AN independent review of property developer Rich Capital has turned up several causes for concern for the Singapore Exchange Regulation (SGX RegCo), which will now probe further into potential listing-rule breaches and report the matter to the relevant authorities.

 

Following a slew of announcements regarding a project in Batam, Indonesia, and a related contract, Rich Capital appointed Provenance Capital as an independent reviewer on Aug 14, 2019, to look into the circumstances surrounding the contract, among other things.

 

The review by Provenance was completed on Tuesday, and released to the board of directors and SGX RegCo.

 

The bourse regulator highlighted certain findings in the independent review relating to the Batam project, and said there could be potential listing-rule breaches, internal control lapses, as well as potential contraventions of Section 156 of the Companies Act.

 

Back in May 2018, Rich Capital acquired an indirect 40 per cent interest in an integrated commercial and residential project on Batam from Oxley International Holdings Pte Ltd.

 

Before the acquisition, the Batam project had been jointly developed by Oxley' s wholly-owned subsidiary, Oxley Batam Pte Ltd (OBPL) and an Indonesian joint venture partner, Karya Indo Batam (KIB) through a joint-venture entity, Oxley Karya Indo Batam (OKIB).

 

OKIB had called for an initial tender exercise for the project in July 2017, and Rich-Link Construction Pte Ltd (RLC) was one of the four contractors who submitted an offer for the tender.

 

RLC was an associate of Rich Capital' s former non-executive chairman and controlling shareholder, Wang Zhen Wen.

 

Provenance noted that, at the close of the tender in November 2017, RLC' s offer was the least attractive, and that a better offer had come from another Indonesian contractor. The award of the contract was then withheld.

 

Following Rich Capital' s acquisition, a revised tender offer was requested - but only from the Singapore contractors, including RLC. The Indonesian contractor who had submitted the more attractive offer was excluded.

 

As RLC' s revised offer was the most attractive, the contract was awarded to it in October 2018.

 

According to the review, certain documents and e-mail correspondence suggested that this award of the contract to RLC was " pre-arranged in connection with the acquisition" , which prompted the independent directors to lodge a police report with the Commercial Affairs Department (CAD).

 

The company' s disclosures in relation to the acquisition and the award of contract to RLC did not include the interests of Mr Wang, in view of the fact that his associate RLC was one of the tenderers for the Batam project at the time of Rich Capital' s acquisition also, the contractual agreement was between Rich Capital and Oxley to vote in favour of the appointment of RLC as the main contractor.

 

In November 2018, RLC requested for an advance payment of S$2 million in connection with the construction contract. The company, instead of RLC' s contracting party, OKIB, disbursed the amount without obtaining the board' s approval.

 

SGX RegCo said: " SGX RegCo expects SGX-listed issuers to uphold high disclosure standards as the Exchange regards disclosure as fundamentally important to the operation of a fair and efficient market."

 

It added that in light of the recent findings, Rich Capital will continue to be suspended until it submits a trading-resumption proposal that addresses the findings highlighted in Provenance' s report, concerns arising from subsequent developments in OKIB and the Batam project, its ability to operate as a going concern, the viability of its remaining business and adequacy and effectiveness of its internal controls.

RICH Capital Holdings' indirect subsidiary Oxley Batam has issued a letter of demand against a joint-venture partner, which has denied the allegations in the letter, Catalist-listed Rich Capital said on Wednesday night.

 

Oxley Batam issued a Nov 4 letter of demand against PT Karya Indo Batam (PT KIB), with which it had formed joint venture PT Oxley Karya Indo Batam (PT OKIB).

 

The letter of demand alleges that a total of S$8 million in advance payments were made by Oxley Holdings, on behalf of Oxley Batam, to PT KIB director Poni Madjukie. The sum comprised S$5 million for the property cost of a project at Oxley Convention City in Batam, for which the JV had been formed, and S$3 million for the attainment of the required development licences.

 

The letter alleges that PT KIB is in breach of a joint-operation agreement (JOA) and an Aug 12, 2016 shareholders' agreement, in causing the termination of the JOA and associated agreements as well as the cancellation of powers of attorney granted to PT OKIB in another lawsuit.

 

This has caused losses and damage to Oxley Batam, including but not limited to the S$8 million, the letter alleged. Oxley Batam gave PT KIB until Nov 11, by which it had to provide written confirmation that it would repay the advance payments.

 

On Nov 9, PT KIB issued a letter in response, denying the allegations in Oxley Batam' s letter of demand.

 

Rich Capital said it is " in consultation with its legal advisors on the proper course of action to protect its interests, and will make further announcements as appropriate to update shareholders accordingly" .

 

In a separate announcement, Rich Capital said that a case brought by piling contractor PT Pratama Widya Tbk against PT OKIB and PT KIB, as well as several other parties as co-defendants, has been revoked.

 

The case had commenced on July 14, 2020, with PT Pratama seeking compensation for alleged breach of contract in relation to works on the Oxley Convention Centre project.

 

Rich Capital said that on Nov 5, it received written confirmation from its Indonesian counsel that, based on publicly available information, the Batam District Court granted the revocation of the case on Oct 22.

 

Rich Capital said it will make further announcements as appropriate to update shareholders accordingly. Trading in the company' s shares has been suspended since June 2019.

 

PROPERTY developer Rich Capital Holdings on Thursday said PrimePartners Corporate Finance will no longer be its continuing sponsor from Nov 1.

 

In a bourse filing, the Catalist-listed company said the decision was made " after deliberations and for commercial reasons" . It had on Oct 1 issued a written notice to terminate the agreement with PrimePartners.

 

Rich Capital added that it has commenced the process of selecting a new continuing sponsor and will provide an update to shareholders when one is engaged.

 

Separately, last month, the company said it will commission an independent review to protect its investments in joint venture Oxley Karya Indo Batam and to look into the possibility of potential breaches of regulations and listing rules.