Study Guide-LAW 2013 Term 1

Question3 (Total:25marks)

Answerquestions3(a)and3(b)havingregardtothefactsgivenintheCase below.

CASE: Recall Ltd

Recall Ltd is a company which is listed on the Singapore Exchange. Summary information about its board of directors may be found in the table below:

InJuly2011,theentireBoardreceivedananonymousletterpurportingtobefrom a “concernedemployee”statingthatregulatory actionwasbeinginitiatedagainstRecall (SEA) Pte Ltd, one of Recall’s principal overseas subsidiaries, for tax evasion offenceswhich,if proven,wouldeffectivelylimitthecompany’sabilitytoexport goodstoabout50%ofitsusualoutput.The Boardheldanemergencymeetingwhere John informed the Board that such regulatory action was “a most unlikely outcome as Recall(SEA)PteLtd.,wasbeinginvestigated forveryminoroversightinitspayment oftax which waslikely toresultin onlyacomposition finebeingimposedonit”.The BoardtookJohn’sresponseatfacevalueandleftthematterassuchanddidnot request any follow-up action on the matter.

InAugust2012,astatementwaspostedonaprominent online investor’s discussion forum (whichisreadbymanyretailinvestors)that“oneofRecallLtd’sprincipal subsidiarieshadbeenconvictedamonthago oftaxevasionwithpenaltieswhichwill significantly affect the group’s bottom line. Investigations in relation to this actually commencedoverayearago.However,thecompanyhasnotmentionedanything about the investigations or conviction to-date”. Recall Ltd’s share-price dropped significantly on high trading volume as news of the online post spread. Upon being notifiedoftheonlinepost,theRecallLtd boardaskedfortradingintheCompany’s sharestobehaltedsothatitcouldinvestigatethestatement.Investigationsrevealed theonlinestatementtobetrueandthat JohnandKellyhaddeliberatelywithheldthe convictionanditsconsequencesfromtherestoftheboardmembers.Itwasfurtherestablishedthat,hadactionbeentakentocorrectcertainpractices ofRecall(SEA)Pte Ltd at the time investigations had commenced intoitsaffairs,matterswouldnothave escalated and Recall (SEA) Pte Ltd would haveat most only had to pay a small fine in relation to the tax evasion charges.

Question 3(a) Required

Discuss whether Recall Ltd may have breached any of its disclosure obligations under theSecuritiesandFuturesActand/ortheSGXListingManualinrespectoftheir failuretomakeanyannouncementinrelationtothecommencementoftaxevasion investigations in July 2011 and the tax evasion conviction in August 2012 and whether or not Recall Ltd may have committed an offence under the Securities and Futures Act in relation tosuch failure. (10 marks)

Question 3(b) Required

DiscusswhetheranyofthedirectorsofRecallLtdmayhavebreached anyoftheir directorial duties. (15 marks)