Suspended S-chip China Sky Chemical Fibre could soon resume trading after its disgraced former chief executive agreed to pay one of the heaviest civil penalties since a decade ago.
The deal struck by the Monetary Authority of Singapore (MAS) yesterday has thrown the firm a lifeline after four years in the wilderness.
It involves Mr Huang Zhong Xuan admitting to breaking capital markets laws under the Securities and Futures Act (SFA) and agreeing to pay a "civil penalty" of $2.5 million out of the US$3.7 million (S$5 million) in his frozen Singapore bank account.
He also has to offer to surrender 10 per cent of his stake in China Sky, or about 15.4 million shares, the MAS and the Commercial Affairs Department (CAD) said in a joint statement.
That stake would have been worth about $1.57 million based on the closing price of 10.2 cents on Nov 16, 2011, the day before the stock was suspended.
Adding in that amount, the total penalty for Mr Huang would come up to about $4.07 million - the biggest since China Aviation Oil's parent had to pay a civil penalty of $8 million in 2005 for breaching the SFA.
Mr Lee Boon Ngiap, assistant managing director of capital markets at MAS, said in the statement that Mr Huang's settlement deal was the first here to include an offer to surrender shareholdings.
It would directly benefit existing shareholders of China Sky by boosting the company's net asset value per share if the company's board accepts the offer, the MAS and CAD added.
The 15.4 million shares Mr Huang will surrender works out to some 1.9 per cent of the stock's outstanding 814.6 million shares.
If those shares are all cancelled, the company's net asset value per share would immediately go up by slightly over 1.9 per cent, based on Straits Times calculations.
The Singapore Exchange (SGX) said in a separate statement yesterday that for trading to resume, China Sky's board must accept Mr Huang's offer to surrender part of his stake as well as fulfil other conditions.
These include appointing a "suitable" chief financial officer within six months after trading resumes as well as a compliance adviser.
China Sky must also get its auditors to certify that it has addressed its problems with internal controls, and must appoint professional accountants to conduct annual audits on these controls for at least three years.
Trading in China Sky was suspended on Nov 17, 2011, a day after the bourse told the firm to appoint a special auditor to look into some questionable transactions.
The exchange had been concerned over events surrounding a planned land acquisition in Fujian province that was later cancelled.
It also wanted a probe into deals the company conducted with one of its independent directors.
The MAS and CAD said yesterday that Mr Huang has admitted to making misleading statements and failing to disclose information about China Sky's aborted Fujian land purchase.
He also cannot work as a company director or manage any Singapore-listed company for three years.
The CAD said it had begun investigating Mr Huang in February 2012 but discontinued the probe so the settlement could take place. Minority shareholder Mano Sabnani said yesterday that the resolution of the China Sky saga "has taken too long... but better late than never. China Sky is profitable... this company is still quite sound and hopefully the market will recognise that."
This article was first published on February 13, 2015.
Get a copy of The Straits Times or go to straitstimes.com for more stories.