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Midas Holdings convenes shareholder dialogue as more litigatory lenders emerge

EMBATTLED Midas Holdings is convening a shareholder dialogue next Wednesday, even as senior staff members in China have resigned amid questionable disclosures.

Lenders - who are not found in the group's records, said Midas - have taken litigation action against the company, it said in a series of announcements on Wednesday evening.

The news comes a week after the board of directors filed a report against the Jilin Midas Light Alloy subsidiary over cash balance discrepancies.

The company has also previously flagged unauthorised loans and unauthorised corporate guarantees involving its subsidiaries.

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Midas said on Wednesday that it has received an arbitration application letter filed by Zhou Shi Ping on Beijing against Jilin Midas Aluminium Industries and four guarantors for a loan of 100 million yuan (S$21 million), made in March 2017, with an annual interest rate of 12 per cent.

Documents relating to this deal bear the signatures of former chief executive Patrick Chew Hwa Kwang and former executive chairman Chen Wei Ping, Midas said. Mr Chen, who stepped down on April 2, has been probed by China's Economic Crime Investigation Unit.

Mr Zhou is asking for the five million yuan that he has lent, as well as about 5.2 million yuan in accrued interest.

Another lender, Chen Gui Zhi, has filed a civil complaint in a court in Jilin province. She is suing over a loan of 30 million yuan to Jilin Midas Aluminium Industries, made in January 2017 with a monthly interest rate of 4.5 per cent.

The loan was to be disbursed into two bank accounts, one of which Midas said does not exist in its records.

According to the group's announcement, Ms Chen has not received an outstanding loan amount of 25.6 million yuan.

Neither of the two loans, nor their guarantees, were reported to the board, said Midas. Mr Zhou and Ms Chen also do not exist in the group's accounts.

The plaintiffs' claims add to other letters of demand that Midas has received for financing agreements that the group said it was not informed about.

Midas said that it has received a court order to freeze a portion below 30 million yuan of an associate, CRRC Nanjing Puzhen Rail Transport.

Meanwhile, the group has accepted the resignations of four senior management executives in China, after noting during internal investigations that they "failed to report material information to the company, leading to wrong or inaccurate disclosure of information relating to the group".

The company said that it reserved the right to seek legal action against the four people who stepped down - legal representatives Yang Xiao Guang and Sun Qi Xiang, as well as Jilin Midas Light Alloy general manager Hou Tie Min and financial controller Li Hui.

Two other staff members - Jilin Midas Aluminium Industries general manager Li Zhen Yu and financial controller Liang Wen Yu - were also fingered by Midas as having been involved in the group's financial irregularities.

They cannot resign or be terminated, under Chinese bankruptcy law, as the subsidiary has been under judicial management since early April.

Midas said that it is trying to access the subsidiary's financial records and, if successful, will update shareholders on the average salary applicable to remaining employees while the company is under judicial management.

A shareholder dialogue has been scheduled for May 2, "with the aim of addressing shareholders' concerns", said the Midas board.

It will take place at Kebun Baru Community Club's seminar room, in Ang Mo Kio Avenue 4, from 9.30am until noon.

"Due to shortage of staff, we will not be making any transport arrangements or providing any refreshments," the board added.

Midas has been suspended from trading since February.