Rebuke of Datapulse's ex-directors leaves shareholders wanting more

NO ONE blinked last month when the Singapore Exchange (SGX) reprimanded mainboard-listed Datapulse Technology's three former executive directors, including a long-serving co-founder who sold his entire stake and bowed out of the company in 2017, days after he was re-elected as director.

The SGX's Listings Disciplinary Committee (LDC) sanctioned the trio - Ng Cheow Chye (the company's co-founder, former chief executive and deputy chairman), his brother Ng Cheow Leng, and Si Fok Yong - for failing to ensure that the company provided an accurate and clear picture in a circular issued four years ago. Shareholders had at the time been asked to vote on a major disposal of Datapulse's only factory and headquarters at Tai Seng Drive for S$53 million.

It wasn't unthinkable that the public rebuke went largely unnoticed. BKW has seen plenty of drama in the form of unexpected ownership changes, shareholder spats and governance fall-outs.

Still, public reprimands of directors are few and far between on the SGX. The significance of this one should not be missed. This is in fact the first time the regulator has reprimanded directors on such grounds.

The trio had also attempted to appeal against the decision, but were turned down.

At the company's extraordinary general meeting (EGM) on Sept 28, 2017, 99.61 per cent of shareholders present and voting approved the proposed disposal of the Tai Seng property.

But the LDC has contended that shareholders were not provided with material information - related to another acquisition of an industrial property in Toa Payoh - to make an informed decision at the EGM. The Toa Payoh property was meant to be a replacement premises for Datapulse's business and hence was not totally separate and independent from the proposed disposal.

The National Environment Agency (NEA) had in fact rejected Datapulse's application to use the Toa Payoh site for manufacturing activities. Ensuing appeals were rejected too.

The LDC's position is that the acquisition of the Toa Payoh property was clearly related to and was an important part of the context of the proposed disposal. Hence, it was reasonable for shareholders to be updated on the NEA's rejections.

"The natural questions that would have arisen in shareholders' minds as a result of the NEA's rejections of the company's appeals were whether there would be any impact on the company's continued operations, what were the company's alternatives, and whether it was still prudent to proceed with the proposed disposal," said the LDC.

The LDC further rebuffed the directors' arguments that the NEA rejections were not material. It described as "untenable" the trio's defence that as laymen, they lacked the legal experience to ensure the company's compliance with regulatory requirements and had deferred to the independent directors and the chairman on such matters.

Indeed, there was ample time for the company to disclose the NEA's first rejection in the circular and the second rejection before the EGM. This was not done.

Instead, Datapulse chose to announce that it was scrapping the option to buy the Toa Payoh property two months post-EGM. That same day, filings to the stock exchange revealed that Mr Ng Cheow Chye had sold his entire block in the company for nearly S$27 million at 55 Singapore cents apiece - a substantial premium over its stock price of 36 Singapore cents when the agreement on the stake sale was inked.

The regulator's admonishment of Datapulse's past directors comes nearly four years after the breach. The year 2017 and the ensuing years were controversial periods for the company due to other perceived disclosure and governance lapses. Shareholders might, therefore, be wondering: Is this it?

In a post on his website, governance hawk Mak Yuen Teen, of the NUS Business School, said: "Does this mean that the other potential breaches were not breaches at all? It is possible of course that private reprimands were issued for some other breaches, but the market is none the wiser in such cases."

Datapulse hasn't had any luck since it switched lanes from the ailing media storage business in 2017 and flirted with a shampoo and hairspray business. This business was sold back at a loss a year later. In 2019, it ventured into the hotel business - drawing some consternation from shareholders - which has now been hit by the pandemic.

While shareholders may be somewhat placated by the regulator's recent public reprimand, they are not much better off. And it would be tough to argue that the outcome of the whole affair has been satisfactory.

In fact, such a result can hardly be much of a deterrent for errant directors in the future.

READ MORE: SGX raps ex-executive directors of Datapulse Technology for breaching rules