The mess at Kitchen Culture leaves minority shareholders with a bad taste

THE right to convene an extraordinary general meeting (EGM) is in place to give minority shareholders a chance at shaping the course of a company they own.

At Catalist-listed Kitchen Culture, however, even getting to the starting point of agreeing upon an EGM has become a stretch.

In the latest boardroom drama to hit the Singapore Exchange (SGX), shareholders of the outfitter of kitchens are being subjected to a bizarre parade of exchanges by two parties seeking control of the company.

The clear losers here are minority shareholders – including one who wrote to The Business Times – as they struggle to determine how much weight they can place on statements from either camp.

In such a situation, an independent party such as the sponsor could play a bigger role to ensure shareholders get adequate information on whether the company’s affairs are conducted in a way that meets regulatory and corporate governance standards.

Disagreements

Ooway Group became a substantial shareholder of Kitchen Culture in 2020, after it sold 30 per cent of its subsidiary Ooway Technology to Kitchen Culture in exchange for 90 million shares – around 21.2 per cent – of Kitchen Culture.

On Sep 30 this year, Ooway Group, together with seven other shareholders, sought to convene an EGM to boot out five directors from Kitchen Culture’s six-person board.

The five are independent directors Ang Lian Kiat, William Teo and Peter Lim, executive director Lim Wee Li, and Lau Kay Heng.

Lau was at the time vice-chairman of Kitchen Culture, but was redesignated as chairman last month.

Lau replaced Hao Dongting, who was redesignated as a non-executive director. Hao is also a director of Ooway, and is the only director the requisitioners are not trying to remove.

Ooway and the shareholders acting in concert with it said they were “highly concerned” about developments at the company and believed new directors would bring fresh perspectives and rejuvenate the board.

Kitchen Culture shares have been suspended since July 2021, and concerns involving unauthorised transactions and payroll irregularities have been raised.

The EGM – which was to take place on Nov 1 – did not proceed, as the five directors cited legal advice that the EGM would be invalid. The directors also said there are no grounds to justify their resignation.

Ooway later submitted a second notice to Kitchen Culture for an EGM to be held on Nov 25. 

The five Kitchen Culture directors again said the EGM notice was invalid, noting that there was insufficient notice in writing “as required by the Companies Act and the constitution of the company”. They urged shareholders not to attend the EGM.

This second EGM was held anyway, with Ooway and the other shareholders citing their own legal advice that the EGM “met all requirements” of the company’s constitution, the Companies Act and Catalist Rules.

EGM or not?

Now, both sides are trying to enforce their claims. But they are raising all manner of questions in the process.

Ooway and its concert parties said in a statement that the EGM saw participation from “over 173.6 million shares held by shareholders” – around 40 per cent of Kitchen Culture’s float – and that all resolutions were passed with 100 per cent of votes in favour.

The shareholders also claim the EGM was overseen “by an authorised polling agent and scrutineer”, although it did not name the agent and/or scrutineer.

The five directors ousted, however, say the requisitioners’ lawyers never sent documentation on executed proxy forms, lists of attendees, who chaired the meeting, and the breakdown of votes at the meeting.

They have therefore asked the requisitioners to put the matter before the Singapore Court.

Moving forward

With both parties having their own interests to protect, it may be difficult for shareholders to know whose statements to trust. This makes it important for an independent party to step in, and ensure affairs are conducted in accordance with accepted procedures.

The best way forward now is probably for the courts to decide on the validity of the EGM.

But could independent parties such as the sponsor have done more at an earlier stage to help shareholders avoid this farcical situation?

During EGMs requisitioned by shareholders, compliance guidelines require sponsors to ensure there is adequate information for shareholders to make an informed decision.

In cases where new directors are being proposed, shareholders should be provided with the proposed directors’ qualifications, experience, and conflicts of interest.

A prerequisite to this, arguably, is ensuring shareholders have sufficient information to decide whether an EGM is valid. 

If the Nov 25 EGM was indeed valid, shareholders who did not attend based on the directors’ SGX filings may have been disenfranchised.

The sponsor, SAC Capital, indicated it had reviewed the SGX announcements from Kitchen Culture, but did not comment on the transaction. 

Certainly, it is not the sponsor or the regulator’s job to arbitrate between disagreeing parties or take sides. But either sponsor or regulator could have directed the company to share the full legal opinion received as supporting evidence, and/or procured another independent legal opinion for shareholders to consider.

If the sponsor or regulator has determined that the validity of the EGM is a legal matter for the courts to decide, they could also publicly engage with both parties to inform them to take this step forward.

An independent party providing information in disputes is helpful to minorities who do not know whom to trust.

In such confusing situations, minority shareholders are, unfortunately, the losers.