Dated 9 February 2020
Lee Hishammuddin Allen & Gledhill (“LHAG”) views with considerable concern the various messages that have been circulated since Friday, 7 February 2020, stating that the firm has been dissolved. At the outset, we state that the firm has not been dissolved and business continues as usual.
There are disputes between the partners, which should have been resolved in the agreed dispute resolution process: mediation and arbitration. Unfortunately, 3 partners – Saravana Kumar, Rosli Dahlan and Ong Eu Jin – chose to ignore those agreed dispute resolution process. On Friday, 7 February 2020 from 5 p.m. onwards, they emailed, to the whole firm, their purported notices to dissolve the firm immediately. One of the Notices of Dissolution was circulated on social media.
Datuk DP Naban also, in the same evening, issued a notice informing the firm that he regarded the firm as dissolved. Ooi Bee Hong also sent a notice purporting to accept the Notices of Dissolution.
Their conduct caused anxiety to over-200 employees whose livelihood and welfare depends on the firm. It also invited concerns and queries from clients who discovered the purported dissolution through social media.
Over the weekend, it came to our attention that in addition to the purported Notices of Dissolution, unsealed cause papers and affidavits, at times setting out highly selective facts, were also circulated on social media. These include copies of the firm’s partnership agreement and other confidential information.
The firm will answer, in the correct forum, the false allegations made in these affidavits and in the Notices of Dissolution.
There is a lot of fake news that have been circulated on social media. Two items in particular require immediate responses.
Fake News: The dispute concerns an attempt by young partners to illegally change the agreed profit distribution scheme. Not true.
FACT: The real dispute concerns the proper treatment of vast sums of moneys running into millions (“Moneys”) received by the firm on files opened and managed by Datuk DP Naban and Saravana Kumar, two partners from the tax practice group, from clients between 2009 to 2019. This was discovered late last year by a newly elected Partners Committee (the highest managing body of LHAG).
Many partners were shocked by this discovery, and were determined that there should be full transparency. The firm’s stand is to comply with the law, in particular tax laws.
Numerous attempts were made to ascertain the full facts. Eventually, on 5 January 2020, the partners, by a clear majority, passed resolutions to, amongst others, ensure full compliance with all tax laws. This included seeking tax advice from the firm’s long-standing tax advisors as to the proper tax treatment of the Moneys, and complying with the advice.
The firm will oppose vigorously the injunction sought on 7 February 2020, by Datuk DP Naban and Ooi Bee Hong, to, among others, prohibit the firm from:
Fake News: LHAG has been dissolved. Not true.
FACT: Under the partnership agreement, the partnership can only be dissolved by a resolution passed by 75% of the equity partners. No such resolution has been passed. Nor is there any risk of such a resolution being passed, as the vast majority of partners oppose it.
Despite being fully aware of this, on 7 February 2020, Notices of Dissolution were issued to the firm by the 3 partners. These 3 partners collectively represent approximately only 11% of the equity in the firm. These 3 partners had voted against the resolutions that had been aimed at ensuring that independent tax advice was taken and implemented in respect of the Moneys. For the record, most of the Moneys in question is attributable to files managed by Saravana Kumar, who is one of these 3 partners.
If any steps are taken to dissolve the firm, the process of reviewing the appropriate tax treatment of these large sums of Moneys may be delayed or even frustrated.
The other allegations contained in the purported Notices of Dissolution, and in the affidavits that have been circulated on social media, is an attempt to deflect attention from the real issue: the need for the firm to ensure proper compliance with tax laws.
WE REPEAT: It is business as usual for the firm.
Partners Committee
Lee Hishammuddin Allen & Gledhill
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