SINGAPORE — Former Chief Executive Officer of Hyflux Ltd (Hyflux), Ms Lum Ooi Lin, its former Chief Financial Officer, Mr Cho Wee Peng, and four independent directors of Hyflux at the material time were charged in court on Thursday (17 Nov) for disclosure-related offences under the Securities and Futures Act (SFA).
Ms Lum was further charged with an offence under the Companies Act (CA) for her failure in ensuring Hyflux’s compliance with accounting standards.
A joint statement by the Commercial Affairs Department of the Singapore Police Force (SPF), the Monetary Authority of Singapore (MAS) and Authority of Singapore and the Accounting and Corporate Regulatory Authority (ACRA) notes that the charges were filed against the five following the completion of their joint investigations.
In June 2020, the three agencies announced a joint investigation into Hyflux and its current and former directors for suspected false and misleading statements, breach of disclosure requirements, as well as non-compliance with accounting standards.
The investigation was launched after a review of Hyflux-related disclosure and compliance with accounting and auditing standards that were announced in April 2019, upon which they discovered reasons to suspect that offences may have been committed.
According to the authorities, the review was an extensive exercise covering the announcements and financial statements issued by Hyflux over a period of eight years, between 2011 and 2018 inclusive.
Ms Lum faces three charges, namely:
One count of section 203(2) read with section 331(1) SFA, for consenting to Hyflux’s intentional failure to disclose information relating to the Tuaspring Integrated Water and Power Project (Tuaspring), when such disclosure was required under the Singapore Exchange Listing Rules (Listing Rules);
(b) One count of section 253(1)(b) read with sections 253(4)(b)(i) and 277(3) SFA for Hyflux’s omission to state the same information relating to Tuaspring in the 2011 Offer Information Statement (2011 OIS). The 2011 OIS was issued for the offer of S$200 million, 6% preference shares on 13 April 2011; and
(c) One count of section 201(5) read with section 204(1) CA for failing to ensure that Hyflux made disclosures required under the accounting standards for its financial statements for the financial year ended 31 December 2017. This included the failure to disclose the breach of a subsidiary’s loan agreement that permitted its lenders to demand accelerated repayment.
Mr Cho faces one charge under section 203(2) read with section 331(1) SFA for conniving in Hyflux’s intentional failure to disclose information relating to Tuaspring, when such disclosure was required under the Listing Rules.
As for the four Independent Directors of Hyflux, namely Teo Kiang Kok, Gay Chee Chong, Murugasu Christopher and Rajskar Kuppuswami Mitta, they each face one charge under section 203(2) read with section 331(1) SFA, for their neglect in connection with Hyflux’s intentional failure to disclose information relating to Tuaspring, when such disclosure was required under the Listing Rules and another charge each under section 253(1)(b) read with sections 253(4)(b)(i) and 277(3) SFA, for Hyflux’s omission to state the same information in the 2011 OIS.
If convicted, the accused persons face:
- imprisonment of up to seven years, a fine not exceeding $250,000, or both, on each section 203 SFA charge;
- imprisonment of up to two years, a fine of not exceeding $150,000, or both, on each section 253 SFA charge; and
- a fine not exceeding $50,000, on the CA charge.
The authorities have also investigated DBS Bank Ltd – in relation to Hylux’s offer information statement in 2011 – under section 253(4)(d) of the SFA for its role as issue manager in the offer and said that no further action will be taken after reviewing the evidence obtained.
As for the outcome of ACRA’s inspection on the audits conducted by KPMG, the auditors of Hyflux, will be finalised in due course.
The Tuaspring desalination plant, which is part of Hyflux’s Tuaspring IWPP project, was the largest seawater treatment plant integrated with a power generator in Singapore that supplies 70 million gallons of treated water per day for 25 years.
Costing Hyflux S$1.05 billion, this project was taken over by Singapore’s national water agency Public Utilities Board (PUB) last year after PUB terminated its Water Purchase Agreement (WPA) with Hyflux – due to the company’s financial debt.
In January 2014, Hyflux made its first issue of perpetual capital securities (preps), raising $300 million and in 2016, it made another security issuance, raising $500 million through the issue of 500 million $1 perp.
Hyflux filed for bankruptcy protection after reporting a net loss of $116.4 million for FY2017. It was later ordered by the court to be placed under judicial management in November 2020 and wound up in July 2021.
The holdings of almost 50,000 retail investors have suffered due to Hyflux’s financial collapse, among which are bondholders and shareholders.
In March 2019, around 500 people went to Hong Lim Park to protest against Hyflux after losing 80 to 97 per cent of their life savings and retirement funds invested in Hyflux preference shares and perpetual securities.
