Its largest shareholder, who attempted to oust directors and made a failed directorship bid himself, is among the six

 

[SINGAPORE] Components manufacturer Fu Yu : F13 +1.04% is pursuing claims against six individuals, including its largest shareholder Victor Lim, over a probe into its unit that made unverifiable arrangements for a payment worth millions.

 

Fu Yu Supply Chain Solutions (FYSCS), a wholly owned subsidiary of the company, was put under investigation after an internal audit revealed that it had made one or more unverifiable arrangements for a payment of around US$3 million to a third party, for which services did not appear to have been rendered, the company said in February.

 

Lim, one of the six, previously made several unsuccessful bids to oust Fu Yu directors and appoint new names to the company&rsquo s board, citing the group&rsquo s &ldquo poor performance&rdquo as his reasons.

 

A substantial shareholder of Fu Yu who owned some 29.45 per cent of its shares as at Jan 9, Lim also made a failed attempt to join the board in December 2024.   He was formerly director of strategy at the precision plastics manufacturer for the past four years, but left the company in March.

 

On Tuesday (Apr 1), Fu Yu said that the claims are for its acquisition of FYSCS, the purported misuse of FYSCS&rsquo resources, and the payment of a pre-paid commission of around US$3 million.

 

The company has sent letters of demand against the persons it is seeking claims from, through its legal adviser Nine Yards Chambers, to commence the process of pursuing the claims.

 

The six individuals are: Victor Lim, Frank Zhang, Hazel Cai, Yasmin Lim, Wong Ka Wing and Tan Xin Yi.

 

It is making claims against Victor Lim and Zhang over the acquisition of FYSCS &ndash formerly known as Avantgarde Enterprise &ndash as it alleges that there has been a &ldquo breach of duties, misrepresentation, and a conspiracy to cause loss&rdquo to the company.

 

It is also seeking claims against Victor Lim, Cai and Yasmin Lim in relation to the misuse of FYSCS resources, as well as pursuing claims against Victor Lim, Cai, Wong, Tan and Yasmin Lim over the pre-paid commission, as it alleges that there was a breach of duties and a &ldquo conspiracy to cause loss to FYSCS&rdquo .

 

In response to the Fu Yu&rsquo s announcement, Victor Lim said that he was &ldquo disappointed but not surprised&rdquo at what he called the company&rsquo s &ldquo latest attempt to deflect attention from the real issues that need to be addressed, such as reduced revenues in our core manufacturing business&rdquo .

 

&ldquo I firmly deny any and all allegations of wrongdoing that the current board has seen fit to publicise even as the investigations are ongoing. I am confident of my position and am prepared to defend myself in court if the current board should cause the company to take legal action against me,&rdquo he added.

 

The company said it would update its shareholders if there are further developments, as and when necessary. It added that it would remain focused on carrying on with business as usual.

 

It urged shareholders to exercise caution when dealing with its shares.

Victor Lim previously made two unsuccessful bids to convene EGMs over director appointments and removals

[SINGAPORE] Fu Yu Corporation : F13 -3% said on Thursday (Mar 20) that it had received a new request from its largest shareholder Victor Lim to table resolutions to oust and appoint directors to the company&rsquo s board at its upcoming annual general meeting (AGM).

 

The component maker said the fresh request came on Mar 11, pursuant to Section 183 of the Companies Act, to table resolutions for the removal and appointment of directors.

 

Fu Yu said its board is taking legal advice on the validity of Lim&rsquo s request under Section 183, and will update its shareholders if there are material developments. It also urged investor caution in dealing with its shares.

 

Lim, who owned some 29.45 per cent of Fu Yu shares as at Jan 9, had made two previous unsuccessful attempts to requisition extraordinary general meetings (EGMs) on the appointment and removal of directors.

 

In his first attempt on Jan 9, he said he was requisitioning an EGM because of the company&rsquo s poor performance and falling share price. In a letter dated that day, he said that &ldquo substantial shareholder value has been erased&rdquo since the directors he proposed ousting were elected to the board.

