Behind closed doors: Closed hearing set as SGX sues Chinese firm

The company was described as “so defiant” and “testing the will and limits” of the bourse.

A Bloomberg report said:

Singapore Exchange (SGX), where 40 percent of listed firms are based outside the city state, is going to court to enforce its listing rules for the first time after a Chinese company ignored a deadline to appoint a special auditor.

The exchange sued China Sky Chemical Fibre Co. and four of its Chinese directors on Jan. 6 to compel the Quanzhou City, Fujian-based company to have a special auditor investigate “interested party transactions,” a failed land acquisition and certain costs. A closed hearing is scheduled today.

“This is the first time that a company has been so defiant,” said Lan Luh Luh, an associate professor at the National University of Singapore’s business school. “They’re testing the will and limits of the SGX. All eyes are on SGX to see the extent of its enforcement.”

Singapore investors have pressed for tougher rules as accounting scandals have wiped out the market values of China- based firms from New York to Hong Kong, including Sino-Forest Corp. (TRE) and FerroChina Ltd (FRC). Singapore Exchange, Southeast Asia’s biggest bourse by the value of shares traded, accused China Sky of “flagrant disregard” of its directive.

China Sky, in minutes of a Dec. 24 meeting in Singapore between its Chief Executive Officer Huang Zhong Xuan and Lawrence Wong from the bourse, submitted to the exchange that some of its demands “were extremely unreasonable.” China Sky released the minutes of the meeting in a statement to the Singapore Exchange.