Bursa Malaysia Securities Berhad (Bursa Securities) has publicly reprimanded Nam Fatt Corporation Berhad (NAMFATT) for failing to make an immediate announcement on several material litigations, and for not complying with the directives of Bursa Securities on 9 October 2008 and 5 November 2008 to make an immediate announcement on the litigations. Bursa Securities has also publicly reprimanded and fined all its seven directors a total of RM 250,000.
NAMFATT failed to make an immediate announcement on several litigations involving NAMFATT / Bentini-NF Energy JV (a joint venture company between NAMFATT's subsidiary, NF Energy Sdn. Bhd. and Bentini S.p.A.) and Malaysian International Trading Corporation (Japan) Sdn. Bhd. since August 2006 to July 2007. The announcement was only made on 13 August 2009. This was in breach of paragraph 9.03(1) read together with paragraph 9.04(f) of the LR where a listed issuer must make an immediate public disclosure of the commencement of or the involvement in material litigation.
NAMFATT's failure to comply with Bursa Securities' directives to announce the litigations breached paragraph 2.19 of the LR where Bursa Securities may issue any instruction or directive to a listed issuer and the listed issuer must comply with the said instruction or directive and within such time as may be specified by Bursa Securities.
Notwithstanding that NAMFATT has been de-listed since 24 May 2011, it is still liable for the breaches that were committed while it was a listed entity.
The directors of NAMFATT were also found to be in breach of the LR, namely paragraph 16.11(b) of the LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, NAMFATT's failure to comply with the said directives in contravention of paragraph 2.19 of the LR and the following penalties were imposed on them:
No. | Director | Penalty |
---|---|---|
1 | Tan Sri Dato’ Ajit Singh Executive Chairman (Appointed on 19 September 2003) |
Public Reprimand & Fine of RM25,000 |
2 | Dato’ Jimmy Ng Keng Joo Group President & Chief Executive Officer / Executive Director (Appointed to the Board on 24 February 1994) |
Public Reprimand & Fine of RM50,000 |
3 | Dato’ Ir Jeffrey Ng Keng Keong Group Deputy President / Executive Director (Appointed on 24 February 1994) |
Public Reprimand & Fine of RM50,000 |
4 | Woo You Hong Executive Director (Appointed on 24 February 1994) |
Public Reprimand & Fine of RM50,000 |
5 | Johari Low Bin Abdullah @ Low Han Hing Senior Independent & Non-Executive Director Chairman of the Audit Committee (Appointed on 28 October 1988 and resigned on 31 August 2009) |
Public Reprimand & Fine of RM25,000 |
6 | Fatimah Binti Mahmood Independent & Non-Executive Director (Appointed on 10 October 1994) |
Public Reprimand & Fine of RM25,000 |
7 | Lt. Jen (B) Datuk Haji Abdul Aziz Bin Hasan Independent & Non-Executive Director (Appointed on 23 February 2006) |
Public Reprimand & Fine of RM25,000 |
Bursa Securities views the above contraventions 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. Listed companies and directors must maintain the highest standards of integrity, accountability, corporate governance and responsibility, including ensuring compliance with the directives issued by Bursa Securities.
BACKGROUND
From August 2006 until July 2007, NAMFATT / Bentini-NF Energy JV (a joint venture company between NAMFATT's subsidiary, NF Energy Sdn. Bhd. and Bentini S.p.A.) was involved in several litigations with Malaysian International Trading Corporation (Japan) Sdn. Bhd. (MITCO) in connection with the performance of the USD180 million construction contract on the Melut Basin Oil Development Project in Sudan. The litigations involved amongst others, the JV's claim for damages of RM211,709,881.80 against MITCO arising from MITCO's breach, repudiation and/or renunciation of the logistics contract while MITCO also claimed against the JV for Euro 38,734,400.20 (equivalent to RM193,223,622.80) and interest thereon as the alleged amount due under the procurement financing agreement.
The litigations were material information as it affected NAMFATT's business / prospects and must be disclosed to shareholders and investors on a timely basis particularly in view of the following:-
- The materiality of the Sudan project and its revenue contribution (i.e. RM75.7 million or 12% in 2004, RM537.4 million or 52.7% in 2005, RM228.7 million or 32.7% in 2006 and RM75.7 million or 13% in 2007);
- MITCO's breaches and defaults of the logistic contract in respect of custom clearance and inland transportation in Sudan caused delay to the JV's construction work and exposed the JV to the project owner's claim for delay damages; and
- There was no adverse announcement made by NAMFATT in 2007 and 2008, and yet NAMFATT's share price started to decline in 2007 from a high of RM0.945 on 21 February 2007 to RM0.245 on 31 December 2008.
NAMFATT failed to make an immediate announcement of the litigations. In addition, when directed by Bursa Securities on 9 October 2008 and 5 November 2008 to make the announcement, NAMFATT refused to comply with the directives of Bursa Securities. NAMFATT applied to Bursa Securities for a waiver from disclosing the litigations and when the application was rejected on 4 December 2008, NAMFATT proceeded to file an application for judicial review on 19 December 2008 and procured an ex-parte stay in respect of Bursa Securities' decision on 20 January 2009. The High Court subsequently dismissed NAMFATT's inter partes stay application on 6 August 2009 and NAMFATT announced the litigations to Bursa Securities on 13 August 2009. Thereafter, NAMFATT filed an application to discontinue the judicial review proceedings on 14 September 2009 and the High Court allowed the application on 22 October 2009.
The representation that the non-disclosure of the litigations was in the best interest of the company and the reliance on the advice of solicitors with regard to withholding the disclosure under the LR were unacceptable in light of the clear directives by Bursa Securities.
In respect of the directors, their respective knowledge, roles and responsibilities as follows were taken into account in finding them in breach of the LR:-
- All the directors were aware of the litigations, Bursa Securities' directives, Bursa Securities' rejection of NAMFATT's application for a waiver from disclosing the litigations and NAMFATT's non-compliance of Bursa Securities' directives;
- The Executive Directors i.e. Dato' Jimmy Ng Keng Joo, Dato' Ir Jeffrey Ng Keng Keong and Woo You Hong did not disclose the litigations to the Independent Non-Executive Directors until Bursa Securities' query on 11 July 2008 and had proceeded to file the judicial review application, thereby delaying compliance with Bursa Securities' directives further;and
- The Executive Chairman and the Independent Non-Executive Directors had permitted NAMFATT's non-compliance of Bursa Securities' directives by virtue of their inaction or ineffective steps / actions to require compliance of the directives upon being informed / aware of the same.
The finding of breach and imposition of the above penalties on NAMFATT and the directors were made pursuant to paragraph 16.17 of the LR upon completion of due process and after taking into consideration all the facts and circumstances of the matter.