 

He noted that the company&rsquo s share price &ldquo dropped steadily&rdquo from S$0.33 in 2021 to S$0.13 as at Jan 9, a fall of more than 60 per cent. He added that the company&rsquo s performance had &ldquo deteriorated&rdquo , going from its 2021 booking of a net profit of S$17.6 million to a net loss of S$10.1 million in 2023.

 

His Jan 9 letter requisitioning for the first EGM called for five resolutions to be passed. These included removing two independent, non-executive directors, Christopher Huang and Royston Tan, as well as appointing Gilbert Rodrigues, Ralf Pilarczyk and Yang Zhenrong as independent, non-executive directors.

 

Fu Yu&rsquo s board of directors on Jan 31 said the company would not convene the EGM as it had obtained legal advice stating that Lim&rsquo s requisition did not meet the legal requirements.

 

He made another attempt to call for an EGM on Feb 5, also on the grounds of the company&rsquo s poor performance. On Feb 26, Fu Yu said it rejected this push for a meeting because it did not meet the necessary requirements specifically, it said its board had been given legal advice that Lim had failed to serve the required special notice to the two directors he proposed ousting when he made the request for the EGM.

Excluding these, the group expects to post an operating profit and an improvement in financial performance for the fiscal year

 

MAINBOARD-LISTED plastic parts manufacturer Fu Yu : F13 -1.79% warned on Friday (Feb 14) that it expected to report a net loss for its financial year ended Dec 31, 2024, as a result of two one-off impairments totalling S$3.8 million.

 

The first relates to S$3.3 million of remaining goodwill in connection with the group&rsquo s FY2021 investment in Fu Yu Supply Chain Solutions (FYSCS). This non-cash impairment is due primarily to the cessation of the business unit&rsquo s activities in the final quarter of FY2024.

 

The second non-cash impairment involves some S$0.5 million on the property, plant and equipment of a subsidiary in China, with the recoverable amount falling below the carrying value.

 

Excluding these one-off impairments, Fu Yu expects to post an operating profit as well as an improvement in financial performance for FY2024.

 

It intends to release its financial results on or before Feb 28, alongside further details on its performance and forward strategies.

 

The group also said that an ongoing inquiry into the affairs of FYSCS is &ldquo isolated&rdquo to that business unit, and does not impact its core manufacturing division.

 

FYSCS was found to have made one or more unverifiable arrangements involving a payment of about US$3 million to a third party, which did not appear to have provided any services. There were also potential conflict-of-interest issues in the arrangement.

 

Separately, on Jan 10, Fu Yu&rsquo s largest shareholder Victor Lim called for an extraordinary general meeting (EGM) to remove two directors amid falling shareholder value and what he described as the company&rsquo s poor performance.

 

The same month, Fu Yu declined to convene the EGM, saying it had obtained legal advice stating that the requisition did not meet the legal requirements and was insufficient to invoke Section 176 of the Companies Act. The board also rejected Lim&rsquo s earlier bid for a board seat.

 

On Feb 6, the group received a second letter from Lim with similar demands.

 

Fu Yu Corp, facing an EGM requisition bid from its largest shareholder, says it has uncovered unverifiable payments of more than US$2.98 million to an unnamed third party by a subsidiary that is undergoing a risk management processes investigation.

 

On Feb 6, citing an interim update from an external law firm Damodara Ong, Fu Yu says that this subsidiary Fu Yu Supply Chain Solutions, or FYSCS, paid for services which " did not appear to have been rendered" .

 

According to Fu Yu, some current and former employees have been called to give interviews as part of the investigations.

 

They include Victor Lim, Fu Yu' s director of strategy for the past four years, whose assistance has been requested for since last December.

 

Fu Yu " understands" that Damodara Ong is " in the process" of scheduling an interview with Lim through his lawyers.

