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Minority shareholders hampering Darco' s growth, says deputy chairman
Robert Wang Zhi says his interests aligned with those of other shareholders
THREE years after Darco Water Technologies decided it would try for more long-term concession projects to raise its income stability, it has little to show for its efforts.
So far, the environment-solutions company has just one greenfield concession project in Vietnam - a drinking-water project in Ben Tre province in the country' s Mekong Delta.
Darco' s non-executive deputy chairman Robert Wang Zhi said the travel curbs imposed because of Covid-19 are partly to blame.
But he also attributes the lack of progress to feelings of " resentment" and " mistrust" that the company' s shareholders harbour against him.
Late last month, Darco had exercised an option to pull out of a waste-management project in West Java, Indonesia, after attempts to renegotiate contractual terms with the local government fell through.
A number of shareholders had opposed the project. They also voiced objection to a dilutive share placement in January this year, and at the annual general meeting, questioned his decision against re-appointing some directors.
" Shareholders with a combined 15 per cent stake in the company have cast aspersions on my intentions and made statements that were misguided," he told The Business Times in Mandarin.
These shareholders include the company' s former chief executive officer Thye Kim Meng, Sofos Infrastructure Investment Fund and Robert Stone. Bloomberg data shows they control 7.6 per cent, 3.7 per cent and 11.7 per cent of the company respectively.
Mr Wang said he had heard of the Indonesian project through a business contact, and, believing it to be a good strategic fit for the company, had " zealously" promoted the project to the company.
To reduce the risks for Darco shareholders, he offered to underwrite any due-diligence fees beyond S$100,000 he also offered to take over the project if Darco decided not to proceed with it.
Minority shareholders had been worried that the US$46 million in fresh funding needed for the project would be a drag on the firm.
But Mr Wang said that, had the business proposition been clearly explained, there would have been no lack of investors wanting in on the project, thus ensuring it would be funded.
Mr Wang said he had voted against the reappointment of certain directors because he found them " too passive" and had not made much contribution to the board.
The single largest shareholder of Darco, he has spent more than S$20 million building up his stake of 44 per cent. In May this year, he launched a general offer for the company to raise his stake in it, but managed to get acceptances of just 3.9 per cent.
He first entered the picture after Mr Thye arranged for both of them to visit Darco' s chairman Wang Yaoyu in Wuhan in 2017.
The trio had discussed a strategic push into long-term concession projects, and Mr Robert Wang had seen Darco as a means of diversifying his investments. (Besides Darco, he has also invested in the agriculture and tourism industries in China.)
An engineer by training and a Singaporean since 2013, he believed he could use his resources, experience and network to help the company grow.
He has " more reason than most to see Darco succeed" , he added, and continues to believe in the potential of the company.
" Water and waste management are essential services - with or without a coronavirus pandemic. Mounting pressures for governments to take actions on climate change as well as economic growth will lead to an unprecedented rise in spending on sustainable water and waste-management solutions in the coming decades, particularly in heavy-resource countries like China and Indonesia," he said.
But he said that the concerns of minority shareholders have been a distraction the company' s management has found itself constantly preparing responses to queries from the Singapore Exchange and other shareholders.
He said: " This will have a negative impact on the company' s operations and shareholders' returns if it continues.
" The sooner we let management get back to the job of growing the business instead of responding to media reporting and false allegations, the better it is for all shareholders.
" If not for all these conflicts, we should at least have been able to clinch a concession project by now."
For the first half of the year, Darco reported losses of S$1.7 million - an increase from the net loss of S$321,000 of the year before.
Revenue fell 11 per cent to S$27.1 million due to fewer project deliveries in Malaysia and Singapore, as a result of some customers shutting down their plants or reducing their capacity because of the outbreak of Covid-19.
Add to this the fact that administrative expenses went up 18 per cent to S$5.5 million, a sizeable proportion of which was related to legal and professional fees for due diligence for the waste-management project in Indonesia, the placement exercise and the mandatory general offer.
Darco' s ex-CEO says allegations undermine his contributions
THE former CEO of Darco Water Technologies Thye Kim Meng on Friday responded to Darco' s allegations that he had breached his duties to the company in relation to a water and solar project.
He called it " an attempt to undermine the work and contributions" which he has made to the company, and challenged the company to seek its recourse in courts if it believes that it is entitled to seek such damages and losses against him.
Darco' s allegations on Thursday were in relation to the proposed acquisition of a solar power farm in Con Dao, Vietnam, and a 90 per cent interest in Can Guioc Water Works. The company said that Mr Thye' s alleged breach of duties caused the company losses and damages of US$1.6 million, because these projects did not go through in the end.
