This article first appeared in The Edge Malaysia Weekly on June 14, 2021 - June 20, 2021
UNIVERSITI Teknikal Mara Sdn Bhd (UniTekMara) — the operator of Universiti Kuala Lumpur (UniKL) — has been holding off the appointments of Datuk Suhaili Abdul Rahman, who is the current Labuan chapter head of Parti Pribumi Bersatu Malaysia, and several others to the board of UniKL.
UniKL could be the last subsidiary of Majlis Amanah Rakyat (Mara) that does not have active politicians on its board after the transfer of the shares of 13 subsidiaries from Mara to Mara Corporation Sdn Bhd since February 2018.
Time is running out for UniKL, however, as it would be hard to hold off the appointments by the Minister of Rural Development Datuk Dr Abdul Latiff Ahmad.
Its sole shareholder, Mara, has also approved the appointments.
But why the resistance from the current board of directors (BOD) of UniKL?
Some say that since Suhaili is an active politician, he should not be on the board of any government-linked body. Aside from this, the appointments are being held back by UniKL’s board to avoid potential issues such as conflict of interest and lack of checks and balances.
“Even Mara’s legal division raised the issue of checks and balances, as some of these appointees also sit on the Mara Council. The diversity of the businesses of the 13 subsidiaries also raised the question of why the same people are appointed to their boards,” a Mara executive tells The Edge.
Suhaili first emerged in Mara and its subsidiaries when Latiff appointed him to the board of Mara Corp on May 15, 2020. Besides Suhaili, Datuk Seri Megat Shahriman Zaharuddin was also appointed to the board of Mara Corp.
Megat Shahriman is the chairman of the Paralympics Council of Malaysia and president of the Kuala Lumpur Hockey Association.
Datuk Jamelah Jamaluddin, a member of the Mara Council and chairman of Mara Investment Committee, is also one of the minister’s appointees to the board of UniKL.
On March 18 this year, Latiff had issued a letter to the chairman of Mara, Datuk Azizah Mohd Dun, on the restructuring of the boards of Mara Corp’s subsidiaries, including UniKL. Meanwhile, the transfer of shares of UniKL has not been finalised.
The restructuring involves the termination of Datuk Norison Ramli, who is a representative of the ministry and was transferred to Pelaburan Mara Bhd (PMB); Rohayah Mohd Zain, who is a representative of Mara and was transferred to Kolej Poly-Tech Mara Sdn Bhd (KPTM); and Kamesa Mohd Yusop @ Abdul Rahman, also a representative of Mara.
In their place, Suhaili and Megat Shahriman, representing Mara Corp; Jamelah, a Mara Council member; Razlan Samsuri, a representative of Mara; and Shahrir Zakey, representing the ministry, are being appointed.
With these new appointments, Suhaili and Megat Shahriman will be on the board of eight and seven Mara companies respectively.
Besides Mara Corp, which is the holding company of commercial companies owned by Mara, Suhaili is also on the board of PMB, PMB Tijari Bhd, Mara Inc Sdn Bhd, Glocal Link (M) Sdn Bhd and Med Bumikar Mara Sdn Bhd. If approved, he will also be on UniKL and KPTM’s boards.
Megat Shahriman is already on the board of Mara Corp, PMB, Mara Inc, Glocal Link and Mara Excellent Ventures Sdn Bhd, besides the pending approvals to join the boards of UniKL and KPTM.
On March 30, the Mara Council approved the terminations and appointments of the new directors according to the letter from the ministry. It is understood, however, that Mara’s legal department raised concerns over checks and balances, especially on the appointment of Jamelah.
“These appointments also raised serious concern over the lack of independent directors in Mara and Mara Corp’s subsidiaries. Even prior to the new appointments, some of the subsidiaries have only one or no independent directors at all.
“This leaves serious questions on check and balance and potential abuse of power, especially in deliberating and approving the instruction from the minister,” says the Mara executive who spoke to The Edge on condition of anonymity, owing to the sensitivity of the topic.
