Fu Yu Corp says it has turned down an EGM requisition by its largest shareholder who happens to be an employee. The company has also announced ongoing probes into the risk management processes of its supply chain unit, which had earlier received claims from a Hong Kong-based provider of oil recycling services that Fu Yu is disputing.
In a market filing on Jan 31, Fu Yu says the EGM requested on Jan 9 by Victor Lim Wei De, who has been working as director of strategy in the company for the past four years, will not be held.
In his EGM requisition notice, Lim says he is not happy with the "poor performance" of the company and a "strategic reset" and "reorganisation of the board" is needed.
Lim wants to use the EGM to remove two of the three independent directors: non-executive chairman Christopher Huang Junli and Royston Tan Tong Loong, but not CEO and executive director David Seow and the third ID Daniel Poh Kai Ren.
Lim, who has a stake of 29.45% in the company but does not hold a board seat, wants to expand the board from four to five directors by appointing three other individuals as IDs. They are Gilbert L Rodrigues; Ralf Pilarczyk and Yang Zhenrong.
In its Jan 31 filing, Fu Yu, citing its lawyers Nine Yards Chambers LLC, says Lim's requisition does not meet certain legal requirements.
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"Primarily, Mr Victor Lim is not a 'member' of the company as defined in the Companies Act, even though Mr Victor Lim owns the beneficial interest in the shares described in his (requisition) letter," says Fu Yu. The IDs, citing their lawyers at Centurion Law LLC, concur.
The company says that "the board has considered and balanced the needs and interests of all material stakeholders, including Mr Victor Lim’s, and has concluded that the interest of the company is best served by not convening an EGM and any resolutions passed would be "invalid, and may expend the company’s resources unnecessarily."
Lim came to own his Fu Yu shares on Dec 11 following the distribution of dividends in species of the shares from Pilgrim Capital VCC - Global Manufacturing Fund, the previous controlling shareholder. According to Fu Yu, Lim only made known his interests on Dec 16.
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Fu Yu says it has asked its legal counsel to reach out to Lim for clarification on his concerns and the reasons for the requisition. Its IDs are "committed to working with the company to engage Mr Victor Lim in a constructive dialogue," the company says on Jan 31.
According to Fu Yu on Jan 24, Lim, despite owning the shares, has been denied a board seat.
"Mr Lim presented his experience as a director of strategy of the company for the past four years, and said he has a turnaround strategy," explained Fu Yu then.
"However, the nominating committee does not hold the same view; the nominating committee also notes that Mr Lim’s justifications were verbal, and not written," said the company in response to questions from the Securities Investors Association (Singapore).
Fu Yu says it is confident that having won new customers and reorganised its businesses, its financial performance will improve in the current FY2025.
Supply chain unit probe
In the same announcement by Fu Yu on Jan 31, its subsidiary Fu Yu Supply Chain Solutions has been given a "cause for considerable concern" rating in an internal audit report dated July 26.
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According to this internal audit report, which Fu Yu says it received on Aug 7, there are "significant weaknesses" in FYSCS’s risk management process that could expose this unit to "unacceptable levels of risk if left uncorrected."
There were also additional risk areas observed by the internal auditors, prompting Fu Yu to appoint Damodara Ong LLC on Oct 8 to investigate the affairs of FYSCS.
"The investigation is currently ongoing, and the board is awaiting further updates," the company says.
On June 12 2024, Fu Yu said FYSCS had a day earlier received a claim of US$925,773.57 from Evertree Hongkong as compensation for "services rendered, under an alleged profit-sharing agreement" dated Sept 1 2023. Evertree Hongkong, as described on its website, is in the business of biodiesel.
In an update on Sept 26, Fu Yu says it has hired Rajah & Tann Singapore LLP to file its responses to Evertree’s notice of arbitration with the Singapore International Arbitration Centre.
Fu Yu says it intends to "vigorously dispute and challenge the claim which it considers "unmerited".
Fu Yu Corp shares closed at 13 cents on Jan 31, up 0.79% for the day, down 9.29% in the past 12 months.