In a letter to the board on Friday, Mr Thye said that the announcement of the letter of demand, together with earlier announcements filed to the Singapore Exchange, sought to " single (him) out" and " tarnish (his) reputation" , with the company knowing full well that they will be reproduced in public media reports.
In his letter, Mr Thye also said that he has not received any letter of demand on Friday, and so it was " unreasonable" for the company to ask him to furnish a written confirmation by Aug 12 that he will pay to Darco the losses and damages.
In response, Darco' s solicitors Solitaire LLP said that on this point, Mr Thye is " at best, disingenuous and at worst, lying" . This is because the law firm had on Aug 12 sent out the letter by three methods: by e-mail, certificate of posting and AR registered post.
Mr Thye also questioned why he had to pay US$1 million for the water project, given that Darco had already given formal notice to the vendor to request for the full refund of US$1 million in accordance with the earlier-signed framework agreement.
An agreement has also been inked in April this year for the vendor to repay the deposit over 66 monthly instalments, starting from June 2020.
As for the solar project, he questioned why Darco did not attempt to get a refund of the US$600,000 it had invested in the project so far, before seeking to claim these losses and damages from him.
To this, a Darco spokesman said: " The company has been pursuing all avenues to protect its interests. But given the potential litigation that may arise, the company is unable to comment more at this juncture and will instead make timely announcements as and when significant developments occur."
Mr Thye also demanded a confirmation from the board as to whether the issuance of the letter of demand was an action taken by the management of the company, or the company under the instructions or influence of non-executive deputy chairman Wang Zhi.
Darco Water issues letter of demand against former CEO
DARCO Water Technologies is alleging that its former chief executive officer (CEO) and director Thye Kim Meng breached his duties to the company in relation to a water project and a solar project, causing losses and damages to the company.
The Catalist-listed firm, through its solicitors Solitaire LLP, issued a letter of demand dated Aug 12 against Mr Thye, alleging these breaches and quantifying the losses and damages at US$1.6 million.
Darco demanded that he provide written confirmation, no later than Aug 12, that he will pay the US$1.6 million amount less any sums that the company may recover.
Darco previously proposed to acquire a solar power farm in Con Dao, Vietnam, as well as a 90 per cent stake in Can Guioc Water Works, under the direction of Mr Thye. However, Darco last week announced that the water project was not commercially viable and thus requested a full refund of the US$1 million partial payment that had been remitted to the seller for the proposed acquisition.
The management had been in discussions with the counterparties to these two transactions to determine the feasibility of continuing with the water and solar projects, and to recover the payments that had been made in advance, should a decision be made to exit from any of the projects.
Mr Thye was a director of the company from October 2001 to May 2019 and held key appointments within the group during his tenure, including as the managing director from March 2002 to May 2019, and as CEO from June 2002 to May 2019.
Darco on Thursday said its solicitors will take all necessary steps to protect the company' s interest, including commencing legal proceedings against Mr Thye if he fails to comply with the letter of demand.
Darco to exercise option to scrap Nambo deal
THE board of Darco Water Technologies has directed its management to exercise the reversal option for the controversial Nambo project, and to take steps to recover the investment made and costs incurred over the conditional sale-and-purchase agreement that it had signed last November.
This was because the West Java government was not agreeable to re-negotiating the terms of the cooperation agreement that the acquisition target company, PT Jabar Bersih Lestar (JBL), had signed with it to provide waste-management services in Bogor City, Bogor Regency and Depok City in Indonesia.
JBL had previously made a formal submission to the West Java government, asking for the re-negotiation of, and modifications to, some terms of the deal, following recommendations by a consultant, but the West Java government were not agreeable.
Despite the seller Emsus Co' s further efforts to engage with the West Java government to make the project viable, the government held its ground.
Accordingly, Darco will proceed to issue a notice to the seller to exercise the reversal option. The completion of the repurchase of the sale shares by the seller is expected to take place within 14 days once the notice is served.
The reversal option will enable Darco to unwind the sale-and-purchase of the sale shares, and sell them back to the seller. In return, the seller will pay Darco US$300,000 and US$400,000, being the sum of the advance payment and first payment, respectively. The target company will pay Darco US$600,000, being the sum of the second payment.
Monkey business on going in China and Indonesia between the 2. Don' t trust the 2 Chairs...
