Lotustpsll contributed this article to NextInsight. He worked 32 years with a global banking group before retiring a few years ago.
My previous article “Privatisation a just measure to settle legal dispute” was published in April 2016.
Nearly a year has passed and it is opportune for me to provide a short update on this highly unusual case involving a Singapore-listed company.
Next month, the Court of Appeal in Bermuda will hear an appeal by Kingboard Laminates and Kingboard Chemical (KC), the ultimate holding company of Kingboard Copper Foil. (Note: Kingboard has announced that the hearing dates are March 6 and 7).
| ♦ How it started |
| Kingboard Copper Foil entered into a license agreement with Harvest Resource Management after the Petitioner (Annuity & Re Life Ltd) had vetoed the proposed general mandate for interested person transactions at the AGM of the Company on 29 April 2011. The Supreme Court of Bermuda found that, as the majority shareholders failed to promptly initiate negotiations with the minority shareholders with a view to resolving the impasse and take into account the interests of shareholders as a whole following the blocking of the IPT Mandate, the license agreement was a commercially prejudicial means of enabling the Company to circumvent the Petitioner’s legitimate exercise of its right to veto the IPT Mandate. |
Listed in Hong Kong, Kingboard Laminates is the majority shareholder (65.95%) of Kingboard Copper Foil which is listed in Singapore.
Kingboard Laminates and KC are appealing against the findings of the Supreme Court of Bermuda on “the Harvest License Transaction”. (See court judgement here)
EY was appointed by Kingboard Copper Foil’s audit committee (after discussions between the Company and the SGX-ST) to conduct an Independent Review.
An EY report, released in October, has affirmed that the findings of the Bermuda Court are consistent with its own findings. 
Electrolyzed copper foils are the main product of Kingboard Copper Foil, which operates out of Fogang and Lianzhou in Guangdong Province. Photo: InternetThe EY report is damaging for KC, and has raised other matters as well concerning corporate governance and transfer pricing issues. The lapses in corporate governance are serious.
I have consulted a long-time friend, a Senior Corporate Lawyer practising in Malaysia. In his opinion, after reviewing the EY report, it will be an uphill task for the appellant to challenge the Supreme Court’s “findings of facts and decisions of law”.
My friend expects the EY report to be tabled in court to refute KC’s appeal.
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Kingboard Copper Foil has net cash of SGD 0.35 and current assets of another SGD 0.35, and no debt.
The reasons why it's so undervalued (share price about 29 cents) are the absence of dividends for many years and the uncertain outcome of this litigation.
The defendants are mainly KC and Kingboard Laminates. Kingboard Copper Foil is only a third party, and will not bear any litigation costs or liability.
This is a long-drawn saga stretching over 6 years already. Let’s hope justice is finally served.
Please do your own due diligence. Am vested.
Comments
The following Judgements should also be noted (page 85) :-
“Mr Wong SC (lawyer for the Respondents) did not dispute the argument that section 111 is fundamentally a class remedy. In principle it seems to me that all minority shareholders must have a right to be heard at the relief stage of the present Petition. However, I would give liberty to apply for any specific directions in this regard rather than making directions at this stage without affording counsel a further opportunity to be heard”.
I am more confident of class remedy supported by the order of 11 January 2016.
Please note that there was a subsequent order made by the Court on 11 January 2016 which read :-
“The Fifth Respondent (" the Company") shall forthwith give notice to all the Company' s shareholder who wishes to have its shares in the Company redeemed upon the same terms and conditions as the Petitioner shall give notice to the Company and the Company shall provide the Petitioner with copies any such notices forthwith upon receipt thereof ”.
Yes, this comment is exactly right.
The article states "Rejection of KC’s appeal by the Appeals Court and the Supreme Court decisions are upheld. This may mean a buyout of all minority shareholders."
Not quite "all minority shareholders".
I wonder how many people who are buying on the back of this appeal, understand this fact. Most probably didn't bother to read the specifics of the judgement.
So I'll quote the relevant part here:
"It was not disputed that these shareholders (the Pope Holdings) were in principle entitled to relief. Mr Woloniecki invited the Court to rule that in principle minority shareholders unconnected to the Petitioner should be afforded an opportunity (perhaps by notification via the SGX) of any future hearing in relation to the grant of buy-out relief. However, as I have already found above, the Petitioner is not entitled to seek relief in respect of shares in the Company purchased after the presentation of the Petition on August 3, 2011. "
There are still many other considerations, so this itself is not reflective of the investment merits or dis-merits at this stage.
But I wonder how many current shareholders jumping on the bandwagon understand this salient point.