Two of the independent directors facing a vote to kick them off the board of doormaker KLW Holdings have listed their concerns about the company in a statement posted on the Singapore Exchange (SGX).
Independent directors Low Hai Lee and Teo Hin Guan, along with company founder and managing director Lee Boon Teck face a vote to oust them at an extraordinary general meeting (EGM) next Monday.
The motion was proposed by shareholders Quek Chek Lan and Siew Yong Wan.
The statement from Mr Low and Mr Teo, posted on the SGX last Thursday, claims to detail the background surrounding the EGM.
The dispute appears to have begun with a May 27 announcement by KLW that Mr Lee had entered into three early-stage contracts regarding property development and hotel acquisition in Bali and China during the first half of 2014 on behalf of the firm without the board's approval. These involved Catalist-listed KLW paying commitment fees of $16.2 million, according to that May announcement.
The deals never eventuated by the July 2014 deadline so the fees were to have been refunded in full, said that announcement.
Mr Low and Mr Teo said in their statement that after consulting KLW's sponsor, SAC Capital, they appointed PricewaterhouseCoopers (PWC) to undertake a special audit related to the signing the contracts. This was announced on the SGX on June 26.
SAC Capital is KLW's sponsor and advises the firm to ensure it complies with Catalist rules.
PwC indicated the first draft of its report would be ready by the end of September and the final report likely late this month, Thursday's statement said.
On Aug 26, Mr Quek bought 18.1 per cent of founder Mr Lee's 18.2 per cent stake in an off-market deal, paying 0.4 cent a share, according to Thursday's statement.
The deal lifted Mr Quek's 1.2 per cent stake in the company to 19.4 per cent, according to SGX filings.
The price of 0.4 cent was more than 60 per cent below than the prevailing market price, Thursday's announcement said.
It added that Mr Lee sold the stock despite SAC Capital advising directors in June against making transactions as the information they had on the early-stage contracts may be price sensitive.
SAC Capital also advised directors to inform it and the other directors before engaging in any share transactions, the statement said.
Mr Lee did not provide prior notice of the sale of his stake or give reasons for it, according to the statement, which was also signed by the third independent director, Mr Ho Pong Chong.
On Aug 31, the board met Mr Quek, who has chaired several firms here, to get his plans for KLW as the new controlling investor, the statement said. He "did not disclose any concrete plan in relation to the management of the business operations" at that time, it added.
However, he indicated that he intended to restructure or strengthen the board and, if necessary, call a shareholders' meeting for that purpose, it said.
Mr Low and Mr Teo said they told Mr Quek at the time that they intended to step down as soon as the board had made recommendations following the final PwC audit.
On Sept 23, Mr Quek and another investor said they requested an EGM to oust three directors as the firm might suffer "irrevocable damage" if no immediate action was taken to address "recent developments".
They did not give details and said they wanted independent director Ho Pong Chong to remain to oversee "special audit investigations".
KLW has recovered only $9 million of the commitment fees but has recently tried to recover the rest, Thursday's statement said (see correction below).
The two independent directors also said that they were concerned that Mr Quek's three nominated independent directors had worked at Teledata at various points in time between August 2004 to November 2009, the period when Mr Quek had served on its board.
Mr Quek is over 70 and so can only be appointed director in an annual general meeting and not an EGM according to the Companies Act, they said.
The Straits Times put questions to Mr Quek about issues detailed in the Oct 1 statement.
Mr Quek said he bought the shares from Mr Lee as an investment and that he was unaware Mr Lee had not provided SAC prior notice before selling.
He did not, however, respond to questions about why the shares were sold at a below-market price.
Mr Quek also said that before calling for the EGM, he had proposed that "the independent directors remain in office until the special audit was completed but that the proposed nominated directors be appointed during the interim".
However, this offer was "rejected by the company", he said.
He would also withdraw as a candidate for director at the upcoming EGM, given the age restrictions.
Mr Lee, Mr Low and Mr Teo declined to comment. Nominated directors Wong Joo Wan and Nicholas Narayanan did not respond to e-mailed questions. Nominated director Lim Jit Siew declined to comment.
KLW lost $6.3 million in the year to March 31. The stock closed flat at 0.9 cent yesterday.
Correction: An earlier version of the story gave the wrong amount of commitment fees recovered by KLW. We are sorry for the error.