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Rich Capital plans review to protect JV investments, look into potential breaches
THE audit committee (AC) of Rich Capital Holdings' board will commission an independent review to protect its investments in joint venture (JV) Oxley Karya Indo Batam (OKIB) and to look into the possibility of potential breaches of regulations and listing rules.
This is to address "external forces at play and potential internal issues", the Catalist-listed property developer said on Tuesday in response to the Singapore Exchange's (SGX) queries.
OKIB is an equal JV entity formed by Karya Indo Batam (KIB) and Rich Capital subsidiary Oxley Batam to develop the Oxley Convention City project in Batam's financial district.
Recently, Rich Capital's banking tokens for OKIB's Maybank accounts were disabled without the former's knowledge. There was also an unauthorised debit from another of the JV's bank accounts, with the Bank Central Asia.
SGX pointed out that the tokens' cessation and the debit indicated "ineffectiveness and failure in controls" on the part of the JV and, by extension, Oxley Batam and Rich Capital.
Rich Capital replied that its management is sourcing for quotes from potential candidates, and will engage an independent reviewer after the AC has finalised the review's scope and the sponsor has assessed the reviewer's suitability and competence.
The AC will then report the independent review's findings and proposed recommendations to the authorities and SGX's regulatory arm.
The unauthorised disabling of the banking tokens highlighted the need to strengthen the group's internal controls and to impose further safeguards, Rich Capital noted.
The Singapore-listed company does not have any representation on the JV's board. After Rich Capital's latest directors on OKIB's board resigned in December 2018 and November 2019, KIB had rejected the two replacement nominees proposed by Oxley Batam, saying that they lacked experience in Indonesian construction projects and were unable to speak Bahasa Indonesia.
On Tuesday, Rich Capital said that Oxley Batam's rights as an equal shareholder in the JV had been "consistently denied and disregarded" by KIB and OKIB in recent months.
It added that there is evidence to suggest KIB "has decided to take matters into its own hands instead of resolving the differences with Oxley Batam in the spirit of the JV or proving its allegations in the ongoing legal action".
KIB had earlier also proposed to transfer its half stake in the JV to an entity known as Batam Citi Moto Karya. OKIB held two extraordinary general meetings (EGMs) of shareholders in July to approve this share transfer, although Oxley Batam did not attend them.
Rich Capital told SGX it was informed on Aug 12 that the share transfer had taken place, although it has not received evidence that the first EGM was validly held.
Rich Capital maintained that the transfer was in breach of Oxley Batam's right of first refusal under an Aug 12, 2016 shareholders agreement.
According to the Indonesian legal advice Rich Capital received, there may be no direct loss resulting from the transfer, and KIB is still bound by its joint operation agreement with the JV.
There has been a string of legal tussles involving the Batam project JV vehicle, starting with two legal letters that KIB served Rich Capital last September to demand full control of OKIB and S$20 million in compensation.
Last month, KIB also filed a lawsuit in tort against the JV for 1.59 trillion rupiah (S$147.1 million) in alleged losses, and Rich Capital said it found out about the legal action only this month.
On Tuesday, Rich Capital said it is seeking legal advice on several matters including the share transfer and its impact on the Batam project, the legal recourse as to the cessation of the banking tokens and the withdrawals from the JV's bank account, and KIB's legal action against the JV.
Trading in shares of Rich Capital has been suspended since June 2019.