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BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS BENALEC HOLDINGS BERHAD AND FINES 3 EXECUTIVE DIRECTORS A TOTAL OF RM250,000

11 Aug 2015

Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded Benalec Holdings Berhad (BENALEC) and its 3 executive directors at the material period for breaching the Bursa Malaysia Securities Main Market Listing Requirements (Main LR).  In addition, the 3 executive directors of BENALEC were fined a total of RM250,000.

BENALEC was publicly reprimanded for breaches of paragraph 10.08 of the Main LR in respect of the following:-

The enforcement actions taken against the 3 executive directors of BENALEC were in respect of breaches of the relevant provisions of the Main LR as follows:-

(1)   Dato’ Leaw Seng Hai, the Managing Director of BENALEC was publicly reprimanded and fined RM50,000 for breach of paragraph 16.13(b) of the Main LR for permitting knowingly, or where he had reasonable means of obtaining such knowledge, BENALEC to commit the above breaches of paragraph 10.08 of the Main LR in respect of the Land Disposals;

(2)   Datuk Leaw Ah Chye, an executive director of BENALEC (resigned on 4 December 2013) was publicly reprimanded and fined RM100,000 for breaching:-

(a)    Paragraph 16.13 of the Main LR for causing or permitting, either knowingly or where he had reasonable means of obtaining such knowledge, BENALEC to commit the above breaches of paragraph 10.08 of the Main LR in respect of the Land Disposals;

(b)   Paragraph 10.08(8) of the Main LR where he, being an interested director in the Land Disposals, had failed to inform the board of directors of BENALEC as well as the subsidiary, SLSB the details of the nature and extent of his interest in relation to the Land Disposals; and

(c)    Paragraph 10.08(6) of the Main LR where he, being an interested director, had failed to abstain from board deliberation and/or voting on the relevant resolution in respect of the Land Disposals; and

(3)   Datuk Leaw Tua Choon, an executive director of BENALEC (resigned on 4 December 2013) was publicly reprimanded and fined RM100,000 for breaching:-

(a)    Paragraph 16.13 of the Main LR for causing or permitting, either knowingly or where he had reasonable means of obtaining such knowledge, BENALEC to commit the above breach of paragraph 10.08 of the Main LR in respect of the Land Disposals; and

(b)   Paragraph 10.08(8) of the Main LR where he, being an interested director in the Land Disposals, had failed to inform the board of directors of BENALEC as well as the subsidiary, SLSB the details of the nature and extent of his interest in relation to the Land Disposals.

The finding of breach and imposition of the above penalties on BENALEC and the 3 executive directors were made pursuant to paragraph 16.19 of the Main 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, impact of the breach to the Company and shareholders 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 (RPT Requirements) under the Main LR which served to govern potential conflicts of interest which may give rise to potential abuses vis-à-vis transactions by listed companies to the detriment of shareholders. 

BACKGROUND

(I)     PUBLIC REPRIMAND ON BENALEC

BENALEC had committed the following breaches:-

No.

Breach

A.

Land Disposals

1.

Paragraph 10.08(1) of the Main LR for failing to announce the land disposals entered into between BENALEC’s subsidiary, SLSB with Sunshine 2000 on 18 January 2012 (Sunshine 2000 SPA) and with Seaside Synergy on 12 March 2012 (Seaside Synergy SPA) (both Sunshine 2000 and Seaside Synergy are collectively referred as the Purchasers) upon agreement of the terms of the Land Disposals.

 

In this respect, the Land Disposals involved:-

(a)    the interests of certain directors / major shareholders and persons connected to these directors and major shareholders; and

(b)   consideration of approximately RM14 million for the respective transactions (and a total of RM28 million for the Land Disposals) representing the highest percentage ratio of 4.05% each (and a total of 8.1%) of the net assets of the Company as at 30 June 2011 of RM346.76 million.

 

The Land Disposals were only announced by BENALEC as related party transactions on 13 & 31 March 2014.

 

2.

Paragraph 10.08(2)(b) read together with paragraphs 10.12 and 8.29(1) of the Main LR for failing to obtain shareholders’ approval prior to the completion of the Seaside Synergy SPA .

