Cordlife substantial shareholders lay out separate plans to address issues after AGM

THE two substantial shareholders in Cordlife’s boardroom tussle have set out separate plans to address the cord-blood bank’s troubles after the May 14 annual general meeting (AGM).

The Friday (May 10) bourse filing is responding to queries from the Singapore Exchange (SGX), which asked for clarity on a resultant board and its plans to resolve the company’s ongoing issues, if resolutions in two shareholders’ requisition notices were passed, respectively.

Cordlife substantial shareholder Nanjing Xinjiekou Department Store had filed resolutions to remove four directors: acting chairman Dr Ho Choon Hou and independent directors Yeo Hwee Tiong, Titus Cheong and Joseph Wong. (Wong has separately announced that he will retire from the board from May 14.)

Nanjing Xinjiekou also seeks to appoint three new directors: Dr Teo Tong Kooi, Dr Xu Tianhong and Cai Yong, to replace the three Singapore-based directors Dr Ho, Yeo and Cheong.

Cordlife’s controlling shareholder TransGlobal Real Estate Group requisitioned to remove one director, Zhai Lingyun, in a separate notice.

This boardroom dispute comes as Singapore’s Ministry of Health (MOH) uncovered lapses in Cordlife’s storage of cord blood, and suspended it from collecting or processing new cord blood for six months since last December.

Noting that the company did not provide any substantive explanation on how the resultant board will ensure continuity as well as coordinate with the relevant authorities to resolve the current issues in its May 6 response, SGX asked the resultant board’s constituent and its specific steps to resolves the issues in Singapore.

Nanjing Xinjiekou Department Store’s response

Assuming all resolutions in the Nanjing Xinjiekou’s resolution notice are carried at the upcoming AGM, the new board will comprise of the following directors:

1. Zhai Lingyun (non-independent non-executive director)

2. Chen Xiaoling (non-independent non-executive director)

3. Yiu Ming Yiu (non-independent non-executive director)

4. Chow Wai Leong (non-independent non-executive director)

5. Dr Teo Tong Kooi (independent and non-executive director)

6. Dr Xu Tianhong (independent and non-executive director)

7. Cai Yong (independent and non-executive director)

Zhai and Chen, as directors nominated by Nanjing Xinjiekou, proposed to reconstitute the audit and risk committee, the nominating committee, remuneration committee and the committee of inquire among the resultant board.

A proposal has also been made to make arrangements for existing director Chen to remain in Singapore for at least the next few months to provide support and facilitate a smooth handover of board matters to the newly appointed directors.

“Together with Dr Teo, (Chen) will engage with the Singapore regulators, including SGX RegCo and MOH, as well as customers to address ongoing concerns in Singapore,” said the duo.

Among other recommendations on corporate governance, they also recommended to appoint additional directors and a new group chief executive officer, as well as engage with third party professionals.

On operational front, they proposed to transfer existing resources and manpower overseas, including the laboratory and technical experts from China, the United States of America and Hong Kong, to Cordlife.

“This is aimed at enhancing the technical processes and introducing industry best practices into Cordlife’s operations, thereby giving further assurances to MOH and existing customers of Cordlife,” they added.

Nanjing Xinjiekou holds around 20.3 per cent of Cordlife, according to Cordlife’s 2023 annual report. Together with its affiliate, China Stem Cells (East) Company, it holds 30.2 per cent. 

TransGlobal Real Estate Group’s response

If only the resolutions in the TransGlobal’s resolution notice are carried at the upcoming AGM, the new board will comprise of the following directors:

1. Chen Xiaoling (non-independent non-executive director)

2. Yiu Ming Yiu (non-independent non-executive director)

3. Chow Wai Leong (non-independent non-executive director)

4. Dr Ho Choon Hou (acting chairman and non-independent non-executive director)

5. Yeo Hwee Tiong (independent director)

6. Cheong Tuck Yan Titus Jim (independent director)

Dr Ho, Yeo and Cheong, whom Nanjing Xinjiekou aims to replace, said that they are actively managing Cordlife’s ongoing issues with “genuine concern and care for the company”.

They highlighted that their continuity as three local directors is “very important” as they have detailed knowledge over the incidents, they are personally involved in the rectification, and they understand clearly what needs to be done to turn the company around, among other reasons.

On top of these, they also noted that being based locally allows they to have developed strong networks of relationships with relevant parties that they can call upon in service of the company.

While Nanjing Xinjiekou said in a letter to shareholder on Thursday that it was “perplexed” by Cordlife’s proposal to raise S$8.1 million through a private placement, the three local directors, as well as Chen, Yiu and Chow, said they think that new capital is needed for the company to fulfil its obligations to local clients and operations, without comprising operations in other countries. This include providing refunds to affected parents.

“The TransGlobal resultant board will continue to work with management on addressing the potential claims by affected parents, including issuing partial refunds where appropriate and strengthening its laboratory operations to ensure that each licensed laboratory in each country is self-sufficient, so that the company’s operational and technical assistance can be shared across the different countries in which the group operates,” they added.

Additionally, the three local directors noted that Cheong and group chief financial officer Thet Hnin Yi have reached out to several audit firms to consider their appointment.

They also noted that Dr Ho and the group CEO Ivan Yiu have continued to ensure smooth operations across the regions and sufficient financial resources in each of the countries to fulfill respective client obligations.

“Since the MOH suspension on Dec 15, 2023, the company has not been generating any new revenue or cashflow from the collection of new samples, and the company is uncertain of the business outlook in Singapore even when the suspension is lifted.

“The company does not wish to compromise the operations or regulatory obligations of the group’s entities in the other regions simply to address the Singapore entity’s immediate needs for cashflow,” said the existing directors, highlighting that most of the contracts in other regions feature upfront payment from clients.

TransGlobal as Cordlife’s controlling shareholder holds a 27.9 per cent stake in the company.

As at 10.18 am on Friday, shares of Cordlife : P8A 0%were trading flat at S$0.126.