Singapore Law Watch has the details of a court case where a unit of OCBC won its appeal against the former CEO of Frontken, Wong Hua Choon. The full judgement can be found at the bottom of the article.
Lawyers said the appeals court's 36-page judgment helped to clarify the law on the circumstances that show when an oral deal is binding as a contract.
But Malaysian invstors might also be interested in the deal itself between OCBC, Frontken and its then CEO:
In the case, OCBC Capital Investment Asia (OCIA) had entered into a risk-sharing deal to help Bursa Malaysia-listed Frontken Corp with 27.6 million shares acquired in 2007. It had invested some RM15 million in Frontken's shares.
Frontken, which maintains equipment in the semiconductor and other industries, is a RM130 million (S$52 million) enterprise with a presence in several countries in the region.
Its president and chief executive Wong Hua Choon personally agreed to underwrite any downside fluctuation risk to the shares for six months after they were listed.
Under this risk participation agreement, he would pay the difference if the share value fell below the floor price of 47 sen per unit, should OCIA opt to sell within the six-month period.
The 2008 global financial crisis sent the share price plunging, and when OCIA wanted to sell its Frontken shares on the open market, Mr Wong stood to pay a potential RM7 million to make up the difference.
Talks followed and Mr Wong agreed to buy 3.7 million shares at 54 sen per share, and for him to enter a new risk guarantee period for the remaining OCIA shares from July 2010 with no expiry date as long as OCIA held the shares.
The parties orally agreed at a Singapore meeting in June 2009 on the terms and to follow up with the formal documents on this supplementary agreement.
But as Mr Wong did not sign the formal papers by an August 2009 expiry date, he took issue with whether he was bound by any deal.
The deal itself looks quite risky, although the global economy appeared to be doing well in 2007, cracks started to appear.
Another question is if these kind of deals should be revealed to investors, it appears to be material information. In a crisis situation it could easily lead to forced selling of a large amount of shares.
This is the 5-year graph of Frontken's share, not a pretty picture: