Hyflux and its directors under probe for suspected breaches of disclosure requirements, non-compliance with accounting standards

SINGAPORE — Beleaguered water treatment firm Hyflux and its current and former directors are under investigation for making suspected false and misleading statements and not complying with accounting standards, the authorities said. 

In a joint statement on Tuesday (June 2), the police, the Commercial Affairs Department (CAD), the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (Acra) said that they have launched an investigation under Sections 199, 203 and 253 of the Securities and Futures Act, as well as under Section 201 of the Companies Act.

The directors being investigated were those who sat on the firm’s board between 2011 and 2018. 

In a filing on the Singapore Exchange (SGX), the company said that it is “assisting and will cooperate fully with CAD in its investigations”. It will make further announcements “as and when there are any updates on the matters”. 

In April last year, the authorities said that they were looking into whether the public-listed firm had violated any laws and regulations. These included a review of Hyflux-related disclosure issues, as well as compliance with accounting and auditing standards, to determine if there have been breaches of listing rules, among other matters.

On Tuesday, the regulators said that the review “disclosed reasons to suspect that offences may have been committed”.

“The investigation will ascertain whether there were lapses in Hyflux’s disclosures concerning the Tuaspring Integrated Water and Power Project as well as non-compliance with accounting standards between 2011 and 2018,” the statement read.

As part of the investigation, the authorities have obtained accounting and other corporate records from Hyflux and its subsidiary Tuaspring. 

Hyflux’s directors and key officers who were involved in the project have also been interviewed.

Tuaspring is the first water plant in Asia to be integrated with power generation capabilities but since it started operating in March 2016, it has been pulling down earnings for Hyflux.

The authorities said that the time needed to complete the investigation will depend on several factors, such as the period of the offence, the complexity of the issues and the number of people involved.

“CAD, MAS and Acra will provide an update when there is an outcome to the investigation,” they added.

They stressed that the criminal investigations are “separate from and do not pertain to the ongoing corporate rescue process”. 

“The investigations are not intended to interfere with Hyflux’s current reorganisation plans as they focus on determining the role of the subjects in the alleged disclosure lapses and non-compliance with accounting standards between 2011 and 2018,” they said. 

Hyflux has been undergoing a court-supervised restructuring process since May 2018 after chalking up debts amounting to nearly S$3 billion.

On whether the firm’s investors will be able to recover their losses following the outcome of the probe, the authorities said that criminal investigations “are distinct from civil claims”. Those affected should consider seeking independent legal advice on the possible recourse available to them. 

Last Friday, the media reported that Hyflux’s S$400 million rescue deal with Middle Eastern utility company Utico has fallen through, though the company remains in talks with the potential investor and is studying its revised offer to replace all cash considerations for creditors with stocks.

The proposed deal was the firm's second restructuring deal since it was granted a court protection to restructure its debt of nearly S$3 million. 

Hyflux is concurrently pursuing other options, including those with other potential investors such as Aqua Munda, Longview and FCC Aqualia.

Once a market darling and much-vaunted trailblazer in Singapore's entrepreneurial space, Hyflux’s fall from grace began on May 22, 2018, when it announced that it was seeking court protection to reorganise its business and deal with its liabilities. It also suspended trading of its shares and related securities.