Bursa Malaysia Securities Publicly Reprimands Farlim Group (Malaysia) Berhad And Fines Nine Directors A Total Of Rm340,000

Bursa Malaysia Securities Berhad (Bursa Malaysia Securities) has publicly reprimanded Farlim Group (Malaysia) Berhad (FARLIM) and its directors for breaching the Listing Requirements of Bursa Malaysia Securities (LR). In addition, the directors were fined a total of RM340,000. 

FARLIM was publicly reprimanded for breaches of paragraph 10.08 of the LR on the failure to make an immediate announcement, appoint an independent adviser and a main adviser and procure shareholders’ prior approval of the following related party transactions:- 

• approval / acceptance on 27 April 2007 and/or 25 August 2007 of its holding company, Farlim Holding Sdn. Bhd. (FHSB)’s request vide letter dated 27 March 2007 for repayment of the amount owed (of RM61,472,113 as at 27 March 2007) to FARLIM by FHSB on or before 31 December 2009; and
  
  
• approval / acceptance on 21 February 2009 and/or 21 April 2009 of FHSB’s request vide letter dated 15 December 2008 for revised repayment of the amount owed (of RM57,659,841 as at 15 December 2008) to FARLIM by FHSB on or before 31 December 2011.

(collectively referred to as “the Related Party Transactions”). 

The following directors of FARLIM at the material time were found to have breached paragraph 16.11(b) of the LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, FARLIM to commit the above breaches. The penalties imposed on the directors are as follows:- 

The finding of breach and imposition of the above penalties on FARLIM and its directors were made pursuant to paragraph 16.17 of the LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the Related Party Transactions / breaches and the role, responsibilities, conduct and interest of the directors.  

Bursa Malaysia Securities views the contraventions seriously in view of the importance of the related party transaction requirements under the LR (RPT Requirements) which formed part of the fundamental obligations of companies listed on the Official List of Bursa Malaysia Securities which served to ensure directors of listed issuers shall maintain the highest standards of integrity, accountability and corporate governance. The RPT Requirements also enable independent shareholders of listed issuers an opportunity to consider, in a timely manner, transactions which have the potential of adversely affecting their interests. 

BACKGROUND 

(I)  PUBLIC REPRIMAND ON FARLIM

FARLIM had committed the following breaches:- 

The amount owed by FHSB to FARLIM (which were advances made to FHSB since 1997) of RM61,472,113 as at 27 March 2007 and RM57,659,841 as at 15 December 2008 represented approximately 80% and 70% of FARLIM’s net assets of RM76,420,069 and RM82,370,833 as at 31 December 2006 and 31 December 2007 respectively. This had far exceeded the percentage ratio of 5% and 25% prescribed under the RPT Requirements where FARLIM must appoint an independent adviser, a main adviser and procure shareholders’ approval before the above repayment proposals were agreed upon. 

Notwithstanding the representation that FARLIM did not suffer any loss arising from the amount owed by FHSB to FARLIM in view that interest was charged and paid, it was for the shareholders to ultimately decide on the merits and/or acceptance of the repayment and settlement of the long outstanding and material amount owed to FARLIM which was only tabled to shareholders for approval on 28 December 2011.    

The breaches were detected by Bursa Malaysia Securities in its monitoring on the settlement of the amount owing by FHSB. 

(II)  PUBLIC REPRIMAND AND A TOTAL FINES OF RM340,000 IMPOSED ON NINE DIRECTORS 

The directors were or should be aware of the Related Party Transactions as the interested directors had declared their interests and abstained from the deliberation and voting of the Related Party Transactions at the Board of Directors’ meetings on 25 August 2007, 21 February 2009 and 21 April 2009.  However, they had failed to ensure compliance with the RPT Requirements.  In addition, the directors were alerted on various occasions as to the Related Party Transactions via the review and approval by them of the disclosures in the financial statements. Notwithstanding these, they had failed to ensure compliance of the RPT Requirements.

It was apparent from the conduct of the directors that they had been blatantly neglectful / lackadaisical in ensuring compliance with the RPT Requirements. 

A higher fine was imposed on all the interested directors i.e. Tan Sri Dato’ Seri Lim Gait Tong, Puan Sri Datin Seri Chin Chew Lin, Datuk Seri Haji Mohamed. Iqbal Bin Kuppa Pitchai Rawther, Lim Yat Koi @ Lim Yoke Kwai and Ng Bock Tye by virtue of their interest in FHSB as a shareholder and/or director and had benefited from the Related Party Transactions which resulted in the delay in / extensions of time towards repayment of the amount owed by FHSB to FARLIM. 

The audit committee was also fined as they had the function to review any related party transactions under the LR and had the responsibility to ensure the proper discharge of the company’s obligations under the LR in approving / accepting the repayment proposals.