Sino-Environment Technology: Executive directors respond to announcement made by independent directors
Sino-Environment Technology Group made the following announcement on the Singapore Stock Exchange.
We, Messrs Sun Jiangrong, You Shengquan and Li Shouxin, being Executive Directors (the“EDs”) of Sino-Environment Technology Group Limited (the “Company”), wish to respond to the Announcement released on SGX-NET on 23 November 2009 (the “Announcement”), by the Independent Directors (the “IDs”) of the Company.
Summary Dismissal of Mr Raynauld Liang (“Mr Liang”)
1. The IDs do not deny that Mr Liang defied the Executive Director/Acting CEO (the “ED/CEO”) Mr You Shengquan’s instructions and caused the Company to commit an Event of Default under the terms of the Convertible Bonds (the “CB”) by instructing the Company’s staff to withhold payment of the interest to the Bondholders. The IDs admit in the Announcement that the sum of “SGD 3m was set aside for the interest payment on the Bonds” and that “they have, at no time, instructed management to withhold payment of the interest on the Bonds to the Bondholders.” From the IDs’ clarification, Mr Liang obviously acted on his own to harm the Company.
2. Further, the IDs have not disputed that, without the knowledge, consent and approval of the EDs, Mr Liang released a misleading and untruthful announcement on 9 July 2009 that the Company was unable to comply with the requirement of having to make the interest payment due under the CB on 8 July 2009. What Mr Liang did was highly improper as he sought not only to mislead the CB Bondholders but also the investing public.
3. The IDs claim that they are “not aware of any inappropriate payments that have been made by Mr Raynauld Liang on behalf of the Company.” The truth (which the IDs must be fully aware) is, Mr Liang made unauthorised and unapproved payments purportedly on the Company’s behalf to himself, including reimbursements to himself for 1st Class air travel (the EDs do not fly 1st Class and for most parts travel economy when on business) and entertainment in Dongguan City, China. It is pertinent to note that the Company does not have any business interest in this city.
4. The IDs do not deny that Mr Liang instructed 21 announcements to be released on SGX-NET in the name of the ED/CEO of the Company without the ED/CEO’s knowledge, consent or authorisation. The unauthorised announcements include the trading halt and the misleading and untruthful announcement on 9 July 2009 mentioned in paragraph 3 above. They are certainly not “administrative announcements” as alleged.
5. In the circumstances, the IDs have no grounds to maintain that Mr Liang’s summary dismissal was unjustified and not in the best interest of the Company.
6. It has also come to the EDs’ attention, by way of a TNT International Courier Delivery Note and Tax Invoice, that on 14 October 2009, Mr Raynauld Liang sent a copy of PwC’s Interim Report (the “Report”), which the EDs have yet to be given a copy, to undesirable elements in China not connected in any way to the Company or to the China Authorities. At the behest of Mr Liang, the Report has been used by these undesirable elements in China to threaten the EDs for the past one and half months in Fuzhou City, PRC. PwC Review
7. The EDs maintain that, at the Board Meeting on 24 October 2009, the IDs and PwC misled the Board by confirming to the meeting that the PwC “findings” could not be released or extended to the EDs because no written report of PwC’s “findings” had been submitted to the IDs and that their report to the authorities
were based on an oral presentation by PwC.
8. The confirmation the IDs and PwC gave to the Board was clearly incorrect and misleading because there is incontrovertible evidence that PwC had as early as 14 August 2009 submitted an Interim Report of their “findings” to the IDs.
9. The EDs are of the view that, by misleading the Board, the IDs and PwC are guilty of a breach of their fiduciary duties to the Company.
10. To date, the EDs have not received the Minutes of the Board Meeting, although a draft of the same had been circulated to the IDs. The EDs are nevertheless in a position to produce a copy of the Minutes of the Meeting, if necessary, since the Board proceedings were recorded.
PwC’s Fees
11. The IDs had appointed PwC to carry out the “special audit” before they informed the EDs about the ointment.
12. The EDs have never agreed to any fee structure or fee of PwC as alleged.
13. The EDs strongly object to the unjustifiable fees that PwC charged to the Company to date, amounting to the sum of SGD 952,874.00. The IDs should agree with the EDs that PwC’s fees are totally unacceptable. In this regard, the EDs ask the IDs to state publicly their views on this matter.
14. The EDs are prepared to agree that the Company appoint another firm to replace PwC to carry out an endent investigation of the Company’s financial affairs and will extend their fullest co-operation to any independent investigation that is in the best interest of the Company. Cash Reserves in Xiamen International Bank (“XIB”)
15. The EDs had proposed to the IDs that they are prepared to transfer the cash reserves to a Singapore bank account provided the IDs:
15.1 assume control of and responsibility for the funds; and
15.2 furnish the EDs with an undertaking that the funds would not be used to pay unnecessary and/or justifiable expenses and professional fees.
