Lawsuits do not affect non-executive chairman's ability as director: KTL Global

DESPITE being involved with 18 civil suits in China, there is no reason to conclude that KTL Global's non-executive chairman Wu Yongqiang is unable to fulfil listing requirements relating to the character and integrity of directors and management of an issuer.

The fresh vegetables and fruits distributor said in a bourse filing on Tuesday (Mar 22) that 12 of Wu's civil suits are commercial in nature, as confirmed by lawyers in China.

"There is no basis and/or reason to assume that there was any fraud, dishonesty, misrepresentation, misconduct, mismanagement or other offence which may lead the nominating committee to doubt Wu's character or integrity and suitability to be appointed as a director of the company," said KTL Global in response to queries from the Singapore Exchange (SGX).

For the remaining cases, KTL Global said that Wu has confirmed that they are also commercial in nature and not due to dishonesty, fraud or other offences, which may lead the committee to doubt his character, integrity and suitability to serve as its director.

The credibility concerns about Wu surfaced when he was appointed by durian and health foods distributor Nutryfarm as its new executive chairman on Mar 9.

SGX had also sent similar queries to Nutryfarm for its assessment of Wu's role and accountability for the relevant debts in each of the 18 civil suits, and whether this affects his ability to meet the listing requirements relating to the character and integrity of directors.

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Reiterating similar responses that Nutryfarm provided to SGX on Mar 15, KTL Global said that Wu genuinely believes he was not at fault and there was no commercial ambiguity as to whether he should assume partial or full liability.

Wu also explained that he has made contributions which in his view, are fair and equitable to satisfy some of these judgements. Hence, creditors and the courts have not taken any further action against him.

Similar to Nutryfarm, KTL Global said it has obtained a letter of undertaking from Wu, where he stated that he has enough financial resources to meet any outstanding judgements that may be enforced against him from time to time, and that he will take all necessary steps to satisfy these judgements or come to a settlement with creditors that may start bankruptcy proceedings against him.

The letter also stated that Wu will resign from KTL Global's board if he becomes a bankrupt or if any new developments affect his ability to continue on as a director.

In a separate filing on the same day, the company had also proposed convening an extraordinary general meeting (EGM) to seek its shareholders’ ratification of the legal interested person transactions it entered into with Chevalier Law.

The company had engaged the law firm for litigation services, as well as those relating to other corporate actions, although the law firm's managing director Chong Eng Wee is also an independent and non-executive director of KTL Global. Chong also holds more than 30 per cent interest in Chevalier Law. 

KTL Global said it had invited other law firms for quotes but Chevalier Law had "provided a fair and reasonable scope of work and fee quotes" for the legal services the issuer needed, read the filing. Chong had also abstained from taking part in any discussions on the legal counsel elected in FY2021.

The mainboard-listed company also announced in a separate filing on Tuesday that Chong had resigned as an independent and non-executive director of the company, to ensure it complies with the Code of Corporate Governance and help the firm cut costs in the form of directors' fees. 

The legal services Chevalier Law rendered to KTL Global since Jan 1 last year until Tuesday amounted to S$255,000. Due to an oversight, KTL Global said it did not seek its shareholders' prior approval for these legal interested person transactions. This was only discovered while the company was preparing for the release of its fourth quarter financial results, and is now taking necessary steps to hold an EGM to get shareholders to ratify these transactions. 

According to SGX listing requirements, listed companies need to obtain the shareholders approval of any interested person transaction which is of equal value to or more than 5 per cent of the company's latest audited net tangible assets. 

The S$255,000 worth of legal interested person transactions accounts for about 64.7 per cent of KTL Global's latest audited net tangible assets.

Despite the hiccup, KTL Global said that its board believes that there had been no prejudice to its shareholders as the legal interested person transactions had been undertaken to support the company's business and operations, defend its interests as well as those of its stakeholders, and was carried out in its best interest. 

The board also said that the failure to get the required prior approval from its shareholders for the legal interested person transactions is an isolated event, and it is not aware of any other matters which needs to be disclosed to the public. 

While Chong was not involved in KTL Global's process of selecting a legal counsel, corporate governance expert Mak Yuen Teen, however, pointed out that the filing did not say that Chong was not personally involved in the legal services that were provided to the company. 

In fact, he referred to a specific line in KTL Global's filing that Chong continued to give legal advice to the company even after a new management had been in place since May last year. 

"If Chong was personally involved in providing the legal advice while at the same time acting as a director of the company, how does he separate his role as a legal adviser and a director of the company and ensure that he is able to address potential conflict of interest?" questioned Prof Mak in a blog post.

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