Darco' s deputy chairman to recuse himself from deliberations on Indonesian project
DARCO Water Technologies deputy chairman Robert Wang Zhi is prepared to abide by the audit committee&rsquo s recommendation that he abstain from deliberations and decisions on a controversial Indonesian waste management project in which the water treatment firm has proposed to invest.
This statement was made to Darco&rsquo s board through Mr Wang&rsquo s legal counsel, Darco said in an announcement on Thursday.
Darco also disclosed that Mr Wang had first learned of the opportunity to take a 75 per cent stake in the Indonesian company Panghegar Energy Indonesia (PEI) through Steven Yee, a general manager at Yunnan Water. PEI&rsquo s 80 per cent-owned subsidiary Jabar Bersih Lestari has inked a cooperation agreement with the West Java government to provide waste management services in certain parts of the province.
The announcement did not specify which unit of Yunnan Water Mr Yee was employed with.
Darco acquired its PEI stake for US$1.5 million, of which US$400,000 was paid to Yunnan Water (Hong Kong) Co, a wholly-owned subsidiary of Hong Kong-listed Yunnan Water Investment Co. Darco had said this was because Yunnan Water (Hong Kong) had a share pledge over the PEI shares.
Mr Wang was previously a director of Yunnan Water International, also a unit of Yunnan Water Investment.
Shareholders had earlier raised doubts about the Indonesian project and asked that Mr Wang recuse himself from further discussions and decisions on the project since he is liable to fully reimburse Darco for any and all costs incurred in pursuing the acquisition if for any reason Darco cannot or decides not to proceed with it.
Darco' s audit panel calls for deputy chairman to recuse himself from project
DARCO Water Technologies' audit committee has recommended that its deputy chairman consider abstaining from deliberations and decisions on a controversial Indonesian waste-management project that he has reportedly been pushing for Darco to invest in.
The mainboard-listed water treatment company, in response to queries from the Singapore Exchange (SGX), revealed on Friday that its audit committee has recommended that deputy chairman Robert Wang Zhi consider recusing himself from discussions and decisions on the Nambo project. Darco added in the statement that the company is awaiting his response.
This revelation was made despite the board having said earlier that it saw no reason to view Mr Wang as having a potential conflict of interest. The board was then responding to shareholders' questions ahead of Darco' s annual general meeting. It had said then: " None of Mr Wang Zhi, his family and associates is interested in the project... Mr Wang Zhi is also not a director in the company which currently holds the project."
Minority shareholders who own a combined 15 per cent stake in Darco had earlier appealed for Mr Wang to recuse himself from talks and decisions on the project, since he is liable to fully reimburse Darco for any and all costs incurred in pursuing the acquisition if, for any reason, Darco cannot or decides against going ahead with it. This means he would face personal losses if Darco ditches the project.
These shareholders fear that the project - which Darco has said could require fresh funding of up to US$46 million - will be a major drag on Darco amid uncertain returns.
Darco also said it has reached out to Mr Wang on SGX' s other queries. SGX wanted to know how he became aware of a deal between Darco and Emsus Co to acquire 75 per cent of the total issued and paid-up share capital of PT Panghegar Energy Indonesia. Panghegar' s 80 per cent-owned subsidiary Jabar Bersih Lestari holds the controversial Nambo project. This gave Darco an effective 60 per cent interest in the project.
In addition, his response is pending on whether he had any involvement in the placement process that proposed S$6.5 million in new shares to be placed to three private investors at S$0.35 apiece.
Darco is to also furnish details on the background of how one of the investors, Yunnan Sidu Investment, was identified and procured as one of the placees for the proposed placement.
Darco says Indonesia project could be financially rewarding ' if carefully managed'
THE board of directors of Darco Water Technologies sees its Indonesia waste management project as a " rare opportunity" to secure a long-term concession project in a new territory where the group has not had any presence.
The board made several clarifications in a filing on Monday, pointing out that there remain " misgivings" among some shareholders as to the purpose and rationale for the company investing in the project and its decision to continue to explore the feasibility of the investment.
The Business Times reported recently that minority shareholders fear that the project - which Darco has said could require fresh funding of up to US$46 million - will be a major drag on the company.
Darco had acquired a 75 per cent stake in Panghegar Energy Indonesia (PEI), while PEI' s 80 per cent-owned subsidiary Jabar Bersih Lestari (JBL) holds the project. This gave Darco an effective 60 per cent interest in the project.
For the project, JBL had signed a cooperation agreement with the West Java government to provide waste management services in Bogor City, Bogor Regency and Depok City in Indonesia.
