Press Statement: Hwa Hong Board Should Expedite SGX RegCo Directives

Date: May 25, 2022

SIAS has observed the recent developments at the board level at Hwa Hong Corporation Limited with some concerns, which left the Board being majority-controlled by certain close family members and substantial shareholders. This is compounded by the recent resignation of their independent chairman due to “disagreement with certain board members on the selection and appointment process of two new independent directors”, which left the Board with no Independent Directors.  SGX RegCo has since issued a Notice of Compliance for the Board to appoint an independent reviewer, amongst other requirements.

The Company has separately announced that the Board will be appointing an independent financial adviser (“IFA”) to advise the directors of the Company who are considered independent for the purposes of the Offer under the Singapore Code on Take-overs and Mergers.  How independent will these two incoming Independent Directors be, given that they were shortlisted by the remaining Board members (i.e. Dr David Ong Eng Hui, Mr Ong Mui Eng and Mr Ong Eng Keong), in the absence of a Nominating Committee?

According to the Company, since they have shortlisted these two Independent Directors, it’s business as usual.  However, SIAS urges the Board to do more to safeguard shareholder interests, especially minority shareholders.

Who are the Independent Directors to be appointed? What are their links to the current Board? Given the current situation, who is in a good position to appoint the IFA to advise the Independent Directors and provide the opinion for the Offer?

To ensure good corporate governance and independence is maintained, the SGX RegCo’s Notice of Compliance should be accomplished at the earliest timeline, before the appointed Independent Directors review the recommendations of the IFA. How will the appointed Independent Directors hold themselves to high levels of independence without this independent review? 

Several other questions also need to be addressed by the Board to assuage the minority shareholders:

  1. Why was a financial adviser appointed by the Company instead of an Independent Reviewer?
  2. When will the new Independent Directors be appointed?
  3. When will the Independent Reviewer be appointed?
  4. Has the Company explored strategic alternatives in the past two years?

SIAS is of the view that the incoming Independent Directors should step aside until this independent review is completed.

Given that a privatisation offer for Hwa Hong Corporation has been made, SIAS calls on the Board to expeditiously comply with the SGX RegCo’s notice of compliance before the appointment of an IFA to opine on the privatisation offer.

David Gerald

Founder, President & CEO

Reply from The Board of Directors of Hwa Hong Cooperation Limited to SIAS Press Statement on 25 May 2022