Stamford Land sues UOB for alleged ill-advice given over a rights issue in 2021

[SINGAPORE] Property company Stamford Land has taken UOB to the High Court over what it says is a breach of the bank’s duties in relation to the company’s rights issue in 2021. Stamford Land is claiming for losses and damages of S$1.88 million.Stamford Land had engaged UOB as its issue manager when it decided to proceed with a rights issue in November 2021, where a sum of S$150,000 before goods and services tax was paid to the local bank for providing its services. Net proceeds of S$238.9 million was raised by the property company from the rights issue.M&C Services was also engaged by Stamford Land as it possessed “the software capability and the raw data to generate (excess rights shares allotment) scenarios”, according to UOB’s defence. The claim centres on Rule 877(10), a provision in the Singapore Exchange’s (SGX) Mainboard Listing Rules that outlines the allocation of excess rights shares in a rights issue.Companies need to consider the rule which states that in the allotment of any excess rights shares, preference will be given to the rounding of odd lots, if any. Directors and substantial shareholders who have influence over the day-to-day affairs of the company or have representation on the board and their respective associates will rank last in priority for the rounding of odd lots and allotment of the excess shares.UOB’s defence said that the share registrar M&C had generated proposals for how these excess rights shares would be allotted. Out of these proposals, the one that was chosen and implemented, involved balloting, where the small shareholders had a higher success rate of receiving the excess rights shares compared with restricted individuals such as directors and substantial shareholders. This meant that not all the applications by the minority shareholders would be fully satisfied before excess rights shares would be allocated to the directors and substantial shareholders. Following a shareholder complaint about the rights issue, SGX commenced Listings Disciplinary Committee Proceedings against Stamford Land for breaching the rule. Eventually, a settlement was reached without any admission of liability. As part of the settlement, a joint statement was published by SGX and Stamford Land on Dec 15, 2023. The statement stated that “in deciding on the excess allocation, Stamford Land and its directors relied on UOB’s professional advice as the lead manager”.SGX’s position of the rule is that “controlling shareholders and directors are entitled to receive excess rights shares only after the excess rights applications by minority shareholders have been fully satisfied.” According to the claim filed by Stamford Land, UOB allegedly “took no steps to check” whether its proposed rights shares allocation was compliant with the listing rules before advising the company. Stamford Land also claimed that the bank “did not advise (it) that there was a risk” of the rights issue being non-compliant and that UOB had displayed “gross negligence”.As a result of UOB’s failure to perform its obligation to propose an appropriate basis for allotment, Stamford Land maintained that it suffered loss in the form of costs and legal expenses incurred in defending disciplinary proceedings brought by SGX RegCo.“We had no reason to doubt UOB as they were our advisers,” said Benedict Tan, the former CEO of Stamford Land, who was cross-examined during the hearing in January. UOB denies displaying “gross negligence”, and asserted that Stamford Land “had agreed with the defendant’s interpretation of Listing Rule 877(10)”, as it approved the allotment proposal over e-mail. UOB added that Rule 877(10) “does not state that all applications for excess rights shares made by small shareholders must be fully satisfied before any excess rights shares may be allotted to directors or substantial shareholders”. It said that SGX’s interpretation of the provision “had not been made publicly available at the time” of the rights issue exercise, thus the wording of the rule was “open to interpretation”. On the same day as the joint statement was issued, SGX published a Regulator’s Column “What SGX Regco expects of listed issuers when allotting excess rights shares”. UOB argued that this is the first time SGX gave guidance on how the listing rule should be interpreted.The two-day hearing concluded on Jan 21. Shares of Stamford Land closed flat at S$0.495 on Monday (Feb 9) while UOB closed at S$38.70, up 0.5 per cent or S$0.20.