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BURSA MALAYSIA PUBLICLY REPRIMANDS BASWELL RESOURCES BERHAD AND FINES EIGHT DIRECTORS A TOTAL OF RM170,000
Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded Baswell Resources Berhad (“BASWELL”) and eight of its directors for failing to make an immediate announcement on the default in payment of various credit facilities. The eight directors were also fined a total of RM170,000.
BASWELL had breached paragraphs 9.03(1) and 9.04(l) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements (“Main LR”) read together with paragraphs 2.1(d) and (e) of Practice Note 1 (“PN1”) for failing to make an immediate announcement of the default in payment of credit facilities by its wholly-owned subsidiaries, Baswood Industries Sdn Bhd (“BISB”) and Aimwood Furniture Industries Sdn Bhd (“AISB”).
Notwithstanding that BASWELL had been de-listed on 17 October 2011, the breach was committed while BASWELL was listed on the Official List of Bursa Securities.
The following directors of BASWELL at the material time were found to have breached paragraph 16.13(b) of the Main LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, BASWELL to commit the breach. The details of the penalties imposed on them are as follows:-:
| No | Director | Penalty |
|---|---|---|
| 1 | Khoo Yew Kheng Managing Director / Chief Executive Officer (Appointed on 30 August 2002 and re-designated as Executive Director on 27 October 2010) |
Public Reprimand and Fine of RM100,000 |
| 2 | Khoo Yew Nean Executive Director (Appointed on 30 August 2002) |
Public Reprimand and Fine of RM10,000 |
| 3 | Dr. Lai Chee Chuen Independent Non-Executive Director Audit Committee Chairman (Appointed on 30 August 2002, re-designated as Managing Director / Chief Executive Officer on 27 October 2010 and resigned on 22 July 2011) |
Public Reprimand and Fine of RM10,000 |
| 4 | Lim Boon Chiang Independent Non-Executive Director (Appointed on 30 August 2002) |
Public Reprimand and Fine of RM10,000 |
| 5 | Chong Yong Kai @ Chong Yong Kait Independent Non-Executive Director (Appointed on 23 January 2009) Audit Committee Chairman (with effect from 27 October 2010) |
Public Reprimand and Fine of RM10,000 |
| 6 | Dato’ Wong Kam Hoong Non-Independent Non-Executive Director Audit Committee Member (Appointed on 15 January 2010 and resigned on 1 August 2011) |
Public Reprimand and Fine of RM10,000 |
| 7 | Tan Beng Kheng Independent Non-Executive Director (Appointed on 15 January 2010 and resigned on 2 August 2010) |
Public Reprimand and Fine of RM10,000 |
| 8 | Tan Sri Dato’ Bentara Istana Nik Hashim Bin Nik Ab. Rahman Independent Non-Executive Director (Appointed on 24 February 2010, re-designated as Independent Non-Executive Chairman on 30 March 2010 and resigned on 1 August 2011) |
Public Reprimand and Fine of RM10,000 |
Bursa Securities views the contravention seriously as timely disclosure of material information is one of the fundamental obligations of listed companies to preserve and sustain market integrity and investor confidence.
