SGX RegCo to review Rich Capital's potential listing-rule breaches

AN independent review of property developer Rich Capital has turned up several causes for concern for the Singapore Exchange Regulation (SGX RegCo), which will now probe further into potential listing-rule breaches and report the matter to the relevant authorities.

Following a slew of announcements regarding a project in Batam, Indonesia, and a related contract, Rich Capital appointed Provenance Capital as an independent reviewer on Aug 14, 2019, to look into the circumstances surrounding the contract, among other things.

The review by Provenance was completed on Tuesday, and released to the board of directors and SGX RegCo.

The bourse regulator highlighted certain findings in the independent review relating to the Batam project, and said there could be potential listing-rule breaches, internal control lapses, as well as potential contraventions of Section 156 of the Companies Act.

Back in May 2018, Rich Capital acquired an indirect 40 per cent interest in an integrated commercial and residential project on Batam from Oxley International Holdings Pte Ltd.

Before the acquisition, the Batam project had been jointly developed by Oxley's wholly-owned subsidiary, Oxley Batam Pte Ltd (OBPL) and an Indonesian joint venture partner, Karya Indo Batam (KIB) through a joint-venture entity, Oxley Karya Indo Batam (OKIB).

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OKIB had called for an initial tender exercise for the project in July 2017, and Rich-Link Construction Pte Ltd (RLC) was one of the four contractors who submitted an offer for the tender.

RLC was an associate of Rich Capital's former non-executive chairman and controlling shareholder, Wang Zhen Wen.

Provenance noted that, at the close of the tender in November 2017, RLC's offer was the least attractive, and that a better offer had come from another Indonesian contractor. The award of the contract was then withheld.

Following Rich Capital's acquisition, a revised tender offer was requested - but only from the Singapore contractors, including RLC. The Indonesian contractor who had submitted the more attractive offer was excluded.

As RLC's revised offer was the most attractive, the contract was awarded to it in October 2018.

According to the review, certain documents and e-mail correspondence suggested that this award of the contract to RLC was "pre-arranged in connection with the acquisition", which prompted the independent directors to lodge a police report with the Commercial Affairs Department (CAD).

The company's disclosures in relation to the acquisition and the award of contract to RLC did not include the interests of Mr Wang, in view of the fact that his associate RLC was one of the tenderers for the Batam project at the time of Rich Capital's acquisition; also, the contractual agreement was between Rich Capital and Oxley to vote in favour of the appointment of RLC as the main contractor.

In November 2018, RLC requested for an advance payment of S$2 million in connection with the construction contract. The company, instead of RLC's contracting party, OKIB, disbursed the amount without obtaining the board's approval.

SGX RegCo said: "SGX RegCo expects SGX-listed issuers to uphold high disclosure standards as the Exchange regards disclosure as fundamentally important to the operation of a fair and efficient market."

It added that in light of the recent findings, Rich Capital will continue to be suspended until it submits a trading-resumption proposal that addresses the findings highlighted in Provenance's report, concerns arising from subsequent developments in OKIB and the Batam project, its ability to operate as a going concern, the viability of its remaining business and adequacy and effectiveness of its internal controls.

Trading in the company's shares has been suspended since June 2019.