Date: November 24, 2009
Chronology of Events
1. Chairman, Sun Jiangrong, took a personal loan from Stark Investment (“Hedge Fund”) on or about 2007, amounting to S$120mil with a pledge of his full shareholding in Sino-Environment, which was 56% of the Company.
2. This personal loan commitment was defaulted somewhere in February/March 2009.
3. The default resulted in the Chairman losing his entire shareholding in Sino-Environment. Stark Investment enforced in blocks of the charge and sold the entire 56% gradually in the open market.
4. This loss of control of the Company by the Chairman through the enforcement by the Hedge Fund meant a possible default of the company’s convertible bond, which will result in the redemption/conversion of S$149mil.
5. Therefore, the Board appointed an independent financial adviser, NTan Corporate Advisory, to carry out a thorough and comprehensive review of the implications of the matters raised in the [5 March 2009 announcement] and to advise on the appropriate measures to be adopted by the Group to safeguard its assets, continue its operations smoothly and enhance values to all its stakeholders and to advise the Company in dealing with, inter alia, towards, the Bondholders.
6. To step up the controls of the assets, especially cash of the Company, the Audit Committee, sometime in April 2009, recommended to the Board that a special cash audit be conducted by the Statutory Auditors, PwC.
7. In April 2009, the then Chief Financial Controller, Mr David Tan, resigned from his position due to personal reasons. Mr Liang was asked by the Board to undertake equivalent duties in the Company. No steps were taken by the Company’s management or the EDs to appoint a new Chief Financial Officer or to object to Mr Liang taking over the ex-Chief Financial Controller’s duties. Mr Liang was the sole individual carrying out the duties of the former Chief Financial Officer. He was not only the Head of Finance of the Company but also served as the Financial Controller of Sino-Environment Clean Power Technology Pte Ltd.
8. Pursuant to para 3 above, there was a mass resignation of the China Executive Directors from their key Management positions on 5 May 2009. This is in spite of the fact that the Company was facing uncertainties due the above-mentioned events. However, at that juncture the IDs have yet to uncover any possible wrongdoings on the part of the EDs hence, the IDs requested that the EDs withdraw their resignation from the Company’s Board. Even during the period of their resignation, they continued to control and run the Company’s PRC subsidiaries and refused to return the Company’s seals or authorize others to manage the Company’s PRC bank accounts.
9. The EDs have not been co-operative with the IDs causing the IDs to resort to engaging solicitors to make the EDs respond to urgent matters of the Company creating doubts as to the intentions of the EDs. The EDs did not respond but after many requests by the Audit Committee, sometime end July 2009, PwC was finally permitted and was allowed to conduct their independent review.
10. During the course of PwC’s review, PwC faced numerous challenges in terms of obtaining required information and access to PRC banks. On 12 October 2009 the Independent Directors released an announcement stating that “in the course of the [PwC Review], [PwC] had identified certain questionable cash transactions and matters which may have a significant impact on the financial position of the Company. The Company has forwarded the findings of [PwC] to the relevant authorities in Singapore, including the Commercial Affairs Department, and the People’s Republic of China.
11. At this point, IDs instructed Financial Controller, Mr Raynauld Liang, to assist the authorities with the investigation.
12. The Financial Controller, Mr Liang’s, services was terminated on 10 November 2009, by the Acting CEO, Mr You Shengquan. The termination was not authorised by the Board and was a unilateral action taken by Mr You Shengquan, with the remaining EDs, Mr Sun Jiangrong and Prof. Li Shouxin, fully endorsing and supporting the termination. The IDs have taken the firm view that the termination of Mr Liang’s services is improper as his service agreement with the Company clearly provides that only the Board can terminate his services and not any officer of the Company. The reasons given by Mr You Shengquan that Mr Liang’s services was terminated for misconduct and breaches of duties as per the Announcement has been dismissed by the IDs as baseless, unjustified and not in the best interest of the Company. At no time has Mr You Shengquan nor any of the EDs given the evidence to support their claims.
13. The Independent Directors took the view that if the Executive Directors wish to effectively continue managing the Group’s operation and finances, it was only appropriate for them to be accountable for their actions. The IDs have lost confidence in the EDs’ motives and management in relation to the Company and its affairs. The manner in which the EDs have conducted themselves and their unwillingness to properly facilitate the PwC Review or implement steps proposed by the IDs to improve the safeguarding of the Company’s assets lead the IDs to reiterate that it would be in the best interests of the Company and its stakeholders if the EDs were to immediately resign from all positions in the Board and the Company.
14. The above chronology shows that the EDs show scant regard to the notion of corporate governance. From, resigning en-masse from the Board while retaining control of PRC subsidiaries when the CEO lost his stake in the Company; to refusing to attend duly convened Board meetings; to refusing to cooperate and submit to PwC’s special audit; to unilaterally trying to dismiss Mr Liang, who has only been trying to perform his duties in the best interest of the Company; to finally refusing to step down when PwC has uncovered evidence that might implicate the EDs.
15. It is the immediate concern of shareholders of the Company as to how the Company is able to safeguard the remaining assets of the Company and to ensure that their investments are protected. To this end, several minority shareholders have approached SIAS and have requested for a meeting to discuss the current situation prevailing in this Company. SIAS will meet the minority shareholders of this Company and will assist them should they wish to proceed with an Extraordinary General Meeting to take any action that would advance their interest.
It is the immediate concern of shareholders of the Company as to how the Company is able to safeguard the remaining assets of the Company and to ensure that their investments are protected. To this end, several minority shareholders (70 to-date) have approached SIAS and have requested for a meeting to discuss the current situation prevailing in this Company.
SIAS will meet the minority shareholders of this Company on 30 November 2009 at 6.30pm to discuss the current state of affairs and to enable the shareholder to decide on the course of action they should take. Minority shareholders need to register with SIAS at tel no. 62272683 or email at admin@sias.org.sg and venue will be advised.
Note: The Board of Sino-Environment comprise of:
Executive Directors (EDs)
Sun Jiangrong (Chairman and CEO)
You Shengquan (Acting CEO/COO)
Li Shouxin (CTO)
Independent Directors (IDs)
Goh Chee Wee (Chairman of Audit Committee and Remuneration Committee and member of Nomination Committee))
Wong Chiang Yin (Chairman of Nomination Committee and member of Audit Committee)
| David Gerald President & CEO SIAS |
