This article first appeared in The Edge Malaysia Weekly on February 14, 2022 - February 20, 2022

THE hearing of lawsuits in connection with the release of the fact-finding update (FFU) on the special independent review done by EY Consulting Sdn Bhd on Serba Dinamik Holdings Bhd started last week.

So far, the court has not ruled in favour of Serba Dinamik, a company that has been charged by the Securities Commission Malaysia (SC),  together with its four executives, including its group managing director and CEO Datuk Dr Mohd Abdul Karim Abdullah, with submitting a false statement.

Last Monday, the High Court ordered Serba Dinamik to reveal the FFU within two market days from the date of the order. This meant that Serba Dinamik would have had to release the update by last Wednesday (Feb 9).

Despite the court order, the minority shareholders, who have suffered from the steep fall in Serba Dinamik’s share price, have yet to get the update on the special review of the company’s financial accounts for the 12-month financial period ended Dec 31, 2020.

This is because Serba Dinamik has formally applied for a stay of Judicial Commissioner Wan Muhammad Amin Wan Yahya’s decision, and that application will be heard on Monday (Feb 14).

The judgment by the High Court was the result of legal action taken by Bursa Malaysia in November because of Serba Dinamik’s “failure to comply” with the stock exchange’s directive to disclose the FFU dated Sept 30, 2021.

Serba Dinamik had declined to release the FFU on the grounds that there was no material information to be disclosed.

Wan Muhammad Amin concluded in his written judgment last Monday that the information sought to be announced in the FFU is “material and does not depend on whether it is true, false or conclusive”.

He said Serba Dinamik was entitled to disagree with the information to be disclosed, but stressed that the stock exchange was entitled under Section 11 of the Capital Markets and Services Act 2007 (CMSA) to give the directive in order to uphold and maintain “a fair and orderly securities market to safeguard public and investors’ interests as well as take the appropriate action under the Main Market Listing Requirements (MMLR) for the purpose of monitoring and ensuring compliance of the listing requirements”.

The judicial commissioner added: “The issue of confidentiality is a private matter between Serba Dinamik and EY Consulting, and cannot override Bursa Malaysia’s right as a statutory body to have the findings disclosed.”

Serba Dinamik’s legal saga continued the following day. There was a hearing on an application filed by the company to also name the SC as a party in its application for an injunction. It sought to prevent the regulator — in addition to EY Consulting — from releasing the FFU.

The High Court, nonetheless, dismissed the company’s application for the injunction. “The applicant cannot democratise the issue at hand. This court rules that the SC is not to be part of the present proceedings,” Justice Ahmad Fairuz said in his written judgment last Tuesday (Feb 8).

There was also a hearing of a legal case related to Serba Dinamik last Thursday.  The company had applied for an injunction to prohibit Bursa Malaysia from forcing it to release the FFU.

In his decision, Justice Datuk Ahmad Fairuz Zainol Abidin ruled that Serba Dinamik’s application to seek an injunction was not defensible and factually not supported, given the company’s undertaking with regard to contractual obligations with Bursa Malaysia.

“Furthermore, the court should not second-guess the functions of a regulator in imposing such conditions [for the company to make the announcement]. There would be chaos if the court were to choose to accept Serba ­Dinamik’s own interpretation rather than that of Bursa Malaysia, which is the regulator,” he said.

The judge said Bursa Malaysia did not act in excess of power in suspending the trading in the company’s securities. “It is the prerogative of Bursa Malaysia to continue to suspend the trading in securities of the plaintiff (Serba Dinamik) and it is not for the court to second-guess the decision of Bursa,” he said.

Serba Dimanik’s shares and warrants have been suspended from trading since October last year as the company refused to follow the exchange’s directive on the release of the FFU. The stock price plunged from RM1.61 in late May to 35 sen, with more than RM4 billion in market capitalisation wiped out.

Minority shareholders might have thought that the court’s decision last Thursday would have enabled the stock exchange to order Serba Dinamik to release the FFU.  It is not that simple because the company had already applied for a stay of the court’s order to release the FFU at the start of the week.

Serba Dinamik’s application for a stay will be heard on Monday (Feb 14). Should the court rule against the company, it could exercise its right to appeal the decision to the appellate court.

The once-high-flying oil and gas firm has been embroiled in audit issues for nine months since late May 2021.  Abdul Karim claimed the management “[had] done nothing wrong”.

It will be a long wait for the minority shareholders in their quest to find out the truth of the audit issues involving transactions amounting to more than RM3 billion flagged by the former external auditor KPMG.

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