KUALA LUMPUR (May 8): Practice Note 17 (PN17) company Zelan Bhd (KL:ZELAN) is disposing of two leasehold office units in Wisma Zelan to its sister company MMC Engineering Sdn Bhd to settle a RM5.22 million debt it owes the company for engineering services provided.

MMC Corp Bhd is a shareholder of both Zelan and MMC Engineering, making this a related party deal. MMC Corp is Zelan’s largest shareholder with a 39.244% interest. 

According to Zelan's filing with Bursa Malaysia, its subsidiary Zelan Holdings (M) Sdn Bhd on May 7, 2026 agreed to settle a RM5.22 million debt owed to MMC Engineering by transferring two office units instead of paying cash. Each unit is worth about RM2.5 million and has a lease until 2090.

The deal needs approval from shareholders before it can proceed. cfSolutions Sdn Bhd has been appointed as an independent adviser for Zelan’s non-interested shareholders.

Zelan, which has yet to submit its regularisation plan two years after falling into PN17 status, said the debt settlement forms an integral component of the group’s overall regularisation plan. The proposed debt settlement will be inter-conditional with the individual proposals comprising the proposed regularisation plan to be announced at a later date. 

Zelan’s PN17 status was triggered on April 30, 2023 after its external auditor issued a disclaimer of opinion on its financial year 2022 statement. Among others, the auditor highlighted an unreconciled RM30.8 million intercompany balance, uncertainty over recovering a disputed RM241.8 million receivable from a stalled Abu Dhabi project, and a defaulted RM113 million foreign term loan. 

The company’s deadline to submit its restructuring plan has been extended several times, from April 30, 2024 to April 30, 2026. At this point it would have faced a trading suspension. However on April 21, 2026, the company applied for another extension and is still waiting for a decision from the regulator.

Zelan’s 2025 annual report shows serious financial issues, with a RM58.8 million loss, a high debt of RM331.1 million, and very low cash of RM3.1 million. Its liabilities are much higher than its assets, resulting in a RM138.4 million capital deficit. The auditor issued a disclaimer of opinion, warning there is major uncertainty about the company’s ability to continue operating without a proper financial recovery plan.

At market close, Zelan’s share price was unchanged at four sen, valuing the company at RM33.8 million.