The third-party consultant engaged by Darco to perform technical and economics due diligence later recommended that certain terms of the cooperation agreement should be renegotiated to render the project viable. However, the West Java government has indicated that it is not agreeable to a renegotiation and that JBL should take steps to commence operation of the project, according to Darco' s filing last Thursday.
Darco on Monday said its clarifications were meant to " address the incorrect impression" that the decisions relating to the PEI stake purchase and the project were made without due consideration by the board.
" If carefully managed, the board believes that the project, which has built-in downside protection from the manner the acquisition is structured, could be financially rewarding for the group," it stated in the filing on Monday.
The company also has the right to exercise the reversal option to exit the project and unwind the acquisition as the board deems fit.
Darco, which has no long-term concession projects under its belt, added that securing the Indonesia project will be a " decisive win" - subject to the terms being right and earnings accretive - as it will bring a stable stream of revenue and help establish a track record for the group to bid for more such projects in Indonesia and the rest of Asia.
Although certain board members had differences in opinion on the appropriateness of the PEI stake acquisition, Darco said this was normal as part of the board&rsquo s deliberations and debate on entering into any transaction by the company.
Despite the differences in opinion, the board later determined that the management should proceed with the acquisition with the necessary safeguards, as it was of the view that the project, if successful, will transform the group and establish a new business segment for it.
The board also continues to believe it will be in the interest of the company to take another shot at making the project work.
This is after the board had deliberated on and weighed the pros and cons of either exercising the reversal option immediately, or working with the West Java government to secure improved terms and conditions.
Darco has requested Emsus, as its business partner and the seller in the PEI 75 per cent stake deal, to reach out to the government to find a " mutually beneficial and workable solution" to the issues surrounding the project.
Darco on Monday also said that its deputy chairman Robert Wang Zhi has never had a personal interest in the PEI stake acquisition and the project - other than through his shareholding interest in Darco - as far as the board is aware and after it had made " due enquiries" .
&ldquo As such, the interests of the company and Mr Wang insofar as the acquisition and the project are concerned have been aligned right from the start,&rdquo the board added.
Last Thursday, the directors said they believed that there is no reason to consider Mr Wang as having a potential conflict of interest in the project. Minority shareholders owning a combined 15 per cent stake in Darco earlier appealed for Mr Wang to recuse himself from further discussions and decisions on the project, seeing as he is liable to fully reimburse Darco for any and all costs incurred if Darco cannot or decides not to proceed with it. This means he would face personal losses if Darco ditches the project.
The company on Monday reiterated that the deputy chairman has offered to pay for costs and expenses incurred by Darco in excess of S$100,000, and to take over the project from the company if the board is not satisfied with the findings of the due diligence and feasibility studies, and opts to exercise the reversal option.
&ldquo Mr Wang has no obligation to make such an offer and has done so gratuitously and purely as a gesture of goodwill as well as to demonstrate his personal belief that the acquisition and project would be beneficial and positive for the group&rsquo s development and growth,&rdquo the board said.
Darco shareholders right to let offer lapse should push for more accountability
DARCO' s deputy chairman Wang Zhi needed shareholders representing just a little over 5 per cent of the company' s holdings to take up his offer to buy their shares. He was able to get acceptances of only 3.9 per cent, which suggests minorities weren' t convinced by the chairman' s recommendation that they take the deal. But shareholders shouldn' t stop there. Recent events at Darco are not conducive to the value of the stock, and shareholders should continue to pressure the board to act on their behalf.
Mr Wang had made a general offer for all of Darco' s shares at S$0.17 per share. The offer was conditional on him accumulating at least 50 per cent of the total voting rights in Darco.
The independent financial adviser (IFA) RHT Capital had, in a June 9 circular, recommended that shareholders reject the offer because the financial terms were deemed to be " not fair" and " not reasonable" .
The offer price represented a 56 per cent discount to the company' s audited net tangible assets per share as at end-2019.
The IFA also said that the company seems to be doing well operationally. It has sufficient current assets to cover its current liabilities, and its net cash outflow from operating activities has decreased significantly in FY2019 compared to FY2018.
In accordance with the IFA' s opinion, the independent directors had therefore recommended that shareholders take no action and allow the offer to lapse. But in a startling departure, Darco' s chairman Wang Yaoyu instead recommended that shareholders accept the offer.
He had argued that the offer presented a good exit opportunity given the illiquidity of the shares and the fact that the water purification and wastewater treatment industry that the group operates in faces " significant challenges" .
The offer for Darco had been triggered after Mr Wang Zhi purchased a 14.27 per cent stake in Darco from Wuhan Liankai Investment Co, a company in which Mr Wang Yaoyu has a 36.32 per cent equity stake.
