Former Member of Parliament Chng Hee Kok, the Chief Executive Officer (CEO) of NTUC Club, was fined the maximum $5,000 on 27 July 2007 for an offence under the Companies Act. The Club’s General Manager, Shirley Lee Lai Ngoh, was also handed the same fine for a similar offence.
Both had failed to disclose their beneficial interest in an IT company, Stoval Technologies Pte Ltd (Stoval), which had business dealings with NCI Leisure Pte Ltd (NCI Leisure) – a wholly-owned subsidiary of NCI Club Investments Pte Ltd (NCI), which is the investment arm of NTUC Club. Chng and Lee are also directors of NCI Leisure. They initially faced two other similar charges each, involving three other private NTUC Club companies, which were taken into consideration in sentencing.
Chng and Lee became directors in Stoval when NCI acquired a majority stake in Stoval in January 2002. In October 2003, Chng and Lee became Stoval shareholders when they bought over 14.27% and 4.55% of Stoval shares respectively at $0.02 apiece. Between October 2003 and November 2006, NCI Leisure gave over $1 million to Stoval for supplying cards and card readers, which were used in amusement arcades and computer games centres. But both Chng and Lee did not declare their interest in the transactions involving Stoval to the other board members of NCI Leisure, despite being required to under Section 156(1) of the Companies Act. Disclosure is mandatory in order to prevent any conflict of interest.
In mitigation, Lee Teck Leng, the pair’s lawyer, argued that his clients had made a verbal declaration of their interests in Stoval to the NTUC Club Deputy CEO, who is also a director of NCI Leisure. Lee added that his clients had abstained from participating in the business negotiations between Stoval and the NTUC Club companies.
However, DPP James Lee pointed out that both Chng and Lee have more than 30 years of business experience and Chng is also a director in several public-listed companies. Chng and Lee should have been aware of their obligations as NCI Leisure’s directors. DPP Lee added that directors of companies "with a strong public character" like the NTUC Club companies must be held to a "high standard of accountability".
DPP Lee said "Corporate disclosure lies at the heart of good corporate governance, which, fundamentally is about trust and confidence in our companies". He also urged the court to view such offences seriously and to punish the two with the maximum fine, citing the concluding remarks of retired CJ Yong Pung How in Yeo Geok Seng v PP:
"I recognised that the effect of a wide interpretation of the provisions of s 156 of the Act will mean that even an innocent failure to disclose with no proven loss to the relevant company can bring about the conviction of the director involved. This is a harsh reality but the fact remains that directors are under an onerous duty by virtue of their positions as fiduciaries entrusted with the responsibilities of managing their companies’ businesses and making corporate decisions for the benefit of their companies. If a person undertakes such duties and responsibilities as a company director, he should also be responsible for familiarising himself with the various rules of disclosure and other statutory duties under the Act.
Section 156 of the Act exists for the benefit and protection of the company so that its board of directors may make informed decisions in the light of declarations of interest by individual directors. A wide interpretation of s 156 is therefore necessary to give effect to its purpose."
In Yeo Geok Seng v PP, CJ Yong upheld the decision of the district court in sentencing the appellant to the maximum fine of $5,000 for the offence under Section 156(1) of the Companies Act.
In sentencing the current case, District Judge Liew Thiam Leng said that good corporate governance requires disclosure for the protection of shareholders’ interest, and agreed with DPP Lee that the maximum fine of $5,000 each be imposed on both Chng and Lee.