Vard: Rules of CEO's 'independence' to recommend delisting differ from 'independent director' regulations

VARD Holdings on Monday responded to queries from the Singapore Exchange (SGX) regarding contents of its circular sent to shareholders over its proposed voluntary delisting.

Contents of the circular had classified and considered its CEO Roy Reite as "independent for the purposes of making recommendations to shareholders in respect of the exit offer". The exchange thereafter received public feedback questioning Mr Reite's independence.

In response, the shipbuilding and repairing company said that as a starting point, whether Mr Reite is independent for the purposes of making recommendations "is determined by reference to the Singapore Code on Takeovers and Mergers, and should not be confused with the entirely separate concept of an independent director under the Code of Corporate Governance 2012".

The former requires the board of directors to indicate whether or not it recommends to shareholders the acceptance or rejection of the exit offer. This places an obligation on the company directors, including Mr Reite, to make a recommendation, unless a director has an "irreconcilable conflict of interest" and has been exempted by the Securities Industry Council (SIC) from making a recommendation.

SIC will normally exempt a director of the offeree company who is a director, employee or nominee of the offeror or its concert party from making any recommendation on the offer.

Vard said in a filing to SGX: "The mere fact that Mr Reite has been in the company's employment for a long period of time or that the company is a subsidiary of Fincantieri Oil & Gas S.p.A. (which is the entity looking to take Vard Holdings private) does not, in and of itself, mean that Mr Reite faces an irreconcilable conflict of interest. This is an assessment to be made by Mr Reite, and not the company. Mr Reite does not consider himself to face an irreconcilable conflict of interest in this case."

Regarding an SGX query about whether the company had consulted SIC in determining whether Mr Reite is considered independent for making a recommendation, Vard pointed to a paragraph of the SIC practice statement which said that: "From time to time, where applications were made or even where no applications were made, Council received requests from directors ... seeking confirmations from Council that it agrees with their views that they are independent for the purpose of making a recommendation on the offer.

"Council wishes to clarify that it is not the role of Council to provide such confirmations. Assessments on independence should be made by offeree company directors themselves."

This in short implied that there was no need for such a consultation with the SIC.

Vard's shares closed flat at S$0.25 on Monday.