Lawyers that The Business Times spoke to said that according to the Singapore Code on Take-overs and Mergers, the sale of the shares would not exclude Mr Wang Yaoyu from making a recommendation on the offer.
The note to Rule 8.3 in the Code says that directors of the offeree company who have sold offeree company shares to the offeror are not deemed to have an irreconcilable conflict of interests.
Lawrence Tan, partner and head of merger and acquisition at Rajah & Tann Singapore, said that only directors with " other interests in or financial connection with the offeror" would be excluded.
TSMP Law joint managing partner Stefanie Yuen-Thio called the requirement for directors to make a recommendation to shareholders " a heavy responsibility and one that a director should not be able to weasel out of easily" .
" For this reason, the Takeover Code and the Securities Industry Council take a tough stance, granting a waiver only in ' exceptional circumstances' so that shareholders have the protection of knowing that all directors have signed off on the recommendation and are taking personal liability for the advice," she said.
Mr Wang Yaoyu' s recommendation did, at least, give shareholders an idea of his inclinations. They should now ask that Mr Wang Yaoyu and the rest of Darco' s board do better in representing their interests.
Since the close and lapse of the offer, Darco shares have risen as high as $0.19 each. But they fell yesterday to close at S$0.17.
At Darco' s annual general meeting on June 26, two independent directors were voted off the board. One, Tay Lee Chye Lester, was voted off nearly unanimously with 99.99 per cent of votes against his re-election. The re-election of the other, Tay Von Kian, was opposed by 71.04 per cent of votes - the same percentage of votes that approved the re-election of Mr Wang Yaoyu and Mr Wang Zhi as directors.
In a subsequent announcement posted on SGXNet, Mr Tay had highlighted some unresolved differences in opinion that he had with the rest of the board relating to an Indonesian waste management project that Darco is pursuing and that he objected to. He also highlighted he was uncomfortable with aspects of a placement that Darco had proposed, and said that in light of recent corporate governance issues raised by BT he might have been uncomfortable staying on as a director in any case.
Yesterday, Darco responded to Mr Tay' s statements with an announcement of its own. Among other things, Darco said Mr Tay gave the " impression that it was the two longer serving independent directors who had been upholding corporate governance standards of the company" when in fact various initiatives have been taken to enhance Darco' s corporate governance.
Mr Tay' s statement and Darco' s response show clearly that Mr Tay has been a dissenting voice on Darco' s board. His departure cannot be a good thing for minority shareholders.
The voting pattern from the AGM shows that it will be difficult for minorities to pressure the board into electing another similarly independently minded director. But they should nevertheless continue to demand greater accountability from Darco' s board.
This is the problem of overseas listing in SGX.
SGX and auditors only care about their fees, nothing else.
SGX and auditors only care about their fees, nothing else.
papayaface ( Date: 28-Jun-2020 07:59) Posted:
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China company now. Guess it is getting problematic, which history has shown.
Why this Lester and Tay Von Kian leave Darco Board. Should they not stay and fight? How come they leave the sinking ship. MAS should definitely investigate all these parties to see if anything improper.
Joelton ( Date: 27-Jun-2020 17:18) Posted:
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Shouldnt the auditors flag this out? Omg all sleeping. Good luck
TA_Expert ( Date: 28-Jun-2020 04:36) Posted:
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A good read up on good corporate governance.
The offeror is clearing ripping off sjhareholders at $0.17 offer price. Super lelong to the max.
https://governanceforstakeholders.com/2020/06/19/darco-water-technologies-executive-chairmans-dissenting-opinion-should-be-ignored/
The offeror is clearing ripping off sjhareholders at $0.17 offer price. Super lelong to the max.
https://governanceforstakeholders.com/2020/06/19/darco-water-technologies-executive-chairmans-dissenting-opinion-should-be-ignored/
No need for deputy chairman to recuse himself, Darco board argues
https://www.businesstimes.com.sg/companies-markets/no-need-for-deputy-chairman-to-recuse-himself-darco-board-argues
THE board of Darco Water Technologies is of the view that there is no reason to consider deputy chairman Robert Wang Zhi as having a potential conflict of interest in a controversial Indonesia waste management project that he has been pushing for the water treatment firm to invest in.
It made this statement on Thursday night in response to shareholders' questions ahead of Darco' s annual general meeting (AGM) on Friday.
