Bursa Malaysia Securities Publicly Reprimands Metal Reclamation Berhad And Fines Its Executive Director, Lim Cheng Sang

METALR had breached paragraph 9.03(1) read together with paragraph 9.04(I) of the Main LR and paragraphs 2.1(c), (d) and/or (e) of PN1 for failing to make an immediate announcement of the following defaults in payment of credit facilities by METALR’s wholly owned subsidiary, MRISB:-

 

Lender	Facility	The total defaulted as at date of default	Total credit facility outstanding (based on the Company’s announcement dated 2 Sept 2014) (A) RM	% of (A) Over METALR’s Net Assets	Date of default	Length of delay (Approx. months)
Hong Leong Bank Berhad (“HLBB”)	Banker’s Acceptances	117,000	889,000.00	3.63%	21 March 2014	5.5
AmIslamic Bank Berhad (“AmIslamic”)	Banker’s Acceptances	385,423.64	1,426,076.15	5.82%	28 March 2014	5.0
Malayan Banking Berhad (“MBB”)	Overdrawn Current Account	155,187.22	155,187.22	0.63%	4 April 2014	5.0
HLBB	Overdraft	60,563.36	1,016,685.63	4.15%	15 April 2014	4.5
Sabah Development Bank Berhad (“SDB”)	Revolving Credit Principal and interest	157,174.73	96,189,023.04	392.24%	29 April 2014	4.0
AmBank (M) Berhad (“AmBank”)	Overdraft	1,606.12	1,522,200.22	6.21%	30 April 2014	4.0
Total			101,198,172.26	412.67%

 

There were defaults in payment of the credit facilities by MRISB as early as 28 March 2014. However, METALR only made the announcement of these defaults in accordance with PN1 only on 2 September 2014.

The Company’s representation that there were regular discussions with the respective financial institutions for indulgence in settling the outstanding payments did not absolve the Company from disclosing the occurrence of these events of default immediately in accordance with the Main LR.

The finding of breach and imposition of the above penalties on METALR and Lim Cheng Sang were made pursuant to paragraph 16.19(1) of the Main LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the following:

1. The materiality of the breach as follows:-
   1. The materiality of the defaults in repayments of the credit facilities to the banks involving defaults of more than 390% of the net assets of METALR;
   2. The length of delay in announcing the defaults in payment of the credit facilities which ranged from 4 to 5.5 months;
   3. The defaults in payment of the credit facilities had led to METALR triggering the prescribed criteria under paragraph 2.1(f) of PN17 and formed one of the basis of the external auditors’ disclaimer opinion in the Company’s annual audited accounts for the financial year ended 30 June 2014;
   4. Subsequent to METALR’s PN1 announcement on 2 September 2014, the share price declined by 15.1% from RM0.66 on 2 September 2014 to RM0.56 on 3 September 2014; and
   5. The requirement for a listed issuer to make an immediate announcement of material default of credit facilities was fundamental to enable investors to make informed investment decisions concerning the listed issuer’s financial condition.

 

1. The knowledge, role, responsibilities and conduct of Lim Cheng Sang, as the only Executive Director of METALR at the material time and who was primarily responsible for:-
   1. the financial management of METALR for the financial years ended 30 June 2013 and 30 June 2014; and
   2. making the assessment on whether the defaults in payment of the credit facilities required immediate announcement, inform the Board of Directors of the defaults in payment of the credit facilities and approve the announcement on the defaults in payment of the credit facilities to Bursa Malaysia Securities

Lim Chee Sang was aware of these material defaults in payment, but failed to discharge his obligation to ensure the Company made an immediate announcement of the defaults in payment of the credit facilities in accordance with the Main LR.  In this regard, the announcement of these defaults was made by the Company on 2 September 2014 after he  informed the Board of Directors of the defaults on 28 August 2014.