 

Lim also happens to be the company' s largest shareholder with a stake of more than 29%. His earlier EGM requisition has been turned down, according to Fu Yu on Jan 31. His request to join the board has been rejected as well, says Fu Yu.

 

Lim wants to oust two of the company' s three independent directors and appoint three other IDs in turn as he is not happy with the company' s deteriorating performance.

 

In Fu Yu' s announcement on Feb 6, Lim, following the rejection last month, has on Feb 5 sent in a second EGM requisition repeating his requests.

 

Meanwhile, besides the unverifiable payments, Fu Yu says that as part of the probe on FYSCS, it has also uncovered potential conflicts of interest issues requiring deeper checks.

 

Other issues flagged included unauthorised use of an email account " [email protected]" by third parties requiring further review the secondment of an unnamed individual to FYSCS as its general manager from May 2023 to May 2024 whose conduct " raises questions" .

 

In addition, there were also " irregular" expense claims made by an unnamed former employee of FYSCS on behalf of a current employee of Fu Yu, who is also unnamed.

 

The company says it will update shareholders and " meanwhile" it " will remain focused on, and be carrying on business as usual."

 

The company says it had obtained legal advice that the request is insufficient to invoke Section 176 of the Companies Act

 

THE board of directors of Fu Yu Corporation on Friday (Jan 31) announced that the company will not convene an extraordinary general meeting (EGM) requisitioned by Victor Lim, its largest shareholder.

 

In a bourse filing, the precision plastic components manufacturer said that it had obtained legal advice stating that the requisition did not meet the legal requirements and was insufficient to invoke Section 176 of the Companies Act.

 

Lim is not a member of the company as defined by the Act, even though he owns the beneficial interest in the shares described in his letter.

 

Fu Yu&rsquo s independent directors also obtained separate legal advice with similar points. They remain committed to working with the company and engaging Lim in constructive dialogue.

 

The board has considered the needs and interests of shareholders including Lim, and concluded that an EGM and any resolutions passed would be invalid and may expend company resources unnecessarily.

 

Fu Yu&rsquo s legal counsel has been instructed by the board to reach out to Lim to clarify his concerns and reasons for the requisition.

 

&ldquo The board reiterates its commitment to cooperate in assisting its members who submit valid requisitions to convene general meetings,&rdquo the company said in the filing.

 

Internal audit findings

Separately, the board announced an investigation into Fu Yu Supply Chain Solutions (FYSCS), a wholly owned subsidiary of Fu Yu, following an internal audit. The internal audit report &ndash dated Jul 26, 2024, and received by the board on Aug 7 &ndash showed that the business unit was assessed to have cause for considerable concern.

 

The report found significant weaknesses in FYSCS&rsquo risk management process that could expose the unit to unacceptable levels of risk if left uncorrected. Besides the initial scope of the report, the internal audit team also identified additional risk areas.

 

In acting on the findings of the report, Fu Yu&rsquo s board engaged law firm Damodara Ong on Oct 8, 2024, to conduct an investigation into the affairs of FYSCS. The investigation is still ongoing, with the board awaiting updates.

The company&rsquo s board remains &lsquo willing and able&rsquo to assess the board candidates proposed by substantial shareholder Victor Lim

 

PRECISION plastic components manufacturer Fu Yu Corporation&rsquo s board of directors declined to appoint substantial shareholder Victor Lim as a director due to potential non-conformance to the &ldquo directors&rsquo integrity requirements&rdquo set out by the Singapore Exchange (SGX).

 

Specifically, Fu Yu said that the board&rsquo s nominating committee (NC) relied on SGX&rsquo s listing manual rules 246(5)(a), which are to be read with the Securities and Futures Regulations 2018.

 

&ldquo The current NC remains willing and able to discharge their duties to perform the assessment of the current board candidates proposed by Lim,&rdquo the company said in a bourse filing on Friday (Jan 24).

 

Lim had earlier called for an extraordinary general meeting on Jan 9 to remove independent directors Royston Tan and Christopher Huang. He also called for the appointment of three other independent directors &ndash Gilbert Rodrigues, Ralf Pilarczyk and Yang Zhenrong. 

