Koh Brothers Eco Engineering faces up to S$57.6 million in potential liabilities over legal disputes

Koh Brothers Eco Engineering disclosed on August 18 that it faces potential liabilities of nearly S$57.6 million due to three major legal disputes, just prior to shareholders voting on its mainboard listing. The company's estimated maximum exposure includes S$20.5 million from a joint venture dispute, S$23.3 million from a consortium arbitration, and up to S$13.78 million from a subcontractor claim.

The most critical issue revolves around the joint venture counterclaim. On August 6, the Singapore High Court dismissed applications by Koh Brothers' subsidiary, Koh Brothers Building & Civil Engineering Contractor, to set aside partial arbitration awards. The subsidiary then sought a final payment order on August 7. Despite an undistributed fund balance of over S$40 million in the joint venture account, Koh Brothers estimated its maximum exposure regarding these counterclaims at S$20.5 million.

Additionally, the company revealed a separate dispute involving consortium partners seeking around S$23.3 million over KBCE’s alleged non-payment of its share of capital injections. A hearing for this dispute has been postponed to an unconfirmed date. Furthermore, Koh Brothers faces a lawsuit from a former subcontractor for wrongful termination and conspiracy, with claims ranging between S$9.18 million and S$13.78 million.

The parties have agreed to attend a mediation session, and Koh Brothers intends to file a counterclaim, though it has not allocated financial provisions for the suit yet.

Despite these mounting legal proceedings, Koh Brothers remains confident in its ability to continue as a going concern. The company cited a net asset position of S$124.7 million as of June 30 and expects the consortium and subcontractor disputes to not reach definitive conclusions within the next 12 months. The legal issues, however, did result in a 2.6% drop in Koh Brothers' share price, closing at S$0.114 on Monday.