Two ex-directors of Kimly fined for not revealing conflict of interest in drinks company acquisition deal

Former executive chairman Lim Hee Liat (left) was fined $150,000, while former executive director Chia Cher Khiang was fined $100,000. PHOTOS: SHIN MIN DAILY NEWS

SINGAPORE - Two former directors of coffee shop operator Kimly were on Wednesday (Feb 16) fined for their role in failing to notify the Singapore Exchange (SGX) that Kimly's acquisition of drinks company Asian Story Corporation (ASC) involved a conflict of interest.

Former executive chairman Lim Hee Liat was fined $150,000 and disqualified from acting as a director of any company for five years.

Former executive director Chia Cher Khiang was fined $100,000 and also handed the same disqualification.

Lim and Chia were each charged under the Securities and Futures Act with one count of failing to notify the SGX that Kimly's acquisition of ASC was an interested person transaction.

Lim was also charged under the Companies Act for failing to disclose that ASC was a company that was partially beneficially owned by him.

The court heard that Lim oversaw Kimly's overall development, which included sourcing for investment opportunities to promote its growth.

Chia's responsibilities involved assisting Lim in the management of the company and ensuring that it complied with the rules after listing on the SGX.

Sometime in 2010, Lim invested around $300,000 in ASC and thus owned a 30 per cent stake in the company. Chia was aware of this.

However, during board meetings in May and June 2018 to discuss Kimly's acquisition of ASC, the duo did not disclose that Lim owned a 30 per cent stake in ASC.

Kimly proceeded to acquire ASC in July 2018 and did not notify the SGX that the transaction involved a conflict of interest.

SGX listing regulations required Kimly to have made an immediate announcement of such a transaction and disclose its details. This is because Kimly is using money raised from its public shareholders to buy another company in which its director has an interest.

The deal was rescinded in November 2018 and Kimly recovered the $16 million it had paid for the acquisition of ASC.

Deputy Public Prosecutor David Koh said Lim had suggested to investigators that he might have chosen not to disclose his interest because it might lead to questions about who owned the remaining 70 per cent of ASC shares.

Chia was aware that Alain Ong Eng Sing, former chief executive of beverage company Pokka International, owned ASC shares at the time and was worried that if Lim's link to ASC was disclosed, so would Ong's.

"Chia was also concerned that this would affect plans at the time for Ong to succeed Lim and become chief executive of Kimly," said DPP Koh.

Ong, whose wife is actress Vivian Lai, faces three charges under the Companies Act for allegedly not disclosing his dealings with ASC to his employer. His case is pending.

DPP Suhas Malhotra said Lim's failure to disclose his interest meant that Kimly's shareholders were deprived of their legal right to veto the acquisition of ASC.

The fact that the non-disclosure was intentional poses a "very high risk of harm" to the confidence in the administration of the public market.

"If a public company can fail to disclose such a clear conflict of interest, the investing public is entitled to question what else is being concealed from the market," said DPP Malhotra.

Lim's lawyer, Senior Counsel Davinder Singh of Davinder Singh Chambers, said in mitigation that Kimly did not suffer any financial harm as a result and his client had pleaded guilty at the first available opportunity.

Those convicted under the Securities and Futures Act can be jailed for up to seven years and fined up to $250,000.

An offence under the Companies Act carries a maximum penalty of a one-year jail term or a $5,000 fine.

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