Shareholder approval was needed for Allied Tech's China subsidiaries' disposal: SGX RegCo

SHAREHOLDER approval should have been sought for Allied Technologies' disposal of its 2 China subsidiaries, the Singapore Exchange Regulation (SGX RegCo) said late on Wednesday (Apr 6).

Its statement came after the release of a special audit report prepared by special auditor PricewaterhouseCoopers Risk Services (PwC) - engaged to examine the developments surrounding Allied Tech's missing funds held in escrow by law firm JLC Advisors.

The report had found that the version of events told by Jeffrey Ong, the lawyer charged with cheating and other offences in the case, appear to be "plausible explanations" for the gaps in the story told by those involved in the company.

The auditors also found failure on the part of the independent directors in safeguarding the company's interest on several counts.

Ong was managing partner of law firm JLC Advisors. Over 2 years ago, Allied Tech reported to the police that over S$33 million held in escrow by the firm had gone missing and that Ong had become uncontactable.

The status of the missing funds from the escrow account remains unknown as at the date of PwC's report. 

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Undisclosed interested person transactions

Ong had suggested the transactions were carried out as part of a pre-arranged deal to achieve the objectives of former chief executive Hsu Ching Yuh, existing executive director Kenneth Low and existing shareholder Lim Tah Hwa.

These transactions included the disposal of China subsidiaries Allied Machineries (Shanghai) (AMSH) and Allied Technologies (Suzhou) (ATSU) to Hsu, who later stepped down from the board and management of Allied Tech, Ong said.

On this matter, the SGX RegCo said if AMSH and ATSU were indeed disposed to Hsu, these transactions would have constituted interested person transactions that should have been subjected to independent shareholders' approval.

Instead, the AMSH disposal was treated as a major transaction, while the ATSU disposal was treated as a disclosable transaction.

PwC could not establish conclusively if the events relating to the disposal of AMSH were natural consequences or if there was indeed a premeditated plan for Hsu to exit Allied Tech, take over AMSH and continue running it, SGX RegCo added.

Private contracts, "round-tripping" exercise

An undisclosed private contract had also resulted in Allied Tech overpaying between S$10.2 million and S$15.2 million to acquire its 51 per stake in Activpass - a provider of software as a service (SaaS) solutions for businesses.

In 2019, the company had paid S$25.2 million to acquire the Activpass stake. Allied Tech also acquired a 51 per cent stake in Asia Box Office, which provides ticketing solutions for events, for S$30 million.

Kingsblade Kabushiki Kaisha Group (Kingsblade), which helped facilitate the Activpass transaction, had entered into a "back end" shareholder agreement with Activpass' owners, PwC found.

The private contract stated that Activpass' owners would only get a fixed consideration of between S$10 million and S$15 million, less than the S$25.2 million stated in the formal sale and purchase agreement entered into between Allied Tech and Activpass' owners.

PwC also retrieved a Kingsblade profile listing Roger Poh as its head of credit and Karen Pok as its legal counsel. Poh and Pok were Allied Tech's executive director and independent director, respectively, during the material time when the company was buying the stake in Activpass.

However, during interviews with PwC, Poh and Pok denied being part of Kingsblade's management team or involved in any professional capacity with Kingsblade.

If Poh had been aware of the private contract and failed to disclose it, his actions in facilitating the scheme would have been deemed a "serious breach of his fiduciary duties" to Allied Tech, SGX RegCo said.

Based on PwC's review of the flow of funds, it also appears to SGX RegCo that the transactions were accomplished via a supposed "round-tripping" exercise.

Low could be deemed a "shadow" director

Low could also be deemed a "shadow" director as there was some indication that he was involved in Allied Tech's affairs since as early as January 2018, before his appointment to the board in June 2018, PwC noted.

As a result, he would be subject to the same duties applicable to other directors. Low was arrested last April and named as the co-accused in 5 of the charges that Ong, who is in remand, is facing.

On Wednesday, Allied Tech said separately that it is reviewing the contents of the executive summary to assess the findings and determine its next course of action.

READ MORE:

• Allied Tech misappropriation case: Auditors find lawyer Jeffrey Ong's account 'plausible'

• SGX queries Allied Tech over executive director; company to respond by April 14

• Allied Tech confirms arrest of executive director Kenneth Low

• Allied Tech executive director Kenneth Low arrested, named as co-accused of Jeffrey Ong in 5 charges

• JLC Advisors former managing partner's acts spawn lawsuits

• JLC Advisors Jeffrey Ong implicates Allied Tech executive director and investor in misappropriation case

• JLC law firm downsizes after managing partner Jeffrey Ong's scandal

• JLC Advisors' Jeffrey Ong faces more charges