AHEAD of the City Developments Limited conflict heading to Singapore’s Supreme Court on Tuesday (Mar 4), the High Court has directed both sides to refrain from further action relating to CDL subsidiaries Singapura Developments and Millennium & Copthorne Hotels (M&C).
Apart from the matter of new director appointments, the High Court on Feb 26 directed both sides “to refrain from taking any action in relation to Singapura Developments and Millennium and Copthorne Hotels that will prejudice their respective positions pending the resolution of the application” from last week’s hearing, said CDL in a Monday media statement.
This comes as shares of CDL resumed trading on Monday morning. The company declared a trading halt on Wednesday after news of the father-son-tussle between its executive chairman Kwek Leng Beng and group CEO Sherman Kwek broke.
CDL shares hit their lowest point since 2009, falling 7 per cent or S$0.36 to S$4.76 after trading resumed on Monday. They last closed 0.4 per cent or S$0.02 lower at S$5.12 on Tuesday before the trading halt.
The conflict centered on the Feb 7 appointments of two new independent non-executive directors –Jennifer Duong Young and Wong Su-Yen – that the elder Kwek said were “irregularly and hastily” made, without going through proper procedures. He alleged that the appointments were part of an “attempted coup” by his son Sherman Kwek and a group of directors acting with him to seize control of the board and group.
Kwek Leng Beng said that Sherman Kwek had bypassed the nominating committee (NC) – which recommends all director appointments to the board – in the approval of the nominations.
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The younger Kwek also dismantled the NC and replaced it with a merged nominating and remuneration committee, the elder Kwek claimed.
These moves were “contrary to established corporate governance principles” such as the Singapore Exchange (SGX) Listing Rules and the Code of Corporate Governance and reflect “serious lapses in corporate governance” the CDL executive chairman said.
This was not the first time the younger Kwek “put CDL in a precarious position” with missteps, he added, citing the group’s investment in China developer Sincere Property Group that resulted in a S$1.9 billion loss for CDL in FY2020 among other losses.
Calling for Sherman Kwek to be sacked, he said that his nephew and the current group Chief Operating Officer Kwek Eik Sheng would stand in as interim CEO as the group searches for a professional CEO.
Sherman Kwek is currently still group CEO until a board resolution changes company leadership, CDL said in a statement.
On Feb 25, Kwek Leng Beng filed an application with the High Court, alongside an injunction, calling for the two new directors to be restrained from exercising the powers of directors.
The elder Kwek said the two new directors had undertaken to not exercise any powers as directors until further notice, in a surprise statement on Wednesday night after the Feb 26 injunction hearing.
Explosive statements from both sides were issued over the following days and have thrown questions over corporate governance, business stability and succession into the limelight.
Sherman Kwek responded with claims that the recent board changes were not about ousting his father but were instead relating to “a very serious issue of corporate governance” involving Dr Catherine Wu, who has a “long relationship” with his father and used to hold an advisory role in CDL’s M&C.
However, resolutions to terminate Dr Wu’s advisory agreement with the M&C board and to affirm that she has no power and authority, among other things, to influence or advise the directors, management and staff of the CDL and M&C groups were passed on Feb 21 by a majority of the board.
Dr Wu wielded “enormous influence” and interfered in matters “well beyond her scope”, which troubled CDL directors, the younger Kwek said. Attempts to rein her in sparked the board rift, he claimed.
The elder Kwek responded that his son’s denial of attempts to oust him “(missed) the point”.
Philip Yeo, a non-independent non-executive director of CDL, described Sherman Kwek’s concerns as an attempt to “distract everyone from the matter at hand”. The younger Kwek should focus on recouping losses, including those related to Sincere Properties, he said.
CDL said on Monday that it would not comment on the validity of media allegations regarding the conflict within the Kwek family-controlled group, as many of the allegations are the subject of the court proceedings that are currently ongoing.
It also cautioned shareholders to “exercise caution” while dealing with its shares.
