On Aug 27, GHY Culture & Media GHY Culture: XJB +0.82% executive chairman and group CEO Guo Jingyu acquired 54,300 shares of the company for a consideration of S$33,275 at an average price of 61.3 cents per share.

 

This followed his acquisition of 200,900 shares at 61.5 cents per share between Aug 20 and 25.

 

Mr Guo has gradually increased his total interest in the company from 59.0 per cent prior to Dec 28, to 60.01 per cent as of Aug 27.

 

Between Aug 20 and 25, GHY Culture & Media GHY Culture: XJB -0.81% executive chairman and group chief executive officer Guo Jingyu acquired 200,900 shares of the company for a consideration of S$123,593 at an average price of 61.5 cents per share.

 

He has gradually increased his total interest in the company from 59.0 per cent prior to Dec 28, 2020 to 60.0 per cent as of Aug 25.

 

On Aug 12, GHY Culture & Media GHY Culture: XJB 0% (GHY) executive chairman and group CEO Guo Jingyu acquired 1,825,200 shares of the company for a consideration of S$1,154,567.

 

At an average price of 63.3 cents per share, this took his total interest in the company from 59.78 per cent to 59.95 per cent.

 

It followed his acquisitions of 143,800 shares at 72.7 cents per share on March 19 and 655,800 shares at 74.8 cents per share on March 1.

 

Mr Guo founded the entertainment business, which focuses on the production and promotion of dramas, films and concerts.

 

On Aug 11, GHY reported that H1FY21 (ended June 30) revenue increased 17.9 per cent year on year to S$43.8 million.

 

This was mainly attributed to the TV programme and film production business, which saw revenue almost double from H1FY20.

 

Despite the ongoing impact of Covid-19, the group was able to complete the filming of a drama and has released two films, with several productions (including a drama and an online short-form series) in progress.

 

Barring unforeseen circumstances, the group expects to commence production of at least another five dramas in the second half of 2021.

 

Mr Guo noted with the results that being close to the ground, the company would stay vigilant to changes and has the agility to ramp-up productions across its two growth engines of TV programme and film production and concert production when the Covid-19 situation improves.

 

On 14 May 2021, G.H.Y Culture & Media (GHYCM) appointed Ms Lian Lee Lee as deputy CEO of the group. The following day, I posted an article on my website titled &ldquo G.H.Y. Culture & Media: More Governance Concerns&rdquo . In the article, I pointed out that the company has complied with the letter of the undertaking and assurance given in the prospectus for its listing in December 2020 but questioned whether it has complied with the spirit. The undertaking and assurance in the prospectus were as follow:

 

&ldquo Mr John Ho has provided an undertaking to our Company that he will not, and will not procure any of his nominees, to be appointed as a director or executive officer of any entities in our Group for so long as he is named in the directors&rsquo and executive officers&rsquo watchlist of the SGX-ST.&rdquo (emphasis is mine)

 

&ldquo Our Nominating Committee will also ensure that none of Mr John Ho and/or his nominees will be appointed as a director or executive officer of any entities in our Group for so long as Mr. John Ho is named in the directors&rsquo and executive officers&rsquo watchlist of the SGX-ST. In the event that any associate of Mr. John Ho proposes to be a Director or Executive Officer of our Company or our Group, our Nominating Committee will assess that such relevant associate possesses the relevant experience, expertise, qualification, character and integrity to perform the proposed role as a Director or Executive Officer and will ensure that an announcement is made on the SGXNET, the web-based platform of the SGX-ST, on the proposed appointment of such relevant associate and our Nominating Committee&rsquo s views (including bases), in a timely manner.&rdquo (emphasis is mine)

 

John Ho is a substantial shareholder and group adviser of GHYCM.

 

When I was writing my first article about GHYCM warning about the governance risks in the company (&ldquo Governance Risks and G.H.Y. Culture & Media, 31 January 2021), I read the 700-page prospectus quite thoroughly. The above undertaking and assurance caught my attention, particularly the reference to &ldquo nominees&rdquo in the first two statements and &ldquo associate&rdquo in the third statement.

 

While the first two statements unequivocally rule out the appointment of any nominee of Mr John Ho, the third statement contemplates the possibility that his associate may be appointed. In that event, the Nominating Committee (NC) is required to, inter alia, &ldquo assess that such relevant associate possesses the relevant experience, expertise, qualification, character and integrity&rdquo of the associate.

 

Under the listing rules, an &ldquo associate&rdquo in relation to any director, CEO, substantial shareholder or controlling shareholder (being an individual) is defined to mean &ldquo his immediate family&rdquo , &ldquo the trustees of any trust of which he or his immediate family member is a beneficiary or, in the case of a discretionary trust, is a discretionary object&rdquo or &ldquo any company in which he and his immediate family together (directly or indirectly) have an interest of 30% or more&rdquo .

