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Honestbee taking legal action against ex-CEO, former director over alleged ‘numerous irregularities’

Honestbee taking legal action against ex-CEO, former director over alleged ‘numerous irregularities’

Source: TODAY
Article Date: 25 Mar 2020
Author: Janice Lim

In a press statement, the grocery and food delivery start-up alleged that it has discovered “numerous irregularities” in various transactions that took place while the pair were still with the company.

Embattled local start-up Honestbee said on Tuesday (March 24) it is taking legal action against its former chief executive officer Joel Sng and ex-director Jeffrey Wong.

In a press statement, the grocery and food delivery start-up alleged that it has discovered “numerous irregularities” in various transactions that took place while the pair were still with the company.

Mr Sng was Honestbee CEO from March 2015 to May last year, while Mr Wong was a director from September 2013 to August last year.

In response to queries from TODAY on whether the company would notify the police of the allegations, an Honestbee spokesperson said: “We will in due course. But we would like to proceed with the civil suit first. At this juncture, we do not have the manpower to assist the Singapore Police Force to conduct their investigations.”

In the statement, the company said it has issued letters of demand to both Mr Sng and Mr Wong for alleged breach of fiduciary duties.

It highlighted three transactions which they believe to have “caused loss and damage” to Honestbee and have “no doubt contributed to the financial difficulties” of the company.

But there could be more than just these three breaches as Honestbee is still conducting its internal investigations.

“The company has not received any substantive response from either Sng or Wong. Honestbee intends to and will raise and pursue any other questionable transactions that may come to light in the course of its investigations,” read the statement.

TODAY has been unable to reach either Mr Sng or Mr Wong for comment.

Here are three transactions that Honestbee said have caught their attention.

1. Purchase of a house in Niseko, Japan

Honestbee said that Mr Sng bought a house in Niseko under his name and the company paid US$1.1 million for it on his instructions.

“During the time of the purchase, there was no apparent real benefit or commercial advantage for Honestbee to purchase the Niseko house and make payment on behalf of Sng for it,” read the statement.

In February 2018, Mr Sng allegedly tried to regularise the property purchase by entering into an agreement with Honestbee.

According to the company, Mr Sng said he had been appointed to provide commissionaire activities in December 2015 by acting on behalf of Honestbee when the house was bought, and the company had appointed him to buy and hold the property.

The property purchase was not disclosed to the then-board of Honestbee until September 2018, said the company on Tuesday.

2. Renting a unit above Honestbee’s Habitat supermarket at Pasir Panjang

Mr Sng and Mr Wong started a company in May 2013 called The Cub SG, and it entered into a tenancy agreement with LHN Space Resources, the landlord of the property where the Habitat supermarket by Honestbee was operating.

The Cub SG rented a unit above the supermarket, and Honestbee paid for all security deposits and transaction costs, including stamp duties, for the tenancy agreement.

It also paid the monthly rent and expenses, which amounted to about S$51,000 every month for a year, from October 2017 to October 2018.

Mr Sng did not disclose The Cub SG payment arrangement to the then-board or shareholders of Honestbee before September 2018.

“Since October 2017, the tenanted premises were left empty and in fact were of no real use to Honestbee. There was no real benefit or commercial advantage for the company to make payment of the tenancy transaction expenses and rent, as well as any other fees or payments for the premises, on behalf of The Cub,” said the company in its media statement.

3. Incorporating a company called 'PayNow'

Mr Sng incorporated a company called PayNow (no link to the digital funds transfer service provided by several banks in Singapore) in January 2017 to develop an e-wallet solution. He was the sole shareholder and director of that company. 

Honestbee entered into a share subscription and partnership agreement with PayNow after Mr Sng said it has a viable product that was ready for launch and that the e-wallet company was worth S$4 million.

Honestbee paid S$1 million to subscribe to 20 per cent of the ordinary shares in PayNow, with Mr Sng owning the remaining 80 per cent.

Between August 2017 and February 2018, Honestbee further paid a total of about S$6.4 million for the supposed purchase of Mr Sng’s shares in PayNow. These payments were made at his instructions, said HonestBee.

Again, Mr Sng did not disclose any of the transactions to PayNow to the then-board or the shareholders of Honestbee before September 2018.

“Honestbee has since found that PayNow did not during that time have a minimum viable product that was ready to launch. In fact, the said product that PayNow had produced was only at a rudimentary stage,” said the company.

The company said it had paid about S$7.4 million in total to buy Mr Sng’s 100 per cent shareholding of PayNow.

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