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SBI Offshore may have breached Catalist rules, review finds

SBI Offshore may have breached various Catalist listing rules during a share placement conducted in 2014, a report from independent reviewer KordaMentha found on Thursday.

SBI Offshore had placed out shares without disclosing that one of the placees – a Singapore-registered firm called Millennium Marine that is controlled by a Chinese investor – had given the company a promissory note instead of paying in cash.

This may potentially be in breach of Catalist rules governing the disclosure of material information, KordaMentha said.

As well, SBI Offshore had failed to disclose material information about how the placement proceeds were used.

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In particular, it failed to inform shareholders when it made an advanced payment of 10 million yuan (S$2.15 million) to Tianjin Hai Shenghao Offshore Equipment Co as part of a proposed acquisition that was eventually terminated.

SBI Offshore also failed to disclose the payment of 1.56 million yuan for the general and operating expenses of subsidiary Jiangyin SBI Offshore Equipment Co (JSBI) for the period from Jan 5, 2016 to Dec 28, 2017.

Later in 2018, SBI Offshore's auditors BDO LLP found that JSBI had made an unauthorised write-off of 17.3 million yuan payable to the parent in its books, so that it effectively owed SBI Offshore nothing.

KordaMentha was hired to investigate the mystery of the markdown.

During its review, it was handed an undated "write-off agreement" between SBI Offshore and JSBI, agreeing to waive the JSBI payable.

According to chief financial officer Amy Soh who resigned in September 2017, this agreement was "essentially meant for China compliance purposes and to satisfy the PRC tax authorities internally", KordaMentha wrote in its report.

There were two signatories to the write-off agreement.

David Tan Woo Thian, a former chief executive of SBI Offshore until 2016, who was then legal representative of JSBI, was one of them.

The other was John Chan Lai Thong, another former CEO of SBI Offshore who left in August 2017.

However, no approval was sought from the then board of directors for the write-off, despite the amount of the markdown exceeding the threshold which requires prior board approval.

In response, SBI Offshore said on Thursday that after the unauthorised write-off was discovered, it made a provision of US$373,000 or 2.5 million yuan for related tax liabilities in China in relation to the write-off in the financial year ended Dec 31, 2017. 

As for the 2014 share placement, SBI Offshore said that the proceeds were subsequently collected in full in both Chinese yuan and US dollars. However, it had to recognise a foreign exchange loss of about US$114,739 as the functional currency of the company is US dollars.

SBI Offshore said it will seek legal advice on the potential breaches and appropriate course of action to take.