Minority shareholders who own a combined 15 per cent stake in Darco had earlier appealed for Mr Wang to recuse himself from further discussions and decisions on the project, since he is liable to fully reimburse Darco for any and all costs incurred in pursuing the acquisition if for any reason Darco cannot or decides not to proceed with it. This means he would face personal losses if Darco ditches the project.
However, Mr Wang is not conflicted, the board has argued: " None of Mr Wang Zhi, his family and associates is interested in the project... Mr Wang Zhi is also not a director in the company which currently holds the project."
As things stand now, minority shareholders fear that the project &ndash which Darco has said could require fresh funding of up to US$46 million &ndash will be a major drag on Darco while returns are uncertain.
Darco said on Thursday that it continues to be in talks with the West Java government to renegotiate the terms of the project " so as to render it viable and earnings accretive" .
Although the West Java government has already indicated in a letter that it is not agreeable to a renegotiation of terms, Darco said that its business partner, Emsus Co, " is of the view that there remains room... to continue to engage with the West Java government to find an acceptable solution with a view towards rendering the Nambo project viable from a financial perspective" .
Separately, two of Darco' s four independent directors were voted out at the AGM on Friday. They are lead independent director Lester Tay Lee Chye and independent director Tay Von Kian. Both had been on the board before Mr Wang became Darco&rsquo s controlling shareholder through a placement in 2018. Mr Wang controls 44.44 per cent of Darco.
These exits have left the board with two independent directors. Both joined last May, after Mr Wang staged a surprise coup and turfed out Darco' s former chief executive and two other directors.
One of Darco' s two remaining independent directors is Joanna Ong Joo Mien, who is linked to Qarah Consultancy, which had tried to facilitate a placement of Darco shares that was eventually called off in March after protests from minority shareholders.
Ms Ong' s husband was Qarah' s sole shareholder until Aug 22 last year. He transferred his shares to one Alyssa Pek less than five months before the placement was announced.
When shareholders dug further, they found that Ms Pek shares a home address with one Gregory Pek, who became a Darco shareholder late last year. According to share variance reports, Mr Pek had been a seller of Darco shares on Dec 17, the same day that one shareholder, Robert Stone, had witnessed unusual trading activity in the stock that had the result of suppressing Darco' s share price.
The Business Times (BT) reported last week that the Monetary Authority of Singapore is reviewing a complaint on suspected market misconduct in the shares of Darco.
Mr Stone, who has an 11.68 per cent stake in Darco and is one of the shareholders who had pressed for a special audit of internal controls, and a review of potential conflicts of interests at the board level, told BT on Friday: " The thing that I have found most significant about all the responses from Darco in the last few days is the lack of any response to the reference to Gregory Pek in BT' s article. If his actions were innocent or the relevant director had no knowledge of his actions you would expect a statement or a denial."
In response to shareholders' questions, Darco revealed on Thursday that prior to the aborted placement, Qarah Consultancy had provided consultancy services to Darco over a period of three months in 2019.
However, Ms Ong has confirmed that she herself did not provide any services to Mr Wang or organisations related to him, Darco said. Mr Wang has also confirmed that Qarah Consultancy did not provide any services to him or organisations related to him, outside of Darco.
Voting patterns at Darco' s AGM on Friday suggest a rift among its shareholders. Mr Wang, Ms Ong and executive chairman Wang Yaoyu were each re-elected by a 71.04 per cent majority, with 28.96 per cent of shares voted against them.
https://www.businesstimes.com.sg/companies-markets/no-need-for-deputy-chairman-to-recuse-himself-darco-board-argues
Darco fields questions from minorities on disclosure and conflicts of interest
DARCO Water Technologies, in a regulatory filing on Wednesday, addressed issues raised by minority shareholders amid concerns that the company has lost its direction following a surprise change in leadership.
This comes after The Business Times (BT) reported on Tuesday that shareholders who own a combined 15 per cent stake in Darco were pressing for a special audit of internal controls and a review of potential conflicts of interests at the board level.
Shareholders had raised questions over Darco' s venture into an Indonesia waste-management project, in which the seller is a unit of Hong Kong-listed Yunnan Water Investment Co. Wang Zhi, who had become Darco' s controlling shareholder through a placement in 2018, was previously a director of one of its subsidiaries, Yunnan Water International.
Darco said in its regulatory filing that the seller of 75 per cent (sale shares) of the Indonesia waste-management project is Emsus Co, a South Korean-incorporated consultancy company, the sole director of which is Do Yun Yu, and not Yunnan Water (Hong Kong) Company Limited as alleged.
