Bursa Malaysia Securities Publicly Reprimands G Neptune Berhad And Its Directors And Fines 4 Directors

Bursa Malaysia Securities Berhad [200301033577 (635998-W)] (“Bursa Malaysia Securities”) has publicly reprimanded G Neptune Berhad (“GNB” or “the Company”) and 4 of its former directors for breaches of the Bursa Malaysia Securities ACE Market Listing Requirements (“ACE LR”). In addition, the 4 former directors of GNB were imposed total fines of RM262,000.  

GNB was publicly reprimanded for committing breaches of the following provisions of the ACE LR:-  

(1)       Rule 9.23(1) of the ACE LR for failing to issue its annual report that included the annual audited financial statements together with the auditors’ and directors’ report for the 18-months financial period ended (“FPE”) 30 June 2017 (“AR 2017”) on or before 31 October 2017 (“Delay Breach”). The AR 2017 was only issued on 17 May 2018, after a delay of 6.5 months.  

(2)       Rule 9.16(1)(a) of the ACE LR for failing to ensure that the Company’s quarterly report for the FPE 30 June 2017 (“QR6/2017”) announced on 29 August 2017 was accurate and contained sufficient information to enable investors to make informed investment decisions (“Deviation Breach”).  

GNB had reported an unaudited loss after tax and minority interest of RM1,299,174 in the QR6/2017 as compared to an audited loss after tax and minority interest of RM8,587,693 in the audited financial statements for the 18-months FPE 30 June 2017 announced on 4 May 2018 which represented a deviation of 561% or RM7.289 million. The deviation was mainly due to an impairment loss arising from the writing off of the prepayments and deposits paid to a supplier of RM7,239,307 (“the Deposit”). 

In addition to the public reprimand, GNB was required to review and ensure the adequacy and effectiveness of its financial reporting function. 

The 4 former directors of GNB (i.e. directors at the material time of the Delay Breach and Deviation Breach) were found to have committed the breach of Rule 16.13(b) of the ACE LR for permitting GNB to commit the Delay Breach and Deviation Breach and were imposed the following penalties:-

The finding of breach and imposition of the above penalties on GNB and the directors were made pursuant to Rule 16.19 of the ACE LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality/impact of the breaches to GNB and shareholders/investors and the roles, responsibilities, knowledge and conduct of the directors.

BACKGROUND 

The delay in the issuance of the AR 2017 and announcement of the inaccurate QR6/2017 were essentially due to the failure of GNB to take reasonable and expeditious steps to assess the recoverability of and/or resolve the audit issue on the Deposit. Even though the external auditors had required the Company to assess/justify the recoverability of the Deposit during the Audit Committee and Board of Directors meetings on 29 May 2017 and 28 August 2017, the Executive Director, Khoo Yick Keung only decided to write off the Deposit on/about 2 November 2017. In this regard:-   

• There was no reasonable justification/change of circumstances for Khoo Yick Keung to only make the decision to write off the Deposit on/about 2 November 2017 i.e. after the due date for issuance of the AR 2017 and 2 months after announcement of the QR6/2017 on 29 August 2017.
• The Company had written off the Deposit in the quarterly report for the FPE 30 September 2017 announced on 30 November 2017 which had led to the Company triggering the prescribed criteria in Guidance Note 3.
• Further, despite the decision to write off the Deposit on/about 2 November 2017, the AR 2017 was only issued on 17 May 2018 i.e. 6.5 months later.  

The directors had failed to discharge their duty, particularly to make enquiries and/or assessment on the recoverability and/or impairment of the Deposit in approving the QR6/2017 during the Audit Committee and Board of Directors meeting on 28 August 2017. There was also lack of supervision, monitoring and follow up by the directors on the status of the preparation and issuance of the AR 2017. The mere reliance by the directors on the management to address/resolve the audit issue on the Deposit and ensure finalisation of the AR 2017 was unacceptable in the discharge of their obligations and tantamount to abdication of their responsibilities.