 

In response to queries by the Securities Investors Association (Singapore), or Sias, the company said that Lim has been a director of strategy at the company for the past four years, and that he indicated that he had a turnaround strategy.

 

&ldquo However, the NC does not hold the same view the NC also notes that Lim&rsquo s justifications were verbal, and not written,&rdquo the company said.

Fu Yu added that the board is open to engaging with Lim and has instructed its legal advisers to reach out to him for information and documents relating to the requisition.

 

The company reiterated that independent directors are not involved in the day-to-day running of the business of the group, and that it is &ldquo difficult to see&rdquo how replacing the directors would effectively improve the performance of the company and its share price.

 

It added that the board has not had disagreements with management. The company had earlier published its strategic direction with its corporate and business update on Nov 28, 2023.

 

&ldquo In the board&rsquo s view, the execution of these strategies will be necessary to drive the company&rsquo s financial turnaround, and pave the way for future growth,&rdquo the company said.

 

Furthermore, Fu Yu said that it is at the tail end of its internal re-tooling and transformation, which will provide a &ldquo strong business foundation to secure customers in new markets and improve operational efficiencies&rdquo .

 

&ldquo Already, the group has recorded increases in orders and higher interest to increase order volumes in recent months, partially driven by customers looking to stockpile inventory in response to an expected rise in US-China trade tensions,&rdquo the company said.

 

Fu Yu added that the company is in the initial stages of prototyping, design iterations and mould development for new clients it secured in FY2024.

 

The group&rsquo s unaudited FY2024 financial results are expected to be released at the end of February 2025, Fu Yu said.

The association is also asking for the board&rsquo s opinion on whether the company&rsquo s recent upturn in financial results will continue

 

THE Securities Investors Association (Singapore), or Sias, has asked precision plastics manufacturer Fu Yu Corporation&rsquo s board to substantiate the claim by the largest shareholder Victor Lim that the company&rsquo s independent directors (IDs) should be removed due to company performance.

 

In its questions Fu Yu&rsquo s board on Thursday (Jan 16), the association noted that IDs are not typically involved with managing the company.

 

It further asked if the board has actively engaged with Lim on Fu Yu&rsquo s strategic direction, as well as whether there have been disagreements between the board and the company&rsquo s management of its strategy.

 

Fu Yu&rsquo s IDs Christopher Huang and Royston Tan had expressed surprise that Lim, who holds a 29.45 per cent stake in the company, requisitioned for an extraordinary general meeting (EGM) on Jan 9 to have them removed.

 

Huang also said that the IDs could not &ldquo in good conscience, say that it is in the best interest (of the company) for him to be admitted as an executive director&rdquo , although he did not give any specific reasons for why the board declined his bid.

 

The Business Times understands that Lim has been a director of strategy at Fu Yu since 2021, but was not on the company&rsquo s board.

 

He has called for the appointment of Gilbert Rodrigues, Ralf Pilarczyk and Yang Zhenrong as IDs to replace them.

 

&ldquo In the event the IDs are removed at the proposed EGM, who will review the suitability of the ID candidates proposed by Mr Lim, as there will be no nominating committee to assess the board candidates proposed by Mr Lim?&rdquo Sias asked.

 

Tan is currently the chairman of the board&rsquo s nominating committee.

 

This comes after Fu Yu&rsquo s board rejected Lim&rsquo s bid for a board seat on Dec 26, 2024. Sias has asked the board&rsquo s nominating committee for its reasons for rejecting his request to join the board, as well as the justifications that he presented to join the board.

 

Sias also asked for the board&rsquo s opinion on whether the company&rsquo s recent upturn in financial performance would continue. 

 

In the nine months leading up to Sep 30, 2024, Fu Yu&rsquo s revenue rose 55.2 per cent to S$162 million, while its net loss narrowed to S$1.9 million, from S$5.8 million in the prior year.