16. The IDs failed or refused to respond to the proposal but have nevertheless called on the EDs to remit the cash reserves to the Company’s Singapore bank account with HSBC. It would appear that the IDs have no wish to take responsibility for the Company’s funds.
17. The EDs reiterate their previous proposal to change the Company’s Bank’s Authorised Signatories by snating either Mr Goh Chee Wee or Dr Wong Chiang Yin as a “Group A” signatory to approve and authorize payments in excess of SGD 100,000.00. The EDs further invite the IDs to personally attend and verify with XIB in China that the Company’s fund amounting to about SGD 14m is still held by the said bank. The Company’s Independent Financial Adviser (the “IFA”)
18. Since the appointment of nTan Corporate Advisory Pte Ltd (“nTan”), the EDs have not been kept informed about the work carried out by nTan, including the alleged negotiations relating to the standstill. The EDs reiterate that they were never advised or consulted on any alleged negotiations between nTan and the Bondholders.
19. To date, the EDs have not received any report by nTan on the work carried out by them. This has hampered the EDs’ ability to deal with the Bondholders’ demand that interest payment be made to them. Proposal To Place The Company under Judicial Management (“JM”)
20. The IDs have proposed to the EDs to place the Company in JM. In this connection, the EDs have convened a Board Meeting for Thursday, 3rd December 2009 to hear a report from nTan on the work carried on by them to date and to discuss the merits of the IDs’ proposal.
21. At this forthcoming Board Meeting, the EDs also intend to move a resolution to appoint a new CFO for the Company. Alleged Transactions amounting to about CNY 189.64m (SGD 38.5m)
22. The Company did not enter into the alleged 2 transactions amounting to CNY 189.64 million as alleged.
23. The Company’s subsidiaries’ investments in China, include more than 10 investments/projects (the “Projects”) in 12 cities, i.e. Jilin Province, Hainan Province, Qinghai City and so on - in the field of Landfill power plants and carbon emission reduction. The cost of these Projects, including fees for the rights to use the resources, deposits, construction, purchase of equipment, equipment installation, the cost involved in the reporting of carbon emission reduction and other fees/expenses amount to approximately CNY 180m. The Company has repeatedly invited the two IDs to personally verify and inspect the Projects on-site but to date such invitations have not been taken up by the IDs.
24. The Projects were initiated and approved by the China Authorities in 2008. It was only in 2009 that these projects came on stream and that various payments in respect of these projects were made. The EDs are, however, very concerned over the viability of these projects should the Company be placed under JM as proposed by the IDs. Legal advice rendered to the IDs
25. The IDs’ personal lawyers, WongPartnership LLP (“WP”) advise the IDs’ on their personal interests and not the interests of the Audit Committee or the Company.
26. Despite the EDs’ requests, the IDs persisted in relying on a misconceived view of the Articles of Association to use the Company’s funds to pay their own legal fees.The fees charged by WP to the Company for acting for the IDs from April to date, amount to the sum of SGD 268,946.00.
27. The EDs have always co-operated with the IDs to the best of their ability to safeguard the Company’s assets and cash position. In particular, the EDs and the PRC management have, at all material times, fully co-operated with PwC when they were carrying out their audit. Furthermore, at the IDs’ request, the EDs remitted a sum exceeding SGD 5m to the Company in June and July. There was no delay in remitting the funds to Singapore as alleged by the IDs. The IDs have failed to understand that remitting funds from China to Singapore always take some time because it requires approval from the China authorities. It is noteworthy that total funds remitted from China to the Company’s HSBC Bank account from January to date, amount to SGD 12, 896,979.00. EDs’ refusal to resign from the Board and management of the Company
28. The EDs’ reasons and explanation as to why they have not acceded to the IDs’ calls to step down have already been fully explained.
29. The EDs wish to reiterate that they did not impede PwC in their work and/or undermine the integrity of the audit. If not for the EDs’ efforts to facilitate the audit, PwC would not have been able to gain excess to the bank records and speak to the bank officers. Without proper authorization given by the EDs, none of the bank officers would have entertained the PwC representatives. Furthermore, if PWC had been stonewalled as alleged, PwC would not have been able to come up with an Interim Report of their special audit, based upon which the IDs made the report to the authorities.
30. The EDs wish to assure all the Shareholders of the Company that they have and will always continue to protect and further their interest and the interest of the Company.
31. The EDs have written to the IDs to refute all the allegations made by the IDs against them. A copy of their letter in Chinese is attached to this announcement.
32. In the light of the matters mentioned above and in the Announcement on 18 November 2009, all allegations made by the IDs in the Announcement are denied. This announcement is by the Executive Directors of the Company.