 

The third statement led me to consider the strong possibility that one of Mr John Ho&rsquo s immediate family members will be appointed after the IPO. This has now indeed happened, five months after the IPO.

 

In my previous post, I wondered whether SGX would have objected to Ms Lian&rsquo s appointment as group deputy CEO if the company applied for listing with this appointment already in place or proposed. If so, with hindsight, SGX should perhaps have insisted that the undertaking and assurance in the first two statements include both &ldquo nominees&rdquo and &ldquo associates&rdquo . I wonder if those involved in undertaking due diligence for the IPO were aware of this scenario that has now played out.

 

On 18 May 2021, GHYCM issued a 5-page response to queries from SGX Regco regarding the appointment of Ms Lian. SGX Regco&rsquo s queries were as follow:

 

&ldquo In view of Ms Lian Lee Lee (&ldquo Ms Lian&rdquo )&rsquo s Appointment and that she is the spouse of Mr Ho, please disclose and provide an assessment as to whether the Undertaking has been complied with.&rdquo

&ldquo Please disclose the circumstances leading up the Ms Lian&rsquo s Appointment, including but not limited to the following:-

whether the company was actively looking for a Group Deputy CEO

since when did the search began and

whether there were other potential candidates for the Group Deputy CEO position, and the reasons for choosing her over the other candidates.&rdquo

&ldquo Please disclose the bases and assessment of the Nominating Committee (&ldquo Assessment&rdquo ) on the appointment of Ms Lian as Group Deputy CEO. In your response, please also provide the Assessment in view that Ms Lian is the spouse of Mr Ho, a substantial shareholder of the Company and is also on the directors&rsquo and executive officers&rsquo watchlist of the SGX-ST.&rdquo

The company&rsquo s lengthy response can best be described as highly technical, including a detailed discussion of who might typically be deemed a &ldquo nominee&rdquo of another person. It emphasised the importance of drawing a distinction between an &ldquo associate&rdquo and &ldquo nominee&rdquo and explained that &ldquo it is not necessarily the case that an associate of a person is a nominee of such a person.&rdquo

 

The company goes on to say (and this statement is not easy to understand): &ldquo Whether a person is an associate or a nominee of another person should be assessed on a case by case basis, and based on the facts on hand. This is particularly relevant, given that if such were the case, the intent of the Undertaking (as explained above, to guard against the risk that a person who is on the SGX-ST&rsquo s watchlist appoints another person who acts in accordance with his directions in order to circumvent the SGX-ST&rsquo s watchlist) would not be achieved because, such other person who is not an associate could potentially be a nominee an a person who is on the SGX-ST&rsquo s watchlist could then potentially appoint a nominee who is not an associate as a director or an executive officer.&rdquo

 

I do not disagree that an &ldquo associate&rdquo may not necessarily be a &ldquo nominee&rdquo although, in my opinion, it should be a rebuttable presumption that an &ldquo associate&rdquo is a &ldquo nominee&rdquo , especially when it comes to the appointment of a director or executive officer. I am glad that the company believes that &ldquo whether a person is an associate or a nominee of another person   should be assessed on a case by case basis&rdquo &ndash in other words, the context matters. In this case, the context is that Mr John Ho is a substantial shareholder and group adviser of GHYCM -   and therefore has close connections with the company - and Ms Lian is his spouse.

 

The company said that &ldquo it would not be reasonable to restrict the   ability of Mr Ho&rsquo s immediate family members to be appointed as directors or executive officers of the Group solely on the basis that he is named in the SGX-ST&rsquo s watchlist&rdquo . It is indeed unfair to penalise an immediate family member of someone who is on the watchlist. However, this is not a case of someone being appointed to just any company &ndash but a company where the spouse who is on the watchlist is a substantial shareholder and group adviser. Clearly, we need to avoid a scenario where the watchlisted person directs or manages through his immediate family member.

 

Which brings me to the NC and its assessment of whether Ms Lian is a nominee. In the announcement of Ms Lian&rsquo s appointment, the company said that the NC had, inter alia, &ldquo assessed that Ms Lian acts independently and does not act under the direction, control or influence of any party, including Mr John Ho, a substantial shareholder of the Company and is further, not a nominee of any party, including Mr John Ho&rdquo . This is to comply with the assurance given in the prospectus which says: &ldquo Our Nominating Committee will also ensure that none of Mr John Ho and/or his nominee will be appointed as a director or executive officer of any entities in our Group for so long as Mr. John Ho is named in the directors&rsquo and executive officers&rsquo watchlist of the SGX-ST.&rdquo

 

In the response to SGX Regco&rsquo s queries, the company reiterated: &ldquo As stated in the announcement dated 14 May 2021, the NC had conducted an interview with Ms Lian and assessed that she acts independently and does not act under the direction, control or influence of any party, nor is she a nominee of any party, including Mr Ho.&rdquo

 

However, the company did not explain how the NC could have reached that conclusion on the basis of an interview or by whatever other means. Perhaps the NC could share more light on this, which I had also asked in my previous post, including what steps have the NC and board taken to ensure that this is the case and continues to be so?