In a conditional sale and purchase agreement, Yunnan Water had a share pledge over the sale shares. It agreed to the release of the share pledge to facilitate the transfer of the sale shares to the company, but only upon assurance of the payment of US$400,000 that was then due and owing to it from Emsus.
Emsus requested that the US$400,000 payable as the first payment of the consideration was to be paid directly to Yunnan Water on completion of the transfer of the sale shares to Darco.
In addition, it clarified that the expected fresh funding of up S$46 million required to invest in the waste-management project in Indonesia is " only indicative" and that the company has not committed to the sum.
In response to shareholders' arguments that Darco has neither the resources nor expertise to go into waste management, the company pointed to its Singapore subsidiary, which builds and operates district-level pneumatic waste conveyance, and a Taiwan subsidiary which is in medical-waste collection. It added that it had in the past owned and operated medical-waste disposal and waste-sorting plants.
BT reported that Darco' s board had failed to disclose that Joanna Ong Joo Mien, who became an independent director after the coup last year, is linked to Qarah Consultancy, which would have collected a finder' s fee if an earlier planned private placement of S$6.55 million to China-based investors at S$0.35 per share, had gone through.
In response, Darco said that Ms Ong started her own corporate services business in 2010 and was engaged by Qarah between September 2013 and December 2019 to provide corporate secretarial services. She was then named company secretary and did not hold any executive role in Qarah.
The suite of services offered by her corporate services firm to Qarah included registered address services (which accounts for her home address being used as Qarah' s registered address), and nominee shareholder and nominee director services, which were provided through her husband, who also owns a small stake in her firm.
To reduce her workload and to pursue other personal commitments, she ceased providing corporate secretarial services to Qarah and resigned as company secretary last Dec 16, ending her involvement in the corporate secretarial matters of Qarah.
The principal of Qarah since its incorporation is Ng Teck Seng Ms Ong' s husband had acted as the nominee shareholder from Qarah' s incorporation until Aug 12, 2019, when Alyssa Pek, an employee of Qarah, replaced him as the nominee shareholder. Ms Pek acted as a nominee shareholder from Aug 12, 2019 until Nov 30, 2019, before Mr Ng became a registered shareholder of Qarah.
Ms Ong' s husband had not been involved in the day-to-day management or business of Qarah, and neither of them had any interest in the introducer' s fee that was contracted to be paid to Qarah in relation to the placement, said Darco.
Darco highlighted that it had only dealt directly with Mr Ng in matters involving the placement.
The company also acknowledged that it has received shareholder questions on the business and affairs of the group and will consolidate all related queries and publish the answers before its upcoming annual general meeting at 2pm this Friday.
Darco minority shareholders raise disclosure, conflict of interest issues
MAS says it is reviewing a complaint on alleged market misconduct in Darco Water shares
MINORITY shareholders who own a combined 15 per cent stake in Darco Water Technologies are pressing for a special audit of internal controls and a review of potential conflicts of interests at the board level, amid concerns that the company has lost its direction following a surprise change in leadership.
Darco shares have collapsed by 66 per cent since April last year, when non-executive deputy chairman Robert Wang Zhi launched a coup by voting out the entire board except for executive chairman Wang Yaoyu and lead independent director Lester Tay. Mr Wang Zhi had become Darco' s controlling shareholder through a placement in 2018.
Mr Tay had served as the chief financial officer of another water company, Asia Water Technology, when Mr Wang Yaoyu was its executive director.
To avoid thrusting the company into limbo, however, the Wangs, who are unrelated, later chose to re-elect all its directors. Thye Kim Meng, Darco' s chief executive since 2001, as well as two other directors, then agreed to resign. They did so one by one in May 2019.
Mr Wang Zhi is set to cement control in Darco through a general offer at S$0.17 a share. The offer closes on Tuesday evening and is conditional on him getting no less than 50 per cent of the total voting rights in Darco. Mr Wang Zhi has been buying shares on the open market to get closer to that threshold. He had a 44.43 per cent stake as of Monday.
Shareholders have raised a number of issues with the offer and with Darco' s disclosures to Darco' s board and the Singapore Exchange, in letters seen by The Business Times.
First, the offer was triggered after Mr Wang Zhi bought a 14.27 per cent stake in Darco at S$0.17 per share from an entity at which Mr Wang Yaoyu is a director and controlling shareholder.
Darco had an audited net tangible asset of S$0.39 per share as at Dec 31, 2019, so shareholders have been advised by an independent financial adviser (IFA) to reject the S$0.17 per share offer.
