Invested in a cash rich company with no future?

Reader says...

I attended an AGM recently. It was a China company. Basically, no one from the management attend. 

No Chairman, no CEO, no executive director. 

The only person there to conduct the meeting is a newly appointed independent director (2016). 

We were there to review financial period 2015, hence the director replied to most of the questions was that he was not with the company. 





The company secretary (representative from a secretarial services)  and auditor was present. Oops, by the way, the auditor has flagged in the annual report on going concern.

Can the meeting be held without anyone from the management to answer shareholders' queries? I tried to check the requirement online, but I can't find regarding who must attend. ACRA requirement only mentioned minimum number of members.

The accounts of the company raised a lot of questions on the flow of underlying cash. The company was cash rich (and still is till today). 





However, over the past 1-2 years, 85% debts has no chance to recover. The company even subsidized their partners (distributors) when they wind up the business. The reason provided by the auditor is to "maintain relationship".  

I wonder why a company would still want to keep relationship if the business partners did not even pay up in the first place. Besides that, the company "invested" 3 times of their 2014 profits in a strategic program. 

The AR stated paid 36 million to an academic professor for consulting work.

I checked with the independent director regarding several huge unjustified spending. 

He said that day to day operation is not covered within the scope of corporate governance.

I have sent an email and also called SGX personally. It seemed that everyone is pushing away. 


SGX asked me to contact share registrar, and shares registrar asked me to contact company secretary. 





I feel that SGX has done a bad job letting companies (mostly China companies) to public list in Singapore without due diligence. It does not speak of a first world standard. I wonder if shareholders of fraudulent companies can sue SGX for negligence. 

Imagine, how many retirees has invested their life saving to these mostly China companies.

Maybe I should check with MAS. A bad company, with no integrity listed in Singapore is no different from con man. 

MAS should set up stricter rules to protect the investment community.

Do you have any advise or info regarding above subject? 

Although I am vested in the company, and I know my action will lead to company suspension, but I would prefer to blow this up so that SGX can do a better job, exercise due diligence tracking companies in future. 

Of course, certain companies should not be listed in the first place. My only concern is that the other shareholders may be affected by my action.

Looking forward to your reply.

AK says...

There are so many red flags here and I think you know it too.

If we have invested in a company that is doing badly due to factors which are not within the control of the management but there is a chance of recovery, we can hope. 


If we have invested in a company that is doing badly due to a dishonest or incompetent management, then, I think there is no hope.





When I feel that there is no hope, I take whatever is left on the table and move on.

Best wishes,
AK

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Why worry about hitting the CPF MS (FRS) too soon?

Hi AK,

I've been following your blog for years and thanks for all the tips you've shared. 

I transferred a considerable sum of monies from OA to SA when I was 34 as I was inspired by your strategy of doing so. I've been trying to build up my RS and hope that my SA balance will reach my RS within the next few years.


I'm also considering to top up my SA with cash to take advantage of the tax relief. However, I realised the strategy of transferring more OA to SA again may interfere with my plans to get tax relief in subsequent years, as the faster my SA grows, the faster I'll reach RS and after I reach RS, I will not be able to top up my SA and earn tax relief. 

Is my understanding correct? If yes, would it be better if I slow down on the OA transfers so that I can take advantage of the tax relief in subsequent years, esp since I'd expect income to get higher (and hence more in need of tax relief)?

Hi YY,

If you would like to have tax benefit, yes, MS Top Up to SA is the way to go. Up to $7K a year of cash top up will enjoy tax benefit.

Once you have hit the MS (the FRS) in your CPF-SA, you will not be allowed to do anymore MS Top Up to SA.

Thus, slowing down or stopping OA to SA transfer might be a good idea if tax benefit from MS Top Up to SA is something that is important to you.

Best wishes,
AK


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Met CPF Minimum Sum but has one regret.