Netccentric board calls for shareholders to dump founder amid legal threats
A fight that’s been brewing for months among the co-founders of Netccentric exploded this week, with legal threats and calls to rid the board of the ex-CEO.
The Netccentric (ASX:NCL) board wants shareholders to vote out Cheo Ming Shen, who resigned as chief executive in January.
Mr Cheo earlier launched a lawsuit against his co-founder and ex-Chief Operating Officer Timothy Tiah, and his relatives shareholders Tiah Thee Kian and Tiah Thee Seng, alleging they colluded to remove him.
Mr Cheo is defying his lawyers, who’ve recommended he stay silent, and is pitching his case to Netccentric shareholders.
The tribal council will vote at a general meeting on November 1.
Former Singapore start-up stars
Mr Cheo and Mr Tiah were stars of the Singapore startup scene.
They’d both dabbled in entrepreneurship before meeting each other in London. They launched Netccentric in 2006 as a holding company for online marketing and social media businesses.
Regional growth was followed by an Australian listing in 2015.
By early 2016 the company had shifted from a full-year profit of just under $1 million to a full-year loss of almost $2 million.
Revenue increased by $2 million, but so did administrative costs, employee expenses, and foreign exchange losses.
My Tiah quit in November, saying he wanted to “pursue other opportunities”. Netccentric told investors “his departure coincides with the streamlining of executive management positions”.
Mr Cheo was gone two months later in January 2017, just before the company reported an even wider loss: $5.5 million as admin and employee costs blew out even further.
A new CEO and COO were appointed this year and the business has started to turn its finances around.
Bad blood spills into court
This month the bad blood spilled into the public sphere.
Mr Cheo alleges in a Singapore High Court suit — has now publicly revealed to Netccentric shareholders — that he and his cofounder Mr Tiah began disagreeing on the direction of the company after it listed.
This came to a head in July last year.
He says Mr Tiah agreed to step down and let Mr Cheo run the company without interference, in exchange for cash — an amount eventually worked out to be $596,000.
Mr Cheo alleges that Tiah Thee Kian and Tiah Thee Seng, who control 10.7 per cent of the company, then used the same reasoning — that they were unhappy with the direction of the company — to work with Mr Tiah to remove him, claiming they represented a substantial block of shares.
Mr Cheo said the losses were well flagged in pre-IPO roadshows and annual reports, as the company was taking an Uber-like hard-spending, high-growth strategy.
Tim Tiah’s lawyer responded with a scathing answer.
“Insofar as Mr Cheo is alleging that our client colluded with Tiah Thee Kian and Tiah Thee Seng to propose the present resolution to remove him as a director, the allegation is strenuously denied.
“Mr Cheo has not put forward an iota of credible evidence save for a presumption that there has to be such a collusion because of the family relationship.
“The allegation of collusion is a fiction.”
The two Tiahs say Mr Cheo presided over an almost 300 per cent slide in losses, and that he should have appeared by teleconference at the annual general meeting in May to explain himself.
Mr Cheo says he was suffering from back spasms and had already warned them he wouldn’t be able to make it.