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Case 1-1 CG PDF
Case 1-1 CG PDF
With this development, for the first time in the company’s history, there
was no Tang family member on the board.
According to C.K. Tang’s Corporate Governance Report in 2009, the
board would be responsible for enhancing long-term shareholder value
and the overall management of the Group. This includes reviewing the
Group’s performance, approval of corporate strategies and promoting
high standards of corporate governance. The board delegated some
of its functions to the board committees, namely the audit committee,
nominating committee and remuneration committee.
First Privatisation Attempt: Scheme of Arrangement
On 29 October 2003, Tang Wee Sung offered minority shareholders
S$0.42 per share via a scheme of arrangement9. This represented a
premium of about 35 per cent above the average closing price over the
last five trading days10. This price also meant a 19.2 per cent discount
against the company’s net tangible assets as at 30 September 200211.
However, the resolution failed to pass, as the shareholders felt the
offer price was too low and wanted more information on the company’s
prospects12.
Doubts were raised about the independence and neutrality of the CEO
of the company at the time, Foo Tiang Sooi, because he was personally
related to Tang Wee Sung. Foo had worked under Tang from 1999 to
2006. He and Tang were also former schoolmates25. However, he
dismissed these facts as irrelevant26. Foo also added that he was related
to the shareholder who posed the question, but this fact was irrelevant
as well27.
Another shareholder called for a vote of no-confidence against the
board chairman. After consulting with legal advisors, the board rejected
the motion, with the chairman saying that the action was an attempt to
frustrate the meeting28. Even as shareholders tried to probe further, the
chairman called for the vote to be taken29. The resolution to privatise
the company was passed with 96.25 per cent of votes in favour of the
proposal30.
Discussion Questions
1. In cases of companies where there are controlling shareholders,
explain why the interest of controlling and minority shareholders may
diverge, using the CK Tang case as an example.
2. Should independent directors be primarily concerned with the
interests of the minority shareholders?
3. Evaluate the independence of C.K. Tang’s board during the third
privatisation attempt. Do you think this affected the actions of the
board during the privatisation process?
4. Do you believe that the basis of valuation was fair? Explain.
5. With regards to the privatisation episode, suggest improvements that
would help protect minority shareholders in the future.
6. C.K. Tang used three different privatisation methods. Explain how
these different methods work and the pros and cons of these different
methods from the viewpoints of the shareholder(s) wanting to take a
company private versus minority shareholders who may prefer that
the company remain listed.