 

In this regard, the Sunshine 2000 SPA and the Seaside Synergy SPA were completed on 17 April 2012 and 7 May 2012 respectively.

 

Both the Land Disposals and the rescission and cancellation of the same (via the HOA) were ratified by BENALEC’s disinterested shareholders on 25 June 2014.

 

 

3.

 

Paragraph 10.08(2)(c) read together with paragraph 10.12 of the Main LR for failing to appoint an independent adviser before the terms of the Seaside Synergy SPA were agreed upon. 

 

B.

Heads of Agreement announced on 5 December 2013 (HOA)

4.

Paragraph 10.08(2)(b) read together with paragraph 8.29(1) of the Main LR for failing to obtain shareholders’ approval prior to the completion of the HOA (i.e. the rescission and cancellation of the Sunshine 2000 SPA and Seaside Synergy SPA).

 

The highest percentage ratio triggered for the HOA was 5.07% based on BENALEC’s audited financial statements for the financial year ended 30 June 2013.

 

The HOA was ratified by BENALEC’s shareholders on 25 June 2014.

 

5.

Paragraph 10.08(2)(c) of the Main LR for failing to appoint an independent adviser before the terms of the HOA were agreed upon.

 

BENALEC only appointed Mercury Securities Sdn Bhd as the independent adviser on 21 February 2014 in the ratification of the Land Disposals and the HOA.

 

The justification by BENALEC that there was necessity to complete the HOA urgently and the fact that BENALEC’s shareholders subsequently ratified / approved the Land Disposals and the HOA could not absolve the Company from the breaches of the Main LR.

The breaches were detected arising from a complaint made to Bursa Malaysia Securities in March 2013 alleging, amongst others, that the Land Disposals were related party transactions involving the interests of Datuk Leaw Ah Chye and Datuk Leaw Tua Choon.  Arising from the engagement by Bursa Malaysia Securities with BENALEC, the board of directors had undertaken steps to verify the said complaint including appointing an independent auditor to review and investigate the matter.   

(II)         PUBLIC REPRIMAND AND A TOTAL FINES OF RM250,000 IMPOSED ON 3 EXECUTIVE DIRECTORS

The culpability of the 3 directors were established upon conclusion of Bursa Malaysia Securities’ investigation on all the directors of BENALEC, taking into consideration their respective role, responsibilities and involvement in the Land Disposals as well as their conduct after and in addressing the complaint of possible breach(es) of the Main LR.

Datuk Leaw Ah Chye and Datuk Leaw Tua Choon

Based on the evidence, the Purchasers (of the Land Disposals) were persons connected to (i.e. accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of) Datuk Leaw Ah Chye and Datuk Leaw Tua Choon by virtue of the control / influence of the 2 directors and the son of one of these directors had over the Purchasers as well as their involvement in the Purchasers.

Notwithstanding their interests in the Purchasers and the Land Disposals, Datuk Leaw Ah Chye and Datuk Leaw Tua Choon had:-

(a)    failed to declare their interests to the board of BENALEC and SLSB in accordance with paragraph 10.08(8) of the Main LR;

(b)   failed to ensure that BENALEC complied with paragraph 10.08 of the Main LR; and

(c)    concealed their interests in the Land Disposals from BENALEC and its board including persistent denial (including under oath) their interests despite being asked by the board after the complaint.

Further, Datuk Leaw Ah Chye had signed the directors’ resolutions of SLSB dated 18 January 2012 and 12 March 2012 authorising SLSB to enter into the Sunshine 2000 SPA and Seaside Synergy SPA respectively in contravention of paragraph 10.08(6) of the Main LR.

Dato’ Leaw Seng Hai

He was the Managing Director of BENALEC primarily in charge of the day to day management of the business and operations of the company including land disposals by BENALEC Group and had approved the Land Disposals on behalf of by SLSB.  He was also aware or should have been aware of the anomalies / unusual circumstances of the Land Disposals and the magnitude / materiality of the Land Disposals. Notwithstanding these, he had failed to undertake due enquiry and address these anomalies resulting in the breaches of the Main LR by BENALEC.