Regulatory Actions By SGX::Queries by SGX RegCo on the Company's announcements of 24 April 2020 and 27 April 2020
Issuer & Securities
HC SURGICAL SPECIALISTS LIMITED
HC SURGICAL SPECIALISTSLIMITED - SG1DC2000004 - 1B1
Regulatory Actions By SGX
Date &Time of Broadcast
Announcement Sub Title
Queries by SGX RegCo on the Company's announcements of 24 April 2020 and 27 April 2020
Submitted By (Co./ Ind. Name)
Singapore Exchange Regulation
Description (Please provide a detailed description of the event in the box below)
We refer to the announcements released by the Company on 24 April 2020 and 27 April 2020, titled "Response to SGX Queries". Please provide your responses to the following in an announcement to be released via SGXNet by Monday, 4 May 2020. In your announcement, please disclose our queries and your corresponding responses to enable investors to understand the matters raised.
1) The Exchange notes that the Singapore Medical Council ("SMC") had informed Dr Ong of the Complaint on 27 February 2019. Please clarify whether SMC had informed him that a complaint had been lodged against him or that the SMC was investigating the complaint. Did SMC request for information or seek Dr Ong's assistance on the complaint / investigation thereafter? If so, please provide details of such requests.
2) The Company acquired 51% in Julian Ong Endoscopy & Surgery Pte Ltd ("JOES") from Dr Ong in February 2017. In October 2019, the Company acquired an additional 19% in JOES, bringing its shareholdings in JOES to 70%. In its announcement of 3 September 2019, the Board explained that the rationale for acquiring the additional 19% in JOES is to "motivate Dr Julian Ong" and that the acquisition will "continue to enhance the working relationship upon which Dr Julian Ong, coupled with the Company s resources, will be able to further improve the profitability of JOES". The Exchange further notes that JOES contributed approximately 17% and 13% to the Group s revenue and profits respectively for the half year ended 30 November 2019. The acquisition of JOES was a commercial decision and driven by profitability of JOES and collaboration with Dr Julian Ong, the key driver of JOES financial performance.
Given the ongoing SMC investigation on Dr Julian Ong, the commercial rationale for the acquisition would potentially be jeopardized should there be adverse developments arising from SMC's investigation. In view of the significance of JOES' contribution to HC Surgical s financial performance and the need to safeguard the company's interest in this investment, please provide the following information:-
a) The terms of the sale and purchase agreement ("SPA") on the acquisition of 19% in JOES provide for the grant of an option by Dr Ong to require Dr Ong to re-purchase 70% of the shares in JOES ("Put Option") should his employment with the Group be terminated.
(i) Please provide details of the salient terms of the Put Option, including the consideration to be received by the Company upon exercise of the Put Option.
(ii) In addition, please state what are the terms with regards to termination of Dr Ong's employment; the circumstances under which the Put Option can be exercised by the company, as well as the termination clause highlighted in the service agreement with Dr Ong and referred to in the SPA.
b) The Put Option is exercisable within the 30th month to the 48th month of Dr Ong's employment with the Group. The 48th month of Dr Ong's employment falls on 31 March 2021. Given that the investigations by SMC is ongoing and should there be any protracted delay in the completion of the investigation, are there any provisions to allow for the exercise period of this option to be extended?
c) Has the Board fully considered if the Company's 70% interest in JOES is safeguarded? Please provide details on steps taken and options considered by the Board.
d) Are there any plans to acquire the remaining 30% in JOES at a later stage subject to separate sale and purchase agreement to be entered into? If so, what are the bases?
e) In the event that the outcome of the SMC investigations impact on Dr Ong's ability to continue practising (such as a prolonged suspension or removal of his licence to practice), please confirm that:
(i) The Board has considered this outcome and its implications in deciding to enter into the SPA to acquire further 19% in JOES. Please state the Board's views and rationale in this regard.
(ii) In respect of questions 2(b) and 2(c) above, the rationale and considerations of the Board in arriving at such decision.
(iii) In respect of questions 2(b) and 2(c) above, the Board is satisfied that the current arrangements are sufficient for safeguarding shareholders interests and fulfillment of its fiduciary duties to shareholders and the basis for this view.
(iv) The Board is satisfied that it has put in place the necessary measures and safeguards to protect the Company's and shareholders' interest in the event of adverse outcome from the SMC investigation. Please specify the measures and the Board s considerations in this regard.
3) The Exchange notes that the Parkway Group has suspended Dr Ong's accreditation and clinical privileges at Gleneagles, Mount Elizabeth, Mount Elizabeth Novena and Parkway East Hospital with effect from 20 April 2020 until SMC dismisses the complaint against Dr Ong. Dr Ong will continue to practice from the Group s heartland centres and utilize facilities at an alternative hospital for inpatients, where necessary. The Board has required Dr Ong to inform all his patients of the matters alluded to in the SMC Complaint prior to any consultation and obtain the consent of each patient to act as their physician if they should so agree, save for emergency consultation.
a) Please provide an assessment of the adequacy and effectiveness of such controls, processes and procedures put in place to safeguard the interest of the Company, and address potential risks, including but not limited to legal, reputational, financial, operational and compliance risks if there are lapses in the arrangements put in place.
4) In view of the above developments, please provide a confirmation from the Board that:
a) In arriving at its decision on the above matter, the Board has taken all steps and carefully examined all options available to the Group to ensure that decisions made and actions taken are in the best interest of the Company and its shareholders. Please confirm the steps taken in this respect and the rationale for these steps.
b) The Board has put in place adequate and effective controls to safeguard the interest of the Company and its shareholders. Please confirm the controls taken in this respect and the rationale for putting in place such controls.