Our analysis shows that 6 people appointed as directors before the 2015 AGM failed to stand for election at the meeting and hence ceased to be directors, so Sunway currently only has 4 valid directors. We also look at the acquisition in relation to which one of the invalid directors and the Guarantor are now being sued by Sunway, which has reported them to the Zhuhai PSB.

The six invalid directors of Sunway (0058)
15 October 2015

update 27-Oct-2015

The Board of Sunway International Holdings Ltd (Sunway, 0058) has appointed several new directors since its 2014 AGM.

On 2-May-2014, the day Sunway completed an acquisition (which, by the way, has blown up in their face), the Board appointed Mr Wang Tian (Mr Wang) and Mr Lin Yepan (Mr Lin) as Executive Directors. On 19-May-2015, Mr Lin resigned and Mr Li Chongyang (Mr Li) was appointed as ED. The next day, Mr Qi Jiao (Mr Qi) was appointed as ED and Mr Lam Kai Yeung (Mr Lam) was appointed as INED. On 29-May-2015, the Board appointed Ms Deng Chunmei (Ms Deng) and Mr Liu Chenli (Mr Liu) as INEDs.

At the AGM on 4-Jun-2015, only 1 director, INED Mr So Day Wing (Mr So), stood for re-election. He was re-elected.

Bye-law 115 of the company's Bye-laws states that any director appointed by the Board shall hold office only until the next following AGM and shall then be eligible to stand for election at the shareholders' meeting. None of Mr Wang, Mr Li, Mr Qi, Mr Lam, Ms Deng and Mr Liu stood for re-election at the AGM, so all 6 of them ceased to be directors on 4-Jun-2015. Sunway seems unaware of this fact and has been naming them as directors ever since.

In fact, immediately after the AGM, Sunway had only 3 valid directors: Finance Director Mr Leung Chi Fai (who is also the Company Secretary), Chairman and CEO Ms Helen Wong King Ching (Ms Wong), and INED Mr So Day Wing (Mr So). Mr So joined in 2001 and was re-elected at the AGM.

On 10-Jun-2015, Ms Wong and Mr So resigned and the board appointed Chairman Mr Huang Weidong, so then Sunway had only 2 valid directors. On 14-Aug-2015, the Board appointed INED Mr Cong Yongjian and ED Ms Fang Jing. As a result, today the board has 4 valid directors (a Chairman, two other EDs and one INED) and 6 invalid directors. An EGM should now be convened if they wish to be elected, but perhaps the Stock Exchange will let Sunway get away with just having the board reappoint them all until the 2016 AGM, depriving investors of the vote for a year.

The acquisition

The latest announcement on 14-Oct-2015 said that two directors of Zhuhai Hoston, which was the subject of the aforementioned doomed acquisition, had been reported by Sunway to the Zhuhai Public Security Bureau on 30-Jul-2015 in respect of "possible commercial crimes" and that this is now under investigation. Sunway said that one of the two is an ED. Based on the annual report biographies, that can only be Mr Wang, who joined the board when the acquisition completed, then aged 31. The other is a Mr Wang Zhi Ning (Z N Wang), aged 61 in the annual report, who was Chairman of Zhuhai Hoston. The report does not disclose any family relationship between the two Wangs.

The circular for the acquisition stated that the vendor was Mr Kevin Xiao Guang, and that his obligations were guaranteed by Z N Wang. Why would someone guarantee the obligations of the vendor, including a profit guarantee, warranties and representations, when he has no apparent financial interest in the transaction? The circular states that Z N Wang is a "close friend of the Vendor". Both are now being sued by Sunway.

Update, 27-Oct-2015

Last night, Sunway announced that "certain allegations" (presumably, our article) had been brought to its attention, and that we were right - from the close of the AGM, the 6 people ceased to be directors because they had not stood for re-election in accordance with the Bye-laws of Sunway. With effect from 23-Oct-2015, the Board has appointed 5 of them as directors again. Unsurprisingly, they did not appoint Mr Wang.

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