Kimly's former chairman, executive director plead guilty to disclosure gaps

KIMLY's 1D0 former executive chairman Lim Hee Liat and former executive director Chia Cher Khiang were fined S$150,000 and S$100,000 respectively by the State Courts on Wednesday (Feb 16).

Both were also disqualified from acting as directors for 5 years after pleading guilty to offences under the Securities and Futures Act. The offence was in relation to the company's failure to notify the Singapore Exchange that its 2018 acquisition of drinks company Asian Story Corporation (ASC) was an interested person transaction.

Lim was also charged under the Companies Act for failing to disclose - during or before the acquisition - that ASC was a company which was partially beneficially owned by him.

The court heard that Lim did not disclose his interest in ASC during Kimly's initial public offering (IPO) in 2017 and had decided to follow through with the non-disclosure

Lim had in 2010 invested S$300,000 in ASC which gave him about 30 per cent ownership of the company. However, these shares were not held under his name. Chia believed that Lim did not want to hold the shares in his own name or to act as a director of ASC because he was concerned that Kimly's competitors might not buy ASC's products, the court heard.

ASC was primarily in the business of supplying and distributing traditional Asian beverages such as chrysanthemum tea.

According to the statement of facts presented in court, Lim's non-disclosure was also due to concerns that it might lead to queries regarding who owned the remaining 70 per cent of ASC shares. He had intended to consolidate all the businesses, including ASC, for the benefit of Kimly, the court heard.

The deal was eventually called off due to Pokka Corp's notice to Kimly in November 2018 to end its manufacturing agreement with ASC.

Deputy Public Prosecutor (DPP) Suhas Malhotra told District Judge Luke Tan that the sentence must deter other directors of public companies from disregarding their disclosure obligations.

Lim deliberately hid the fact that he had an interest in ASC as he did not want scrutiny into the ownership of ASC, said DPP Suhas.

The disclosure of this information would have given investors the opportunity to scrutinise the acquisition carefully before deciding whether or not to trade shares in the company, according to DPP Suhas.

Furthermore, the non-disclosure deprived shareholders of the chance to voice their views and to vote on the acquisition.

Lim's lawyer Davinder Singh said that there were no objections to the prosecution's sentencing position.

However, he maintained that there was no evidence to suggest that the non-disclosure had any "discernible effect" on Kimly's share price nor evidence of investors suffering quantifiable harm.

Kimly too did not suffer any financial harm given that that the acquisition was rescinded and the consideration of S$16 million initially paid to ASC was returned.

Meanwhile, the prosecutors had proposed a lower fine of S$100,000 for Chia given that his culpability is lower than Lim's.

Still, he had failed to disclose Lim's interest in ASC despite then being entrusted with the company's listing compliance matters, DPP Suhas told the court.

Chia not only failed to disclose Lim's interest but had also allowed Kimly to publish announcements that contained materially false statements which indicated that none of the directors had any interest in ASC, said DPP Suhas.

The court heard that Chia had said that as soon as they were aware of the regulatory breach, steps were taken to mitigate the offence and the acquisition was rescinded.

But DPP Suhas pointed out that the announcement in relation to the termination of the acquisition did not mention that it was an interested person transaction nor did it disclose that Lim had an interest in ASC.

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