But Mr Wang Yaoyu has told shareholders that they should accept the offer anyway because Darco operates in an industry that faces " significant challenges" , among other things.
Shareholders have questioned Mr Wang Yaoyu' s position, and his interest in the offer.
Minority shareholders including Robert Stone, who has an 11.68 per cent stake in Darco, wrote to the board on June 11: " The IFA has stated that the group has sufficient assets to cover its liabilities and the group' s net cash outflow from operating activities has decreased significantly from FY2019 as compared to FY2018, which suggests that prospects are improving for the company.
" The basis and reasons provided by the chairman for his differing recommendation to shareholders to accept the offer (are) unclear and/or weak... Please highlight the steps taken by the board to mitigate or manage such conflict of interest, if any."
BT approached Darco to seek out both the Wangs for comment but was told that the chairman is in China, while the deputy chairman is tied up with the general offer till Tuesday.
Second, Darco is expected to require fresh funding of up to S$46 million in order to invest in a waste management project in Indonesia that Mr Wang Zhi has been pushing for.
The board had earlier planned a controversial S$6.55 million private placement to China-based investors at S$0.35 per share.
But this was aborted in March after minority shareholders led by Sofos Infrastructure Investment Fund argued that the placement - which would be at a discount to Darco' s NTA - should be put to a shareholders' vote since the company was not in any distress.
Darco' s board had also failed to disclose that Joanna Ong Joo Mien, who became an independent director after the coup last year, is linked to Qarah Consultancy, which would have collected a finder' s fee if the placement had gone through.
Little is known of Qarah, though BT understands that Qarah was introduced to Darco by Mr Wang Zhi.
Qarah Consultancy was registered to Ms Ong' s home address when Darco proposed the placement on Jan 13, and she was Qarah' s company secretary as well, according to its corporate records. Qarah has since changed its registered address to International Plaza.
Ms Ong' s husband was Qarah' s sole shareholder until Aug 22 last year. He transferred his shares to one Alyssa Pek less than five months before the placement was announced.
When shareholders dug further, they found that Ms Pek shares a home address with one Gregory Pek, who became a Darco shareholder late last year. According to share variance reports seen by BT, Mr Pek had sold 6,100 Darco shares on Dec 17. Mr Pek did not immediately respond to BT' s requests for comment.
Third, on that same day Mr Stone had witnessed unusual trading activity in the stock and had subsequently written to alert Darco' s board of it.
In a letter dated Dec 18, he described what may have been an attempt to knock Darco' s shares down. In one example, he said he " had an order to buy 2,000 shares at S$0.35 and just seconds before the close someone sold 2,200 shares at S$0.25" .
Mr Stone said he has not seen any similar activity since, but added: " As soon as I saw that, I stopped trying to buy and I' ve stopped buying since Dec 17."
It is not known who put in the sell orders seen by Mr Stone. Darco is a thinly traded stock and the day' s volume of 18,300 was already higher than usual.
Mr Stone received a response to his letter from Darco' s new CEO Poh Kok Hong, who said that he was unaware of who was behind the trades.
On June 3, minority shareholders reported the incident and their findings to the police. The case has been referred to the Monetary Authority of Singapore (MAS).
An MAS spokesperson said: " MAS is reviewing a complaint on suspected market misconduct in the shares of Darco Water Technologies that was initially lodged with the Commercial Affairs Department. As the review is confidential, we are unable to comment further on its status."
Finally, shareholders remain leery of Darco' s venture into the Indonesia waste management project. The seller of the project is a unit of Hong Kong-listed Yunnan Water Investment Co. Mr Wang Zhi was previously a director of one of its subsidiaries, Yunnan Water International.
Shareholders have argued that Darco, which is in the business of water treatment, has neither the resources nor the expertise to go into waste management.
In response to these concerns and other queries from the Singapore Exchange, Mr Wang Zhi said last November that he will fully reimburse Darco for any and all costs incurred in pursuing the acquisition if for any reason Darco decides not to proceed with it.
But this still leaves Mr Wang in a position of conflict, shareholders said. They wrote to Darco' s board last week requesting that Mr Wang Zhi recuse himself from taking part in further discussions on the Indonesia project, but have not yet received a reply.
https://www.businesstimes.com.sg/companies-markets/darco-minority-shareholders-raise-disclosure-conflict-of-interest-issues
Proposed Share consolidation 20:1
Does anybody know the details of the date when it will be consolidated?
l shres fall.. this 1 no feeling... why?
treetops ( Date: 21-Jul-2015 15:08) Posted:
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Up so fast now!
Catch 0.039