Legal setback

The boardroom battle at seafood processing giant Alliance Select Foods International Inc., pitting the majority shareholders against two Singaporeans minority shareholders, could soon be over with the latter recently suffering a  legal setback.

The Regional Trial Court of Pasig recently dismissed the petition of Hedy Chua and Albert Hong Hin Kay for the issuance of a temporary restraining order (TRO) against the entry of Strong Oak Inc. in Alliance, saying that this did not appear to be of “extreme urgency.”

The court ruling is a victory for the majority stockholders of Alliance, led by chairman George E. Sycip and president and CEO Jonathan Y. Dee.

The Singaporeans were protesting a board resolution passed by Alliance to allow Strong Oak, Inc. to acquire 28.7 percent of the company’s shares through a private placement worth around P563.7 million. The investment involves the issuance of 430,286,226 shares to Strong Oak for P1.31 per share.

The legal setback for the Singaporeans did not surprise observers, as the latest lawsuit, like two others the Singaporean had filed earlier to compel management to give them unprecedented access to company records, is deemed to be based on flimsy grounds.

The two Singaporeans have been raising hell within the company.

Chua and Hong have accused the Filipino majority shareholders of engaging in self-dealing. The two Singaporeans have also insisted that their personal auditor, who did nothing for the company but limited his work for the Singaporeans only, be compensated SGD20,000 a month, or roughly P600,000 monthly.

The Singaporean also proposed that Alliance put up an office in Singapore where the company would pay a management fee of SGD20,000 per month even though no part of the operations of Alliance takes place in Singapore.

Company officials say that if the proposal of the Singaporean had been allowed to proceed, they would have made the company their milking cow.

One of the Singaporeans even insisted that an offspring,  half the age of Alliance’s senior managers, be given a salary equivalent to the prevailing rate in Singapore. The two expatriates had questioned the salaries being received by management for being too high, and yet, were only too willing to give a higher salary to their children.

Even more surprising, despite the young Singaporean receiving a less than well-deserved paycheck, he still questioned paying withholding taxes to the BIR.

The two Singaporean directors in Alliance had questioned the entry of Strong Oak because they said its capitalization amounted to only P62,500.

Their own companies, however, seem to be suffering the same fault that the Singaporeans accuse Strong Oak of.

Harvest All Limited, a Hong Kong registered company represented by Albert Hong Hin Kay, has 177,261,165 Alliance shares registered in its name, while Victory Fund Limited, a Hong Kong company represented by Hedy Yap-Chua, has 138,474,015 Alliance shares registered in its name. This totals 315,735,180 Alliance shares. At the prevailing rate of around P1.45 per share, this amounts to a whopping P457.8 million.

However, an examination of the records of these companies show an entirely different story. Harvest All has paid-up capital of only HK$1 while Victory Fund has paid up capital worth only HK$2. This means that both companies only have paid up capital worth HK$3, or approximately P17.

How can two companies owning more than P457 million worth of shares have a capitalization of only P17?

In short, the Singaporeans’ own companies have even less capitalization than the new Alliance investor.

Lately, the two expatriates also complained that Alliance had rewarded its directors and officers with generous paychecks. Last year, the directors and officers of the company were given a total of P55.541 million in combined compensation.

A survey of prevailing salary rates of officers of publicly listed companies would reveal that the total compensation received by Alliance’s top executives are comparable to the prevailing industry rates for companies of its class. In fact, they are even less compared to other publicly listed companies.

Meanwhile, the Singaporeans wanted their own managers to be compensated based on Singapore rates, which are much, much higher than the compensation received by the company’s current crop of managers.

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