SINGAPORE — The former chairman and executive director of Kimly Limited - one of Singapore's largest traditional coffeeshop operators - were each fined on Wednesday (16 February), after the company failing to disclose that its 2018 acquisition of drinks company Asian Story Corporation (ASC) was an interested person transaction.
Lim Hee Liat, the former executive chairman, was fined $150,000, while Chia Cher Khiang, the former executive director, was fined $100,000.
Both pleaded guilty to one count under the Securities and Futures Act. Lim also had one count under the Companies Act for failing to disclose, during or before the acquisition, that ASC was a company which was partially beneficially owned by him.
Besides the fines, both Lim and Chia have been disqualified from acting as a director of any company for a mandatory five-year period.
Failure to disclose partial beneficial ownership on three occasions
Lim was the founding shareholder of Kimly, which was incorporated in Singapore as a private limited company in 2016 and was listed on the Catalist board of the Singapore Exchange a year later. He held 42 per cent of Kimly’s shares and oversaw the overall development and performance of Kimly and its subsidiaries.
Lim had a partial benefit ownership of ASC, which supplied and distributed drinks such as chrysanthemum tea and soya bean drinks. Its other beneficial shareholders were Amos Wang, Chin Gim Wah and Alain Ong, the husband of actress Vivian Lai. Ong and Chin were both employees of another drinks company, Pokka, when ASC was incorporated in 2009, and did not wish to legally own its shares under their own name.
Ong had approached Lim around 2009 or 2010 to invest in ASC. In 2010, Lim invested around $300,000 in the company, but was never involved in its operations or management.
Arising from Lim’s investment in ASC, the beneficial ownership of the shares in ASC was then split as follows: Lim (30 per cent), Ong (40 per cent), Wang (15 per cent) and Chin (15 per cent).
On 2 July 2018, Kimly announced that it had acquired all the shares and fully paid-up ordinary shares in the capital of ASC at a consideration of $16 million, paid to Wang in cash.
Since Lim had a partial beneficial ownership of ASC, the acquisition was an interested person transaction and had to be disclosed and immediately announced under the SGX Catalist Rules.
However, he did not disclose his partial beneficial ownership over two board meetings on the proposed acquisition, and also when Kimly's board of directors passed a Directors' Resolution to approve the acquisition.
Concerns about credibility and perceived integrity
Lim had decided not to disclose his interest in ASC because in the initial public offering (IPO) for Kimly in 2017, he had not disclosed his interest in ASC.
Lim also suggested to Commercial Affairs Department investigators that he did not disclose his interest in ASC because, if he did, it might lead to questions about who owned the remaining 70 per cent of ASC’s shares. His ultimate intention then was to consolidate all of the businesses, including ASC’s business, under Kimly to create an ecosystem that was good for Kimly’s overall business.
Chia also did not disclose Lim’s beneficial interest in ASC as he was concerned about Lim’s credibility and perceived integrity with his long-term partners, who were also partners of Kimly.
He also felt that the “window of opportunity” to disclose the transaction had passed, as neither him or Lim had disclosed Lim’s interest in ASC during Kimly's IPO and the initial discussions on the acquisition of ASC.
He was also concerned about the employment of Ong and Chin by Pokka, that their interest in ASC would be disclosed if Lim’s interest in ASC was disclosed.
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