Do Yun Yu, and not Yunnan Water (Hong Kong) Company Limited as alleged.
In conditional sale and purchase agreement, Yunnan Water had a share pledge over the sale shares. It agreed to the release of the share pledge to facilitate the transfer of the sale shares to the company, but only upon assurance of the payment of US$400,000 that was then due and owing to it from the Emsus.
Emsus has requested that the US$400,000 payable as the first payment of the consideration was to be paid directly to Yunnan Water on completion of the transfer of the sale shares to Darco.
In addition, it clarified that the expected fresh funding of up S$46 million required to invest in the waste-management project in Indonesia is "only indicative" and that the company has not committed to the sum.
In response to shareholders' arguments that Darco has neither the resources nor expertise to go into waste management, the company pointed to its Singapore subsidiary, which builds and operates district-level pneumatic waste conveyance, and a Taiwan subsidiary which is in medical-waste collection. It added that it had in the past owned and operated medical-waste disposal and waste-sorting plants.
BT reported that Darco's board had failed to disclose that Joanna Ong Joo Mien, who became an independent director after the coup last year, is linked to Qarah Consultancy, which would have collected a finder's fee if the company's proposed share placement exercise announced in January 2020 had gone through.
In response, Darco said that Ms Ong started her own corporate services business in 2010 and was engaged by Qarah between September 2013 and December 2019 to provide corporate secretarial services. She was then named company secretary and did not hold any executive role in Qarah.
The suite of services offered by her corporate services firm to Qarah included registered address services (which accounts for her home address being used as Qarah’s registered address), and nominee shareholder and nominee director services, which were provided through her husband, who also owns a small stake in her firm.
To reduce her workload and to pursue other personal commitments, she ceased providing corporate secretarial services to Qarah and resigned as company secretary last Dec 16, ending her involvement in the corporate secretarial matters of Qarah.
The principal of Qarah since its incorporation is Ng Teck Seng; Ms Ong's husband had acted as the nominee shareholder from Qarah’s incorporation until Aug 12, 2019, when Alyssa Pek, an employee of Qarah, replaced him as the nominee shareholder. Ms Pek acted as a nominee shareholder from Aug 12, 2019 until Nov, 30, 2019, before Mr Ng became a registered shareholder of Qarah.
Ms Ong's husband had not been involved in the day-to-day management or business of Qarah, and neither of them had any interest in the introducer's fee that was contracted to be paid to Qarah in relation to the placement, said Darco. Darco highlighted that that it had only dealt directly with Mr Ng in matters involving the placement.
The company also acknowledged that it has received shareholder questions on the business and affairs of the group and will consolidate all related queries and publish the answers before its upcoming annual general meeting at 2pm this Friday.