BACKGROUND
BASWELL had breached paragraphs 9.03(1) and 9.04(l) of the Main LR read together with paragraphs 2.1(d) and (e) of PN1 for only making an announcement on the default in payment of credit facilities by its wholly-owned subsidiaries, BISB and AISB on 9 August 2010. The details of the default in payment are as follows:-
AISB| Lender | Facility | Outstanding credit facility as claimed in Notice of Demand (A) (RM) | % of (A) Over BASWELL’s Net Assets | Date of default | Length of delay (Approx) |
|---|---|---|---|---|---|
| Citibank Berhad (“Citibank”) |
Overdraft | 351,430 @ 9 Aug 2010 |
1.67% | June 2010 | 1 month 9 days |
| Citibank | Bankers Acceptance and Bank Guarantee | 1,085,295 @ 9 Aug 2010 |
5.18% | 22 July 2010 | 18 days |
| Malaysian Industrial Development Finance Berhad (MIDF) | Machinery Loan 1 | 2,719,427 @ 31 July 2010 |
8.25% | 1 November 2009 | 9 months 9 days |
| MIDF | Machinery Loan 2 | 968,578 @ 31 July 2010 |
2.94% | 1 November 2009 | 9 months 9 days |
| Ambank (M) Sdn Bhd (Ambank) | Hire Purchase | 193,033 @ 7 Sep 2010 |
0.80% | April 2010 | 3 months 9 days |
| Orix Credit Malaysia Sdn Bhd (Orix) | Hire Purchase 1 | 30,336 @ 28 July 2010 |
0.12% | May 2010 | 2 months 9 days |
| Orix | Hire Purchase 2 | 24,155 @ 28 July 2010 |
0.10% | May 2010 | 2 months 9 days |
| Malayan Banking Berhad (MBB) | Term Loan | 885,962 @ 30 June 2010 |
4.23% | 30 June 2010 | 1 month 9 days |
| MBB | Trade line | 1,151,893 @ 30 June 2010 |
5.50% | 30 June 2010 | 1 month 9 days |
BISB
| Lender | Facility | Outstanding credit facility as claimed in Notice of Demand (A) (RM) | % of (A) Over BASWELL’s Net Assets | Date of default | Length of delay (Approx) |
|---|---|---|---|---|---|
| Citibank | Overdraft & Bankers Acceptance | 2,517,599 @9 August 2010 |
12.02% | June 2010 | 1 month 9 days |
| MBB | Overdraft & Bankers Acceptance | 768,220 @ 30 June 2010 |
3.67% | 30 June 2010 | 1 month 9 days |
The finding of breach and imposition of the above penalties on BASWELL and its directors 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:-
- The materiality of the breach as follows:-
- BASWELL was unable to provide the requisite solvency declaration to Bursa Securities upon announcement of the default in payment on 9 August 2010 and was classified as a PN17 company on the same day;
- BASWELL’s share price had decreased by 78.57% from approximately RM0.70 in January 2010 to RM0.15 on 10 August 2010 after BASWELL announced the default in payment pursuant to PN1 and the First Announcement pursuant to PN17 on 9 August 2010. In particular, BASWELL’s share price had decreased from RM0.19 on 9 August 2010 when the Company announced the default in payment pursuant to PN1 and the First Announcement to RM0.15 on 10 August 2010 i.e. a decrease of 21% from 9 August 2010. Further, the volume of BASWELL’s shares traded on 10 August 2010 alone was 7,368,300 as compared to an average of 1,587,066 shares traded for the preceding three days; and
- The requirement for listed companies to make an immediate announcement of material default in payment of credit facilities was fundamental to enable investors to make informed investment decisions concerning the listed company’s financial condition.
- The knowledge, role, responsibilities and conduct of the directors:-
- Khoo Yew Kheng was the Managing Director and was primarily responsible for the business operations and day-to-day affairs of BASWELL during the relevant period. In particular, at the time of the material default to MIDF, she was involved in the discussion with MIDF representatives in respect of the repayment of MIDF’s loan and hence, had or should have knowledge of the default to MIDF since 1 November 2009. Notwithstanding this, she had failed to immediately inform the other directors of the default and failed to ensure that BASWELL made an immediate announcement of the default in payment to MIDF. She had also abdicated her responsibilities and subordinated her powers premised on the emergence of a new major shareholder and formation of the executive committee which in any event occurred only on and after 15 January 2010 and 11 May 2010 respectively (i.e. after the material default to MIDF). In this respect, the subordination or delegation of her powers/functions showed improper discharge of her duties and obligations as the Managing Director of BASWELL;
- The Non-Executive Directors had failed to discharge their obligations to ensure that BASWELL made an immediate announcement of the default in payment immediately upon being informed of the defaults in May 2010. Notwithstanding being advised by the solicitors of the obligations under PN1 and that BASWELL should announce the defaults and the obligations irrespective of whether a demand for repayment has been made and the prescribed criteria in paragraph 2.1(f) of PN17, they had allowed and agreed to defer the PN1 and PN17 announcement.
The representations of the Non-Executive Directors that they had acted in the best interest of the Company in taking every effort to exhaust all avenues before making the announcement and they were not paid were unacceptable and did not reduce nor mitigate their culpability particularly in the light of the severity of the breach.