 

Local fund management firm Pilgrim Partners Asia had earlier purchased a 29.8 per cent stake in Fu Yu from the company&rsquo s co-founders and placed it in a fund in January 2021.

 

Lim became the fund&rsquo s sole shareholder on Nov 22, 2024, and opted to wind it down on Dec 11, 2024. He had also applied to join the company&rsquo s board, the company said in a clarification notice on Dec 19, 2024.

The independent directors reiterate that they do not have any control over the day-to-day operations of the company 

 

PRECISION plastic components manufacturer Fu Yu Corporation&rsquo s independent directors (IDs) Royston Tan and Christopher Huang were surprised that substantial shareholder Victor Lim has requisitioned for an extraordinary general meeting (EGM) to have them replaced, they said on Monday (Jan 13).

 

In a bourse filing released last Thursday (Jan 9), Fu Yu : F13 0% announced that Lim had called for both Huang and Tan to be removed as directors of the company in the EGM.

 

Lim also called for the appointment of Gilbert Rodrigues, Ralf Pilarczyk and Yang Zhenrong as independent non-executive directors.

 

In his requisition notice, Lim said that substantial shareholder value had been erased since both Huang and Tan were elected to the board.

 

Tan and Huang were elected to the board as IDs on Jan 31, 2022, and Jul 19, 2021, respectively.

 

Tan, who is chairman of the board&rsquo s nominating committee, told The Business Times that the board had rejected Lim&rsquo s application to join the board on Dec 26. However, he declined to specify their reasons for doing so.

 

On Dec 19, the company issued a clarification notice about the status of Lim&rsquo s 29.8 per cent stake in the company.

 

It said that Lim, who had originally purchased a stake in the company from its co-founders in January 2021 through Pilgrim Partners Asia, had decided to wind down the fund and redeem his shares in-specie, of which he currently holds a 29.45 per cent stake.

 

In addition, the company noted that he had also applied to join the company&rsquo s board.

 

Huang added that as an ID, he would not bend to shareholder pressure, no matter how substantial their stake.

 

&ldquo We cannot, in good conscience, say that it is in the best interest (of the company) for him to be admitted as an executive director at this juncture,&rdquo he said, adding that he would leave it to the company to address why Lim was rejected.

 

Meanwhile, Tan said that he was surprised by the move to try and remove the company&rsquo s IDs for its performance, since a company&rsquo s financial performance is typically tied to the executive team&rsquo s performance.

 

&ldquo The IDs don&rsquo t get involved in the day-to-day execution of running the business. This is very, very clear,&rdquo he said.

 

He added that from a financial perspective, he felt that the company&rsquo s management team has done a &ldquo very good job&rdquo amid a difficult macroeconomic environment post-pandemic.

 

In the nine months leading up to Sep 30, 2024, the company posted a 55.2 per cent increase in revenue to S$162 million and a net loss of S$1.9 million, narrowing from a net loss of S$5.8 million a year earlier.

 

Huang said that as with any strategic reset, a company&rsquo s performance would likely follow a sort of &ldquo J curve&rdquo as its performance dips and the company recalibrates on a growth path.

 

&ldquo It&rsquo s up to the market to decide how they view the company&rsquo s trend to be,&rdquo he said.

 

In a bourse filing on Monday, Fu Yu said that the company and the board have appointed lawyers to advise on the requisition of the EGM.

 

Both the company and board also reiterated that Huang and Tan are IDs, and are not involved in the day-to-day operations of the company.

 

BT has reached out to Fu Yu to understand Lim&rsquo s role at the company, as well as the reason that he was declined a seat on the board.

 

The largest shareholder of manufacturer Fu Yu Corp is calling for an EGM to remove two out of the four company directors, citing its deteriorating performance.

 

Victor Lim Wei De, who holds 29.45% of Fu Yu shares, states in his requisition letter that the company' s earnings had dropped from $17.58 million in FY2021 to a loss of $10.11 million in FY2023. The share price has dropped from 33 cents in 2021 to 13 cents as of Jan 9. 

