KUALA LUMPUR (April 25): Bursa Malaysia Securities Bhd has publicly reprimanded Reach Energy Bhd (KL:REACH) and seven directors, for failing to promptly announce that the company had triggered the Practice Note 17 (PN17) criteria under listing rules, after its auditors raised concerns about its ability to continue as a going concern.
Six of the directors have also been fined RM50,000 each, according to Bursa in a statement on Friday.
Bursa said the breach occurred when the company failed to make the first announcement of its PN17 status "immediately upon the release of its fourth quarterly report for the financial period ended Dec 31, 2022 (4QFP2022) on Feb 28, 2023".
There was no reasonable explanation for the delay in making the announcement, especially given the clear guidelines in the Main Market Listing Requirements, Bursa said.
Reach Energy triggered the PN17 criteria because its external auditors had highlighted a material uncertainty related to its ability to continue as a going concern in its audited financial statements for the financial year ended Dec 31, 2021 (FY2021), issued on April 29, 2022.
Reach Energy's report for 4QFP2022 had also revealed that Reach Energy's consolidated shareholders’ equity stood at RM111.29 million, representing only 22.8% of its share capital of RM488.98 million as at end-2022, down from 62% as at end-2021.
Despite having already triggered the PN17 criteria when it released its report for 4QFP2022, Reach Energy only announced its PN17 status about a month later — on April 3, 2023 — following engagement with Bursa on March 31, 2023.
The seven who were directors at Reach Energy at the time were also reprimanded because they permitted the group to commit the breach, said Bursa.
Five of them have resigned on March 29, 2023, namely: Tunku Datuk Nooruddin Tunku Shahabuddin (formerly Reach Energy's executive director); Nik Din Nik Sulaiman, Datuk Jasmy Ismail and Datin Noor Lily Zuriati Abdullah (independent non-executive directors); and Izlan Izhab (senior independent non-executive director).
Two are still with the group: non-independent non-executive chairman Tan Sri Dr Azmil Khalili Khalid and independent non-executive director Yusoff Hassan.
With the exception of Izlan, all were fined RM50,000 each. "No fine was imposed on Izlan Izhab due to personal adverse/extenuating circumstances," Bursa said.
Bursa said this is a serious breach as the first announcement is crucial for shareholders and investors, as the PN17 status indicates a company is under financial distress, which could lead to suspension and delisting if the financial condition is not regularised within the stipulated timeframe. "Timely disclosure" of PN17 classification is therefore vital for informed investment decisions, it said.
Company directors, it added, should not solely rely on management or external auditors to flag potential PN17 triggers but must exercise robust oversight and ensure compliance with all applicable regulations, especially in light of clear financial indicators of distress.
Reach Energy will be delisted from Bursa's Main Market next Tuesday, April 29, as it has decided not to appeal against the delisting after Bursa rejected its third request for more time to submit its regularisation plan. Bursa had cited lack of material progress since the last deadline as the reason for rejecting the company's request to extend the submission deadline from April 2 to Oct 2.
Established in 2013 as a special purpose acquisition company (SPAC), the group went public in August 2014 after an initial public offering (IPO) that raised RM750 million — making it Malaysia's largest SPAC IPO at the time. It then transitioned into an oil and gas entity after acquiring a 60% interest in Emir Oil LLP, which owns the concession to a block of area in southwestern Kazakhstan for oil and gas exploration. But the group has been loss-making since.
The stock was last traded at half sen a share, valuing it at RM10.64 million.