SGX has mandated that S-Chips introduce new measures that could give them more control over their mainland-based legal representative or top executives.
But “constructive”, “nation-building” Today reports that there practical problems.
“If you don’t have the cooperation of the legal rep, then you might not be able to go through the whole procedure and then to effect the removal of the legal rep because you can foresee that the legal rep will not give full cooperation in helping you to remove himself,” said Mr Lin Song, co-head of international China practice group at law firm KhattarWong.
The lawyer was referring to the paperwork involved in effecting the removal of the Chinese-backed legal representative. Company transactions become binding only when they bear the firm’s corporate seal and the power to affix this seal is vested only in the legal representative.
“The issue is more on the execution level even though you might have in the articles of association all these provisions when you really need to remove the legal rep … you may face difficulty,” Mr Lin said.
“For example, the listed company might be required to present the local authority a stamp registration form and other documents which might require the legal rep to sign,” he added.
Mr Robson Lee, partner at Shook Lin & Bok LLP, echoed the same sentiment that the SGX ruling might not be enough to clip the wings of Chinese-backed executives.
Mr Lee, who also sits as a director for S-chip firm Youcan Food International, said there are practical enforcement difficulties to ensure compliance by the executive management that are based in China.
“It would be better to put in place the necessary legal provisions in the articles of association to give the board of the listed company the legal right to intervene when things go wrong,” he said.