After a “please explain” from the ASX, Chinese agricultural producer Dongfang Modern Agriculture (ASX: DFM) has released a statement attempting to clarify why four directors, the chief executive officer and company secretary all jumped ship in a mass exodus last month.
On 9 June, Dongfang released an ASX announcement stating directors Michael Wai Man Choi, Dan Lin, Ming Sing Barton Tso and Chiu Soas had resigned from the board with immediate effect.
The announcement also noted that chief executive officer Chiu “Charles” So and company secretary Philip Killen had also departed the company with immediate effect, leaving behind Cai Hongwei as executive chairman.
A few days later on the 13 June, the ASX issued Dongfang with a “please explain” describing the resignations as “most concerning”.
The regulator requested Dongfang to provide a full account of the circumstances leading to the exodus.
Dongfang responded claiming the reasons behind the resignations “differ”.
The company attributed the departure of independent directors Michael Choi and Dan Lin to “serious” rumours regarding local government officers interviewing Dongfang plantation staff about possible criminal connections.
“These rumours were not true,” the company stated.
“Because the independent directors could not investigate this rumour for themselves by visiting the plantations, they tendered their resignation due to the seriousness of the rumours, even though the rumours were false,” the company explained in a convoluted fashion.
In a comical farce, Donfang told the ASX the departure of directors Ming Sing Barton Tso and Chiu Soas was because the previous two directors had resigned.
The company then went on to state that Charles So’s exit was a result of his desire to seek “another career development”.
“The company secretary resigned due to the sudden resignation of the two independent directors as well as the chief executive officer without explanation.”
With such a farcical account of the exodus provided to the ASX, Small Caps attempted to get more details from Charles So but was told he had “nothing further to say”.
Small Caps also reached out to the company’s financial and corporate relations representative Ashley Rambukwella, but was, again, told not further comment or explanation would be made.
Remaining chairman breaches Trading Policy
In addition to requesting clarification regarding the “concerning” board exodus, the ASX probed whether chairman Cai Hongwei had breached section 4.2 of the Trading Policy.
The ASX pointed out that Cai Hongwei had purchased more than 5.61 million shares on-market in three separate transactions in late May during a closed trading period.
Dongfang responded claiming Cai Hongwei “was not aware” he was in breach of section 4.2 of the Trading Policy.
“There was no insider trading involved and the trading did not affect the share price,” the company added.
“However, he is now aware of the requirements and will endeavour to ensure future compliance.”
As a remedial action for Cai Hongwei’s trading breach, Dongfang stated it would deduct one-half of his director’s fees.
Additionally, Dongfang claimed the board exodus had “nothing to do” with Cai Hongwei’s trading breach.
In order to ensure ongoing ASX compliance, Dongfang noted it had engaged a firm to assist with finding replacement directors and a company secretary.
“The company is endeavouring to make substitute appointments as soon as it can.”
At the end of May, Dongfang had a market cap of $370 million and generated $244.9 million in revenue in 2018, resulting in a net profit after tax of $84.4 million.
The company runs 23 orchards across Jiangxi in China, with its Gannan navel orange purportedly a top brand in the country.
Dongfang also operates licenced health supplement manufacturing facilities in Sydney, with products including complementary medicines, along with health and skin care items.
The products are sold within Australia and exported to Asia.