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Foreland Fabrictech Holdings warns of loss of control over unit Fulian Knitting Co
FORELAND Fabrictech Holdings may have lost control over its wholly owned subsidiary, Fulian Knitting Co, in China, it warned on Wednesday.
Former executive chairman Tsoi Kin Chit - who resigned in August 2016, and was publicly reprimanded by the Singapore Exchange in November 2016 - has been "increasingly reluctant" to cooperate in matters relating to Fulian which he is effectively controlling, Foreland said in a filing to the Singapore Exchange. In December 2016, Foreland had lodged a complaint with the Commercial Affairs Department against Mr Tsoi, centred on 290 million yuan (S$61 million) paid as compensation by Fulian to a customer.
Previously, Mr Tsoi had lead Foreland's directors to believe that he would cooperate, because he had been willing to sign negative assurance confirmation on financial results on several occasions, Foreland added. "With that, the directors had reason to believe that there was still some control over Fulian."
However, in an e-mail on May 6 this year, Mr Tsoi stated that he would not cooperate or allow the company access to Fulian's funds and also declined to change the legal representative of Fulian from himself to executive chairman Yang Meng Yang.
This was in response to an e-mail sent by Foreland on May 5 to propose an urgent meeting to discuss outstanding matters to complete an audit so that the company could hold annual general meetings for FY2016 and F20Y17, and issue the annual reports for the financial years.
On May 9, Foreland's lawyers in China issued a due diligence report on Fulian, which disclosed a total of 26 court proceedings against the subsidiary, contrary to Mr Tsoi's negative assurance confirmations and records in Fulian. Mr Tsoi's staff in Fulian had omitted the court proceedings in their financial records; as such, these court proceedings were not included in the auditor's reports.
Foreland said that it will continue to vigorously pursue the legal proceedings against Mr Tsoi. Foreland has a net carrying amount in Fulian as at May 9 of 61.1 million yuan (S$12.85 million).
Shares of the Chinese textile maker are suspended from trading.