SGX RegCo directs Lorenzo International to delist following multiple contraventions

SINGAPORE Exchange Regulation (SGX RegCo) said on Friday (Feb 10) it is directing furniture manufacturer Lorenzo International to delist, given that it has not submitted any resumption proposal following its trading suspension in 2018.

Trading in Lorenzo International shares has been suspended since Dec 14, 2018, following the disclaimer of opinion issued by its auditor on the company’s ability to continue as a going concern.

Lorenzo International had on Aug 13, 2019 announced plans to dispose of its wholly-owned subsidiary Lorenzo Furniture Kunshan, which ceased operations in 2017 but continued to own a property in Kunshan city in Jiangsu province, China that accounted for more than 20 per cent of the group’s total assets then.

The purchaser was Shanghai Kunhao Wood Industry, an independent third party, according to bourse filings by Lorenzo International then.

On Friday, KPMG Forensic Services, appointed by SGX RegCo to look into the circumstances of the proposed disposal, issued a 29-page report detailing multiple discrepancies.

For example, the company had stated the proposed sale price to be 88 million yuan (S$17.3 million at that time) when the share transfer agreement stated the sale price to be 88 million yuan less the total indebtedness of Lorenzo Kunshan.

The company’s announcement also stated that the proposed sale would be subject to shareholders’ approval but this condition was not required in the supplemental agreement, KPMG found.

The buyer then filed a legal proceeding against the company on Sep 17, 2019 to compel it to transfer its entire interest in Lorenzo Kunshan as well as seek compensation for the long delay in the completion of the share transfer.

A court in China on Oct 30, 2020 then ordered Lorenzo International to complete the sale within a month and to compensate the buyer 18 million yuan in damages by Nov 9, 2020.

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KPMG noted that while Lorenzo International provided periodic updates on the legal proceedings, it did not disclose the court’s judgement and other pertinent information in its announcements.

Meanwhile, the group’s personnel who were apparently involved in the negotiations and execution of the various agreements were unable to provide proper explanation of the key events from the initiation of the proposed disposal and determination of the sale price to its conclusion, SGX RegCo said.

This includes executive director Lim Pang Hern, chief finance officer Teo Kok Meng and former chief executive Jason Teoh.

“With the absence of supporting documents, KPMG was unable to form a clear understanding of the group’s governance of the proposed disposal or to demonstrate whether or not the negotiations and agreements took place appropriately and in good faith,” SGX RegCo added.

Additionally, KPMG highlighted potential contraventions of Sections 157 and 199 of the Companies Act, and the regulator said it will report the alleged contraventions to the relevant authority.