UOB-Kay Hian Holdings (UOBKH) has defended its decision to continue designating Tang Wee Loke as an independent director (ID).

This comes despite his substantial shareholding, past employment as a senior excutive in the group, and long-standing position on the board of directors.

The group was responding on Monday (Oct 16) to queries from Singapore Exchange Regulation (SGX RegCo), which sought details on how the nominating committee (NC) – of which Tang is chairman – and the board of UOBKH had come to the decision.

SGX RegCo asked the company last Thursday to elaborate on whether the NC and board had exercised a more “rigorous review” of Tang’s independence in view of his ties with the company, and how it complies with the Code of Corporate Governance (CG Code).

UOBKH said Tang’s relationship with the company and his previous executive appointments “have been fully taken into account by NC and board from the beginning of his tenure as an ID”.

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Tang began his career in Kay Hian & Co as an analyst and became a director in 1977, according to UOBKH’s website. He was later appointed deputy managing director of UOB-Kay Hian Holdings in 2000 following the merger of UOB Securities and Kay Hian Holdings.

Tang retired from his position in December 2007 and remained as an executive director of UOBKH until December 2011. He was appointed non-executive director from January 2012 and was designated an ID from January 2015.

UOBKH noted that it has been almost 12 years since Tang had a role in executive management of the company.

It added that Tang’s independence was “specifically proactively considered” by the NC in February 2022 in view that Tang may become a substantial shareholder through his participation in the company scrip dividend scheme.

This was considered again by the NC in August 2023, when Tang became a substantial shareholder of the company after his shareholdings rose to 5 per cent.

SGX RegCo noted that Tang is the third-largest shareholder in the company with around 45.2 million shares in June, which are worth around S$62 million based on the current market price.

It queried why Tang should be exempted from Provision 2.1 of the CG Code which requires that IDs have no relationship with the company, its related corporations, its substantial shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgement in the best interests of the company.

UOBKH noted the CG Code’s practice guidance requires NC and board to consider circumstances where a director should be deemed not independent, such as when a director is a substantial shareholder.

However, it added the guidance stated that the examples were meant to illustrate situations of likely non-independence, and NC and board can still consider a director to be independent.

“The NC considers Tang’s independence to be such a situation where the director is considered independent notwithstanding his substantial shareholding,” it said.

The company added that Tang was a longstanding shareholder and with a 4.5 per cent stake when he first became an ID in 2015.

The NC’s recommendation on Tang’s independence was “first and foremost based on his independent character, independent conduct and ability to exercise objective judgement with regard to the best interests of the company”, UOBKH said, adding that the NC also took into account his past conduct and active participation in board meetings.

SGX RegCo also sought an explanation on how the NC was “equipped and adequately resourced to carry out the assessment”, given that Tang was also chair of the NC.

UOBKH said Tang has recused himself from such deliberations, and the NC has also consulted external legal counsel to clarify and seek advice on such issues.

It added that Tang’s independence was previously approved at an annual general meeting (AGM) in April 2021 by the two-tier vote in accordance with previous rules for IDs who have served for more than nine years.

Long-serving IDs (LSIDs) could previously continue to be deemed independent if approval was obtained at two tiers of voting – first, from all shareholders, and second, from shareholders excluding directors, the CEO and their associates.

SGX RegCo had expected issuers to use the provision sparingly, but the mechanism has been widely used to retain hundreds of LSIDs. Earlier this year, the market regulator clamped down on such practices with a hard tenure limit of nine years for IDs.

SGX RegCo noted that Tang will no longer be eligible to be designated as an ID and must resign or be designated as a non-independent director at the company’s AGM to be held in April 2024 for the financial year ending December 2023.

UOBKH said its board and NC are aware of the implications of the rule and will comply “as and when it applies to the IDs of the company”.

Shares of UOBKH closed flat at S$1.38 on Monday, before the announcement.