Sunvic chided for breaking rules on interested-person deals

Singapore

THE Singapore Exchange (SGX) has reprimanded Sunvic Chemical Holdings for breaching listing rules related to 1.6 billion yuan (S$354 million) of interested-person transactions (IPTs) over the three latest financial years.

SGX said that Sunvic, a maker of intermediate chemical products, failed to make immediate announcements of and seek shareholders' approval for IPTs that had been undertaken in the 2013, 2014 and 2015 financial years. The IPTs were made with associates of current Sunvic executive director and chief executive Sun Xiao and of the late Sun Liping, the former executive chairman and CEO of the company.

The company also failed to ensure that the IPTs were properly disclosed in the company's annual reports for the 2013 and 2014 fiscal years.

Sunvic's auditor, Foo Kon Tan grant Thornton, in April 2014 had highlighted a breach of SGX listing rules related to IPTs between Sunvic and Taixing Jinyan Chemical Technology Co, a company controlled by both Mr Suns and their associates. A number of other previously undisclosed IPTs were subsequently revealed by the company.

The nature of the IPTs included short-term loans, purchases of equipment, sales of chemicals, transfers of land-use rights and the provision of corporate guarantees.

Although the company announced over the course of five quarterly financial reports that it was planning to seek shareholders' approval for the IPTs, a shareholders' vote on those IPTs has yet to be called. In the meantime, the company has continued to enter into new IPTs.

SGX said that Sunvic's directors have responded that the IPTs were necessary for the business operations of the company, and stopping them abruptly would have a "material adverse impact" on the company. Sunvic's board has also expressed a view that the IPTs "did not result in any prejudice to the interests of the company and its minority shareholders", according to SGX.

The directors also stated that the board "had done the best it could to resolve these issues...that have persisted to date", according to SGX.

Listing rules require companies to immediately announce IPTs when they account for at least 3 per cent of the company's latest audited net tangible assets. Issuers must also obtain shareholder approval for any IPTs with the interest person if the IPTs in total account for at least 5 per cent of net tangible assets.

The IPTs accounted for almost 30 per cent of Sunvic's net tangible assets in year-to-date fiscal 2015. They accounted for about 31 per cent in fiscal 2013, and about 17 per cent in fiscal 2014.

Sunvic shares closed unchanged at 22 Singapore cents on Monday before the reprimand was announced.