 

Lim wants to remove chairman Christopher Huang Junlin and another independent director Royston Tan Tong Loong, but not the other two directors, CEO David Seow Jun Hao and Daniel Poh Kai Ren.

 

All four directors were appointed to their roles in Fu Yu between 2021 and 2022.

 

In their place, Lim wants to appoint three independent directors. They are Gilbert L Rodrigues, Ralf Pilarczyk and Yang Zhenrong.

 

" A strategic reset of the company and reorganisation of the board will be required," says Lim in his requisition letter. 

 

Lim, according to Fu Yu, has been employed by the company since 2021 as director of strategy.

 

In its more recent 1HFY2024 ended June 2024, the company eked out earnings of $0.1 million, reversing from a loss of $3.9 million in the year earlier. Revenue in the same period was up 78% y-o-y to $126.7 million.

 

As indicated in its 9MFY2024 ended Sept 2024 business update, Fu Yu has improved its revenue by 55.2% to $162 million and eked out an operating profit of $0.8 million, versus an operating loss of $6.5 million.

 

According to Fu Yu' s Dec 19 filing with SGX, Lim previously held shares in the company via a fund but the fund has been wound down and Lim now holds the shares directly.

Precision plastics parts maker Fu Yu Corp has recorded a net loss of $1.9 million in 9MFY2024 ended September, after including forex losses and taxation, compared to a net loss of $5.8 million in the same period last year. 

 

This came on the back of a net loss of $3 from its manufacturing division, which was partially offset by the group&rsquo s supply chain management services division&rsquo s net profit of $1.1 million.

 

Meanwhile, the group recorded an operating profit of $0.8 million for 9MFY2024, reversing from an operating loss of $6.5 million in 9MFY2023. 

 

For the same period, revenue rose by 55.2% y-o-y to $162 million, driven by higher sales across the group&rsquo s manufacturing and supply chain solutions divisions. 

 

For 3QFY2024, the group&rsquo s revenue saw a 7.6% y-o-y increase to $35.7 million, due to improved performance from Fu Yu&rsquo s manufacturing business. Contributions from the group&rsquo s Singapore and Malaysia operations grew 13.7% and 31.8%, respectively, in 9MFY2024 to $33.3 million and $27.8 million, respectively. This was partially offset by lower sales from China. 

 

Similarly, gross profit from the group&rsquo s manufacturing segment saw a 15.5% y-o-y increase to $10.6 million in 9MFY2024, while gross profit margin for the segment stood at 12.4%, up from 11.6% a year ago. 

 

For its supply chain segment, the group recorded revenue contributions of $76.4 million, up from $25 million in 9MFY2023. This came on the back of higher demand amid a global economic recovery, says the group. 

 

Gross profit margin for the segment increased to $1.5 million in the same period from $0.3 million in 9MFY2023, while gross profit margin stood at 1.9%. 

 

Group-wide gross profit rose by 27.5% to $12.1 million in 9MFY2024, while gross profit margin for the group stood at 7.5%, mainly due to a change in revenue mix.

 

Before foreign exchange, the group&rsquo s ebitda stood at $6.4 million, up from $0.1 million in 9MFY2023, due to growth in the manufacturing segment.

 

Moving forward, the group says it will continue to execute its transformation strategies to upgrade its manufacturing capabilities, move up the value chain to provide higher-precision products, and expand its customer base into new emerging industries.

 

As at Sept 30, the group&rsquo s net cash stood at $55.8 million or 7.3 cents per share. 

 

David Seow, group CEO of Fu Yu, says: &ldquo Looking ahead, we will strive to secure new customers in the biomedical sector and maintain a healthy project pipeline. In response to macroeconomic headwinds and geopolitical headwinds, we will continue to implement our strategies for long-term transformation to diversify our customer base, particularly in the biomedical industry.&rdquo