 

The company also said &ldquo The Nominating Committee (&ldquo NC&rdquo ) comprises Mr Yeo Guat Kwang, Mr Guo Jingyu and Dr Jian Minghua, who are reputable and experienced individuals, and who have independently and objectively reviewed the appointment of Ms Lian as the Group Deputy CEO&rdquo .

 

Mr Guo is described in the prospectus as a notable producer, director and scriptwriter in the PRC with more than 25 years of experience. However, until his appointment as GYYCM&rsquo s executive chairman and group CEO, he has no experience as a director or CEO of a public-listed company. Dr Jian is a professor of Peking University, Guanghua School of Management, where he teaches the Marketing and Brand Management courses. The prospectus said that he too have no prior experience as a director of public listed companies in Singapore. While these two individuals may be &ldquo reputable and experienced&rdquo in their respective fields, their reputation and experience are not particularly relevant to the issue at hand &ndash the assessment of whether Ms Lian should be deemed a nominee of Mr Ho.

 

In my view, GHYCM&rsquo s response to the SGX Regco&rsquo s queries leaves unanswered questions.

 

ENTERTAINMENT and content provider GHY Culture & Media Holdings on Tuesday defended the appointment of Lian Lee Lee as deputy chief executive officer, saying that she is separate and acts independently of her husband John Ho, who is the group' s substantial shareholder and group adviser.

 

This was in response to queries by the Singapore Exchange Regulation (SGX RegCo) on May 14. The move was also questioned by corporate governance advocate Mak Yuen Teen, an associate professor of accounting at the NUS Business School.

 

Back in 2011, Mr Ho was placed on the directors' and executive officers' watchlist by the SGX RegCo, following a reprimand against Catalist-listed company Scorpio East and several directors including Mr Ho for breaching listing rules and other corporate governance failures. Mr Ho was then the CEO and executive director.

 

According to GHY, Mr Ho provided an undertaking that he will not procure any of his nominees to be appointed as a director or executive officer as long as he remains on the watchlist.

 

GHY upheld its decision to appoint Ms Lian as deputy CEO, claiming on a technicality that she is an " associate" of Mr Ho' s and not a nominee.

 

" It would not be reasonable to restrict the ability of Mr Ho' s immediate family members to be appointed as directors or executive officers of the group solely on the basis that he is named in the SGX-ST' s watchlist," wrote GHY in its response.

 

" Each of Mr Ho' s associates, whilst his immediate family members, are separate and independent persons and are not his nominees or representatives, and should not be deemed to be his nominees or representatives solely by virtue of the fact that they are his immediate family members."

 

The company went on to highlight that Ms Lian has " demonstrated that she acts independently" by emphasising her 25 years of experience in the media and entertainment industry in the region, where she took on leadership positions in various companies.

 

" These leadership roles and responsibilities would require Ms Lian to exercise independent decision-making," said GHY.

 

GHY also said that all appointments to senior management are evaluated " at length through a robust and comprehensive framework" , describing its three individuals in the nominating committee - Yeo Guat Kwang, Guo Jingyu and Dr Jiang Minghua - as " reputable and experienced" .

 

The company disclosed that it received only two applications for the role, including Ms Lian' s, even after having " actively reached out to recruiters and posted online job advertisements" for the position.

 

" Ms Lian' s professional experience and independent judgment should not be overlooked, or be deemed to be affected by virtue of her being the spouse of Mr Ho," said GHY.

 

Ms Lian was previously the executive director of subsidiary GHY Culture & Media (Singapore) since November 2019. Before that, she was events director of Bestin Entertainment.

 

In an earlier post on his website, NUS Business School' s Mr Mak questioned the appointment as to whether it abides by the spirit of the undertaking and assurance given in the prospectus by Mr Ho and the nominating committee.

 

This comes as GHY had just listed on the SGX Mainboard in December 2020.

