No Signboard interim CEO’s stake in white knight raises conflict-of-interest risk

BELEAGUERED No Signboard could run the risk of a potential conflict of interest, as interim chief executive Lim Teck-Ean is also a substantial shareholder in white knight investor Gazelle Ventures, a source with knowledge of the restaurant operator’s corporate affairs told The Business Times.

Gazelle Ventures has offered investments into No Signboard, as well as support for its acquisitions and the stock’s resumption of trading.

According to a Jan 15 filing from the Accounting and Corporate Regulatory Authority (Acra), Lim is a director of Gazelle Ventures, having been appointed on Sep 27, 2012. He had stepped down as its chief executive when he assumed the role of head honcho at No Signboard. 

Gazelle Ventures is a Singapore-incorporated company jointly owned by Gazelle Capital and Valiant Investments. Each of the two entities owns half of Gazelle Ventures. 

An Acra filing dated Jan 16 indicated that Lim Teck-Ean owns two million shares in Gazelle Capital, translating to a 50 per cent stake in the entity’s share capital of four million shares. The remaining two million shares are owned by one Lim Su-Lynn. 

The fact that Lim Teck-Ean owned a lion’s share of Gazelle Capital – and, by extension, Gazelle Ventures – was first made known in detail to shareholders in a lengthy 79-page circular on Nov 8, 2022, regarding an extraordinary general meeting.

Lim Teck-Ean was appointed as No Signboard’s interim CEO in October 2023, after then-executive chairman and CEO Sam Lim Yong Sim was charged with share-price rigging offences and suspended from his executive duties.

In a bourse filing when he was first appointed to the company’s board as a non-executive director in May 2022, No Signboard disclosed that Lim Teck-Ean was “one of the beneficial owners of Gazelle”.

The source said Gazelle’s involvement with No Signboard could potentially be viewed as a transaction with a conflict of interest. Even though Lim Teck-Ean has stepped down as chief executive of Gazelle, he remains on its board. 

Meanwhile, as CEO of No Signboard, he is at the forefront of the company’s corporate decisions and strategic direction. Lim Teck-Ean, along with other directors, also holds the key to deciding on any investor the Singapore-listed company will work with.

The source also noted that No Signboard’s directors – with the exception of Sam Lim Yong Sim, who has been put on leave of absence – do not own any shares in the company.

Investments, or loans?

Gazelle so far has given No Signboard an advance deposit of S$5 million. The company said last week that it will provide the company with additional funds through an escrow account. 

Of the S$5 million, S$500,000 will be through the subscription of new shares that will make up 75 per cent of No Signboard’s enlarged share capital. 

But with the shares of No Signboard suspended from trading for over two years now, this investment has been classified under the company’s loans and borrowings segment in its Q4 FY2023 financial statement. 

The company’s advance deposits for the quarter came in at S$4.55 million, while loans from super-priority financing stood at S$450,000. No Signboard said in its financial statements that these two amounts came from Gazelle. 

It appears likely that any money Gazelle gives to No Signboard – before the counter starts trading on SGX again – will be classified as a loan. This will do little more than to increase the company’s liabilities, and push up its debt or gearing levels, especially against a stagnant or depleting assets tally. 

Against higher interest rates, investors should also be mindful that No Signboard has other loan obligations to fulfil. 

In its latest financial statement, the company said it reached an agreement with OCBC on the terms of repayment of an outstanding bank loan – comprising the principal amount of about S$2.1 million and any contractual interests incurred. The first repayment will commence after the stock resumes trading. 

No Signboard most recently posted a net loss of S$582,102 for the fourth fiscal quarter ended September last year, versus a loss of S$2.3 million in the corresponding prior-year period. This took the company’s full-year net loss to S$1.7 million, from S$4.5 million.

Trading in shares of the company has been suspended since January 2022. The company’s board of directors requested for a voluntary trading suspension, on the grounds that the group was unable to continue according to Catalist rules.