The Mara Corporate Governance Handbook states that the minimum number of independent directors should be of the board, while the Malaysian Code on Corporate Governance stipulates a composition of at least 50%.
According to documents sighted by The Edge, the Mara Subsidiaries Division issued a letter to UniKL on April 22, instructing the termination and appointment of new directors to be approved by the board via circulation and to be lodged with the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia, or SSM) immediately.
On April 30, however, UniKL in its reply to Mara raised concern over a potential breach of the stipulated BOD composition in the memorandum and articles of association (M&A) of UniKL and also the prior approval required under Section 15 of the Private Higher Educational Institution Act before registration with SSM can be made.
Section 15 of the Act says a private educational institution company shall not change or alter its name, issued and paid-up capital, equity participation, composition of its BOD and M&A without obtaining prior approval from the Registrar General.
Mara responded in a letter dated May 5, 2021 that the last time the M&A of UniKL was amended and approved by Mara and lodged with the SSM was when the composition of the BOD was changed through a special resolution dated Jan 8, 2005.
Article 63 (1) of the M&A was amended then, where the composition of the BOD was changed to comprise a chairman (who is appointed by the council), the director-general of Mara, a representative from the ministry responsible for Mara, a representative from the Economic Planning Unit (EPU) of the Prime Minister’s Department and three representatives from the corporate sector who, because of their knowledge and experience, would — in the opinion of the council and the board — be of assistance to the board.
In the letter, Mara said UniKL had had a representative from the Ministry of Finance on its board between 2017 and 2019. This appointment too does not meet the BOD composition requirement as per its M&A. The appointment could not be questioned, however, as it was approved by the Minister of Rural and Regional Development on Sept 21, 2016 and by the Mara Council during its 426th meeting on April 8, 2016.
The Investment and Subsidiary Development Division of Mara had sought advice from AAJ Management Services Sdn Bhd, a corporate secretarial services company, on whether there was a clause in the M&A of UniKL that might shed light on whether the appointments could be done.
In an email dated May 6, AAJ stated that, while approving the restructuring of the board does not contradict the Companies Act 2016, it might result in legal issues, as it goes against UniKL’s M&A.
AAJ also advised that each appointment to the BOD of a private educational institution must receive the approval of the Ministry of Higher Education, before the appointment is lodged with SSM, as per Section 15 of the Private Higher Education Institution Act 1996.
UniKL had also sought legal advice from Ahmad Rizal, Sara Idylla & Co on the matter. The firm stated in a letter dated May 18, 2021 that it found the proposed composition of the BOD to be against the provisions of Article 63 of the Articles of Association of UniKL, which clearly lays down the directors to be appointed.
According to the Article, within the BOD, two seats are reserved for the Ministry of Rural Development and EPU.
“As per the unambiguous wording of Article 63, the individuals occupying these two seats must be appointed by the respective bodies named therein. There is also clearly no requirement for the approval of the Majlis (Mara Council) with regard to these two seats.
“Irrespective of whoever sits in these two seats, the condition is that they are appointed by the ministry and EPU respectively, as these two seats are meant only for the representatives of these two institutions,” said Ahmad Rizal, Sara Idylla & Co in the letter.
The law firm further said in the letter that it noticed that there was no director representing EPU. As such, the proposed appointment of five additional directors, including the remaining two directors, clearly means that the right of one institution to a board seat has been usurped, it says.
When contacted, Suhaili referred the matter to Mara Corp, which declined to comment.
UniKL is a profitable company under Mara. In the financial year ended Dec 31, 2020, it registered net profit of RM8.43 million, compared with RM1.14 million in the preceding financial year.
In its books, it has RM54 million of cash and short-term funds and deposits of RM113.6 million at licensed banks. It also had RM201 million worth of financial assets at fair value through profit or loss as at Dec 31, 2020.
UniKL owed RM161.8 million in government grants, and had trade and other payables of RM164.73 million as at Dec 31, 2020. Meanwhile, its retained earnings stood at RM147.6 million.
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