By Mak Yuen Teen

 

On 31 January 2021, I posted an article on this website raising concerns about governance risks of G.H.Y Culture & Media (GHYCM), which listed on the SGX Mainboard in December 2020 (" Governance Risks at G.H.Y. Culture & Media" ). The article can be accessed here: https://governanceforstakeholders.com/2021/01/31/governance-risks-at-g-h-y-culture-media/

 

On 14 May 2021, GHYCM announced that it has appointed Ms Lian Lee Lee as Group Deputy CEO. Ms Lian is the spouse of Mr John Ho, a substantial shareholder and group advisor of GHYCM. Mr Ho is on SGX& rsquo s directors& rsquo and key officers& rsquo watchlist. This followed an SGX reprimand in October 2011 directed at Scorpio East, Mr Ho and several other individuals. Mr Ho was CEO and executive director at Scorpio East. The reprimand cited several breaches in listing rules. It said that he had & ldquo not demonstrated the qualities expected of directors and management of SGX-listed companies& rdquo and failed to act in the interests of shareholders as a whole. The special auditors& rsquo findings pointed to possible breaches of the law, and SGX said that it would refer the case to the relevant authorities.

 

The announcement of Ms Lian' s appointment states: " Ms Lian was an executive director of Scorpio East Holdings Ltd. (" Scorpio East" ) from March 2003 to March 2011 and was re-designated as a non-executive director from March 2011 to June 2011. Certain disciplinary actions were taken by SGX-ST against Scorpio East and certain of its directors (which did not include Ms Lian) in October 2011."

 

The announcement also said: " The members   of the Nominating Committee had (i) reviewed Ms Lian' s curriculum vitae and conducted an interview with Ms Lian (ii) taken into account her experience, expertise and knowledge in the business of media and entertainment, are satisfied that she possesses the relevant experience, expertise, qualification, character and integrity to perform the role as the Deputy Chief Executive Officer of the Group, and (iii) assessed that Mr Lian acts independently and does not act under the direction, control or influence of any party, including Mr John Ho, a substantial shareholder of the Company and is further, not a nominee of any party, including Mr John Ho. The Nominating Committee thus recommended the appointment of Ms Lian as Deputy Chief Executive Officer of the Group to the Board of Directors for approval. The Board of the Company, having reviewed Ms Lian' s curriculum vitae, and taking into consideration the recommendation of the members of the Nominating Committee, is satisfied that she possesses the relevant experience, expertise, qualification, character and integrity to perform the role as the Deputy Chief Executive Officer of the Group" .

 

How did the Nominating Committee assess that Ms Lian " acts independently and does not act under the direction, control or influence of any party, including Mr John Ho (her spouse)?" Have the nominating committee and board considered and taken steps to put in place procedures, controls and monitoring to ensure that this is the case, both at work and outside of work? Can the nominating committee and board explain what these are?

 

On page 243 of the prospectus, GHYCM said: " Mr John Ho has provided an undertaking to our Company that he will not, and will not procure any of his nominees, to be appointed as a director or executive officer of any entities in our Group for so long as he is named in the directors' and executive officers' watchlist of the SGX-ST" . It goes on to say: &ldquo  

 

Our Nominating Committee will also ensure that none of Mr John Ho and/or his nominees will be appointed as a director or executive officer of any entities in our Group for so long as Mr. John Ho is named in the directors' and executive officers' watchlist of the SGX-ST. In the event that any associate of Mr. John Ho proposes to be a Director or Executive Officer of our Company or our Group, our Nominating Committee will assess that such relevant associate possesses the relevant experience, expertise, qualification, character and integrity to perform the proposed role as a Director or Executive Officer and will ensure that an announcement is made on the SGXNET, the web-based platform of the SGX-ST, on the proposed appointment of such relevant associate and our Nominating Committee' s views (including bases), in a timely manner" .

 

Mr John Ho (Ho Ah Huat) is still on the directors and executive officers watchlist: https://www.sgx.com/regulation/directors-and-executive-officers-watchlist. It would appear that the appointment of his spouse as an executive officer of GHYCM is deemed to be compliant with the undertaking by Mr Ho and the assurance by the Nominating Committee in the prospectus because Ms Lian is not considered as a nominee of Mr Ho, even though she is his spouse. Further, even though Ms Lian is an associate of Mr Ho as an immediate family member, the Nominating Committee is deemed to have complied with the prospectus having assessed that she has the " relevant experience, expertise, qualification, character and integrity" .

 

Is this in the spirit of the undertaking and assurance given in the prospectus by Mr Ho and the Nominating Committee? Given the appointment of Ms Lian just five months after the listing, was it already the plan that she will be appointed soon after the listing when the company applied to list? Were the statements in page 243 mentioned above written with this in mind?

 

Ms Lian was an executive director of G.H.Y. Culture & Media (Singapore) Pte. Ltd, a wholly-owned subsidiary of GHYCM, from September 2017 to June 2018 and from November 2019 to March 2020. It appears that she stepped down as a director of the subsidiary as GHYCM was preparing for its listing. If the company had appointed Ms Lian as group deputy CEO when the company applied to list, would SGX have raised any concerns?

 

Unfortunately, while SGX has some leverage over the appointment of directors and key officers prior to listing, this leverage largely evaporates after a company has been listed.