They should seek EGM to replace executive directors if firm is to be saved
By LYNETTE KHOO 17 November 2009
If you are a passenger in a car with a reckless driver, what would you do? Replace the driver.
And that is probably what shareholders of Sino-Environment Technology Group should do, following the sacking last week of its financial controller in questionable circumstances.
Management, led by chairman and CEO Sun Jiangrong, fired Singapore-based Raynauld Liang Wee Leong without consulting the company’s independent directors (IDs) and without apparent reason. This removed the company’s only liaison person with its auditors and independent financial adviser here - serving only to frustrate attempts to heal the company that has been rocked by one scandal after another.
And it has drawn a swift response from the Singapore Exchange, which has slapped Sino-Environment with a warning and an ultimatum to resolve governance issues within 30 days or face delisting.
Yet, the severity of the situation suggests that shareholders should get their act together to protect their interests. As the Securities Investors Association of Singapore (SIAS) put it: ‘If the executive directors do not resign immediately as requested by independent directors, the shareholders should organise an EGM to remove the three executive directors to ensure that the board of the company is functional again and it is managed in the interest of all stakeholders.’
To this end, SIAS said that it is prepared to coordinate with shareholders to achieve this objective.
All along, the person behind the steering wheel at Sino-Environment has been Mr. Sun, even after he lost his entire 56 per cent stake when his creditor, Stark Investments, enforced its right on the pledged shares.
But things just got worse from there. The change of controlling shareholding in Sino-Environment triggered a default on $149 million of convertible bonds, which has cast doubts over the company’s ability to continue as a going concern.
Mr. Sun also led the management team in stepping down in May, before they all resumed their positions after being persuaded by the IDs.
But just when things looked more settled, Sino-Environment got hit again - and even more seriously this time. An independent review by its auditors unveiled ‘questionable cash transactions’ in October, prompting the IDs to file police reports in Singapore, China and Hong Kong. One major roadblock faced by the auditors was a refusal by the management to allow an independent check on bank balances.
The drama came to a climax last week when the management team decided to kick out Mr. Liang.
Unknown to many earlier, Mr. Sun’s share transfers in some companies had led to lawsuits in different jurisdictions, leading to freezing of his assets and winding up of an investment vehicle that owns a 52.41 per cent stake in another S-chip, Radiance Group.
Given the backdrop of lawsuits and a poor assessment of Mr. Sun’s integrity by the Hong Kong court, the credibility of the management team has been severely dented. And with Mr. Sun no longer holding any shares in Sino-Environment, it begs the question of whether his interest is still aligned with the company.
While it is commendable that SGX has taken a tough stance, there is only so much it can do as a frontline regulator. It has used up much of its arsenal - slapping a public reprimand and threatening delisting.
BT understands that SGX has also engaged Adrian Tan, a litigator from Drew & Napier to provide defence for SGX against any potential counter-action by the Sino-Environment management.
But given the lack of clarity in the company’s cash position, it is unclear if a delisting would provide any recourse for investors in the form of an exit cash offer.
It is also a question mark if corporate governance at Sino-Environment will take a 180 degree turn as long as the Board remains dominated by executive directors. Sino-Environment’s Board now comprises three Chinese executives and two Singaporean IDs after one ID resigned in July and was not replaced.
While SGX cannot bar individuals from taking office post-listing unless they have been disqualified by the court, shareholders have the power to vote out directors who have not acted in the best interest of the company.
As things are now, shareholders can no longer take a back seat and passively watch developments unfold before them. They need to act quickly if they want to save the car from crashing.
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Shareholders need to act in Sino-Env Tech debacle
They should seek EGM to replace executive directors if firm is to be saved
By LYNETTE KHOO
17 November 2009
If you are a passenger in a car with a reckless driver, what would you do? Replace the driver.
And that is probably what shareholders of Sino-Environment Technology Group should do, following the sacking last week of its financial controller in questionable circumstances.
Management, led by chairman and CEO Sun Jiangrong, fired Singapore-based Raynauld Liang Wee Leong without consulting the company’s independent directors (IDs) and without apparent reason. This removed the company’s only liaison person with its auditors and independent financial adviser here - serving only to frustrate attempts to heal the company that has been rocked by one scandal after another.
And it has drawn a swift response from the Singapore Exchange, which has slapped Sino-Environment with a warning and an ultimatum to resolve governance issues within 30 days or face delisting.
Yet, the severity of the situation suggests that shareholders should get their act together to protect their interests. As the Securities Investors Association of Singapore (SIAS) put it: ‘If the executive directors do not resign immediately as requested by independent directors, the shareholders should organise an EGM to remove the three executive directors to ensure that the board of the company is functional again and it is managed in the interest of all stakeholders.’
To this end, SIAS said that it is prepared to coordinate with shareholders to achieve this objective.
All along, the person behind the steering wheel at Sino-Environment has been Mr. Sun, even after he lost his entire 56 per cent stake when his creditor, Stark Investments, enforced its right on the pledged shares.
But things just got worse from there. The change of controlling shareholding in Sino-Environment triggered a default on $149 million of convertible bonds, which has cast doubts over the company’s ability to continue as a going concern.
Mr. Sun also led the management team in stepping down in May, before they all resumed their positions after being persuaded by the IDs.
But just when things looked more settled, Sino-Environment got hit again - and even more seriously this time. An independent review by its auditors unveiled ‘questionable cash transactions’ in October, prompting the IDs to file police reports in Singapore, China and Hong Kong. One major roadblock faced by the auditors was a refusal by the management to allow an independent check on bank balances.
The drama came to a climax last week when the management team decided to kick out Mr. Liang.
Unknown to many earlier, Mr. Sun’s share transfers in some companies had led to lawsuits in different jurisdictions, leading to freezing of his assets and winding up of an investment vehicle that owns a 52.41 per cent stake in another S-chip, Radiance Group.
Given the backdrop of lawsuits and a poor assessment of Mr. Sun’s integrity by the Hong Kong court, the credibility of the management team has been severely dented. And with Mr. Sun no longer holding any shares in Sino-Environment, it begs the question of whether his interest is still aligned with the company.
While it is commendable that SGX has taken a tough stance, there is only so much it can do as a frontline regulator. It has used up much of its arsenal - slapping a public reprimand and threatening delisting.
BT understands that SGX has also engaged Adrian Tan, a litigator from Drew & Napier to provide defence for SGX against any potential counter-action by the Sino-Environment management.
But given the lack of clarity in the company’s cash position, it is unclear if a delisting would provide any recourse for investors in the form of an exit cash offer.
It is also a question mark if corporate governance at Sino-Environment will take a 180 degree turn as long as the Board remains dominated by executive directors. Sino-Environment’s Board now comprises three Chinese executives and two Singaporean IDs after one ID resigned in July and was not replaced.
While SGX cannot bar individuals from taking office post-listing unless they have been disqualified by the court, shareholders have the power to vote out directors who have not acted in the best interest of the company.
As things are now, shareholders can no longer take a back seat and passively watch developments unfold before them. They need to act quickly if they want to save the car from crashing.
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