Arrests of EHT directors cast spotlight on directorship rules, responsibilities 


    The Business Times, 7 October 2020

    Same director, different companies


    FOLLOWING Eagle Hospitality Trust's (EHT) announcement on Oct 1 that six of its former and current Singapore-based directors were arrested and released on bail, there has been a flurry of announcements from other listed companies addressing the positions of these individuals on their boards.

    The directors in question - Lau Chun Wah, Kelvin Peng, Tarun Kataria, Salvatore G Takoushian, Carl Gabriel Florian Stubbe and Ng Kheng Choo - were arrested on "reasonable suspicion" over breaches of disclosure rules, in a follow-up from police investigations announced in June.
    Some of them currently sit on or were on other boards of locally listed companies besides EHT's (see table). All have retained their current board seats.

    Singapore Exchange Regulation (SGX RegCo) has been querying companies with these directors on their boards, asking for an "assessment and the bases of such assessment" on whether the directors are suitable to continue in their respective positions.

    The exchange currently does not have any power to remove directors from boards, although a consultation is ongoing that would give the regulatory body more control over board membership.

    As none of them has been charged, corporate governance expert Mak Yuen Teen said, "a case can be made" for them to continue in their roles at other companies. At the same time, he said, it is important that boards continue to make this assessment.

    "They should continue to assess whether the fact that the director may be tied down with the investigation may affect his ability to devote the necessary time to the company," he said. "(They should) not just do this one-off assessment and not monitor if the director's ability to perform his role is affected over time."

    But he added that the current arrangement "does not give me much confidence".

    As breaches of disclosures go, SGX RegCo said only those that are "more severe" would be referred to the Monetary Authority of Singapore and the Commercial Affairs Department.

    "The less severe breaches may be dealt with at the exchange level. This may be by way of private or public enforcement proceedings," said SGX RegCo.

    Adrian Chan, vice-chairman of Singapore Institute of Directors (SID), noted that five of the six EHT directors arrested are or were independent directors. This, he said, is unusual as executive directors and senior management are usually the ones held accountable for matters relating to lack of due diligence. Mr Chan said that if these directors are charged, it "would be a very big deal".

    "All the directors in Singapore will be paying close attention to how this case develops and the lessons to be learnt from it," he said, adding: "But we don't know what they will be charged with (if at all), so we should hold back judgements until we see how this plays out.