SINGAPORE, May 14 — The Singapore Exchange (SGX) has taken unusually tough measures against embattled cosmetics firm Best World International after the company confirmed its main franchisee in China was related to its chief executive officer and managing director Dora Hoan.
The SGX yesterday ordered the franchisee in China, Changsha Best, and other import agents to hand over their accounting and corporate records, as well as other documents containing financial information to its regulatory arm, known as SGX RegCo. Best World must also obtain an independent legal opinion “on the legality of the group’s sales and distribution business under the franchise model”.
Best World has said it set up the franchise arrangement last year. Before that it operated an export model. It has been fending off allegations that it runs fraudulent schemes.
The company’s shares have been suspended from trading since last Thursday.
The SGX directive came after Best World confirmed, in an SGX company filing earlier yesterday, that Hoan is the sister-in-law of Changsha Best’s owner and sole shareholder, Koh Kim Chuan.
In a statement to the SGX, Best World argued that the two entities are independent of each other despite the family connection for the following reasons:
- Koh was a passive investor, and he and his wife were not involved in the management or operations of Changsha Best or Best World.
- Hoan was not involved in Best World’s decision to partner with Changsha Best as the distributor of its skincare products in China.
- Yan Weijun, a Chinese national unrelated to any management of Best World, was responsible for Changsha Best’s operations.
Best World also said that Yan set up Changsha Best in 2014, with Koh providing the initial capital of US$100,000 (RM$416,450) as a “personal investment”.
Despite such assurances, SGX said in a notice of compliance on Monday that the revelation of the relationship between Changsha Best and Best World’s CEO and managing director “raises serious concerns about the veracity” of the firm’s sales in China and “whether these were conducted on normal commercial terms”. — TODAY