KUALA LUMPUR (March 15): South Malaysia Industries Bhd (SMI) has gone to court for a declaration that the extraordinary general meeting (EGM) scheduled for March 24 proposed by two of its shareholders is unlawful and unconstitutional.
The EGM, requested by Honsin Apparel Sdn Bhd and HIQ Media (M) Sdn Bhd, was meant to remove the current five-member board of directors in SMI, replacing them with two persons, namely Lee Boon Siong and Tan Eik Huang.
Honsin Apparel and HIQ Media, both subsidiaries of Prolexus Bhd, collectively own a 10.01% stake in SMI.
SMI said it filed the lawsuit at the High Court on Wednesday (March 15) on grounds that the property developer's constitution does not allow meetings to be held on a fully virtual basis.
"The basis for holding the proposed EGM on a fully virtual basis through live streaming and online remote voting arising out of Covid-19 health concerns is no longer applicable," the group added in a filing with Bursa Malaysia.
SMI also said the directive from Honsin and HIQ to limit the EGM to only shareholders’ names that appear on the record of depositors (ROD) as at Feb 20 was contrary to the group's constitution.
According to the group, its constitution allows any person whose name appears in the ROD three market days before the shareholders meeting to speak and vote.
"The proposed manner of voting by poll is contrary to Article 70 and Article 71 of the constitution, particularly excluding the right of the chairman to appoint proper scrutineers over the voting process," SMI further claimed.
In a separate statement, SMI said the legal action is meant to protect shareholders who are denied their rights to attend the group's general meetings
“By using a ROD dated Feb 20, 2023, Honsin and HIQ are denying shareholders who purchased SMI shares in the one-month period between Feb 20, 2023 and March 21, 2023 the right to attend, speak and vote at the proposed EGM on March 24, 2023.
“Conversely, any shareholder who sells their shares in SMI during this said one-month period will still be able to attend, speak and vote at the proposed EGM as their name is listed on the ROD that Honsin and HIQ intend to use,” it added.
SMI also said the two directors proposed by Honsin and HIQ have no experience in property development and management.
“In accordance with Section 207(2) of the Companies Act 2016 which provides for the right of each and every director to answer to any complaint or charge levied against them, the SMI board wrote to Honsin and HIQ to request for the reason for [the current board's] proposed removal. Honsin and HIQ replied in identical letters, signed by the same person, that they do not need to provide any justification or reasons,” it added.
Honsin and HIQ had on Feb 15 collectively acquired the 10.01% stake in SMI, and two days later requested for an EGM, which would be limited to shareholders whose names appear on the ROD as at Feb 20.
Honsin and HIQ had also requested for a copy of the ROD.
However, SMI's directors were only able to meet on Feb 24 to deliberate on these requests.
A day before the board meeting, Honsin and HIQ filed a suit at the High Court to compel SMI to provide the ROD.
SMI responded by filing an application to strike out the suit on March 7.
Prolexus’ latest annual report shows that its substantial shareholders include YB Ventures Bhd with a 17.82% stake, while former managing director Lau Mong Ying and his brother Lau Mong Fah collectively controlled 20.82% shareholdings through direct and indirect interests, while current executive director Datuk Au Yee Boon held a 5.83% stake.
Tan, one the two candidates nominated by Hosin and HIQ to replace current SMI, also sits on the Prolexus and YB Ventures’ boards as executive director.
Lee, the other candidate, also sits on YB Ventures’ board with Au as executive director.
Au is the largest shareholder in YB Ventures, with a 4.51% direct interest and 8.33% indirect interest through his wife Datin Lim Lee When, and a deemed interest in TechBase Solution Sdn Bhd.
It is worth noting that YB Ventures also disclosed that Chin Hin Group Bhd founder Datuk Seri Chau Beng Teik owned a 4.1% stake while his son Haw Choon owned 1.48%.
As for SMI, its shareholdings structure is rather fragmented, with the biggest portion of 9.311% owned by BH Builders Sdn Bhd, the wholly-owned subsidiary of another Main Market-listed property developer Asian Pac Holdings Bhd.
Asian Pac also has a 2.253% direct interest in SMI, while Mah Sau Cheong owned a 7.65% stake.
Mah is a major shareholder in Asian Pac, owning 31.98% direct interest and 0.35% through his wife Chin Lai Kuen.
SMI's share price — which has come down by half from a multi-year high of RM1.46 on Feb 15 when Prolexus bought into it — closed 1.5 sen or 2.0% lower at 75 sen, giving the group a market capitalisation of RM157.45 million.