BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS AND/OR FINES FITTERS DIVERSIFIED BERHAD AND FIVE (5) DIRECTORS

Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded Fitters Diversified Berhad (FITTERS) and 5 of its directors for breach of the Bursa Malaysia Securities Main Market Listing Requirements (MAIN LR). In addition, the 5 directors were imposed total fines of RM2 million.

FITTERS was publicly reprimanded for breach of the following provisions of the MAIN LR: -

(1) Acquisitions – Disclosure Breaches

(a) Paragraph 10.08(1) of the MAIN LR for: - 

i. failing to make an immediate announcement of the following transactions by Fitters Development Property Sdn. Bhd. (Fitters Property), a wholly owned subsidiary of the Company on 7 & 8 March 2023: -  

- the acquisition of 4.54%/12,140,000 ordinary shares of Computer Forms (Malaysia) Berhad (CFM) for an aggregate sum of RM26,443,532.28 in cash via open market; and  

- the acquisition of 4.78%/6,180,000 units of the Warrants A of CFM for an aggregate sum of RM8,334,931.47 in cash via open market,  

(hereinafter referred to as Acquisitions); and 

ii. failing to ensure that the announcement on the Acquisitions dated 9 March 2023 contained the information as required in items (1) – (3) of Appendix 10C of the MAIN LR.    

(b) Paragraphs 9.35A(1)(a) & (b) of the MAIN LR in respect of the representation in the announcement dated 9 March 2023 that the Acquisitions were not subject to the approval of the Company’s shareholders, which was not factual, inaccurate, false and misleading. 

In this regard,

- the Acquisitions were related party transactions (RPT) involving the interest of a common major shareholder in FITTERS and CFM (Common Major Shareholder) and the percentage ratio of the Acquisitions was 9.51% based on the aggregate purchase consideration of RM34.778 million.  Hence, the Acquisitions were subject to the approval of the Company’s shareholders in accordance with paragraph 10.08(2) of the MAIN LR; and 

- FITTERS had only announced the Acquisitions on 9 March 2023 (9 March Announcement).  FITTERS had further announced that the Company shall seek the approval of its non-interested shareholders for the ratification of the Acquisitions (Acquisitions Ratification) and the information required in items (1) – (3) of Appendix 10C of the MAIN LR on 4 April 2023.

(2) Acquisitions – Shareholders’ Approval Breach

Paragraph 10.08(2) read together with paragraph 8.29(1) of the MAIN LR for failing to carry out the following prior to the Acquisitions: -  

(a) appoint an independent adviser; and 

(b) send a circular which included the information set out in Appendix 10B and Appendix 10D to the shareholders and obtain shareholders’ approval. 

The Company had only appointed an independent adviser for the Acquisitions Ratification on 16 March 2023, announced the circular to shareholders on the Acquisitions Ratification on 7 September 2023 and obtained the Acquisitions Ratification by its non-interested shareholders on 22 September 2023.  

(3) Disposals - Disclosure Breach

Paragraph 10.08(1) of the MAIN LR for failing to make an immediate announcement of the following transactions by Fitters Property on 14, 21 & 22 March 2023: -

(a) the disposal of 4.54%/12,140,000 ordinary shares of CFM Shares for an aggregate cash sum of RM7,320,568.43 via open market; and

(b) the disposal of 4.78%/6,180,000 units of the Warrants A of CFM for an aggregate cash sum of RM1,230,067.20 via open market, 

(hereinafter referred to as Disposals).

In this regard,

- the Disposals were RPTs involving the interest of the Common Major Shareholder and the percentage ratio of the Disposals was 9.51% based on the aggregate original cost of investment of RM34.778 million; and

- FITTERS had only announced the Disposals and that the Company shall seek the approval of its non-interested shareholders for the ratification of the Disposals (Disposals Ratification) on 26 June 2023.

(4) Disposals – Shareholders’ Approval Breach

Paragraph 10.08(2) read together with paragraph 8.29(1) of the MAIN LR for failing to carry out the following prior to the Disposals: -  

(a) appoint an independent adviser; and 

(b) send a circular which included the information set out in Appendix 10B and Appendix 10D of the MAIN LR to the shareholders and obtain shareholders’ approval.  

The Company had only appointed an independent adviser for the Disposals Ratification on 26 June 2023, announced the circular to shareholders on the Disposals Ratification on 7 September 2023 and obtained the Disposals Ratification by its non-interested shareholders on 22 September 2023.  

All the 5 directors of FITTERS (Directors) at the material time had breached paragraph 16.13(b) of the MAIN LR for permitting the company to commit the breaches for which the following penalties were imposed on them: -

The findings of breach and imposition of the above penalties on FITTERS and the Directors were made pursuant to paragraph 16.19 of the MAIN LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the breaches, impact of the breaches to FITTERS and shareholders/investors and the roles, responsibilities, knowledge, involvement and conduct/action/inaction of the Directors.

Bursa Malaysia Securities views the contraventions seriously as the requirements to make an immediate announcement and obtain prior shareholders’ approval for material RPTs are fundamental to aid investors to make informed investment decisions, protect the interest of shareholders and allow the shareholders an opportunity to consider, in a timely manner, transactions which have the potential of adversely affecting their interests.

Bursa Malaysia Securities has also reminded FITTERS and its Board of Directors of their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public.

BACKGROUND

On 7 & 8 March 2023, FITTERS had undertaken the Acquisitions which were RPTs involving the interests of the Common Major Shareholder.  However, FITTERS had only announced the Acquisitions on 9 March 2023.  Further, the 9 March Announcement did not contain the information as required in Appendix 10C of the MAIN LR and misrepresented that the Acquisitions were not subjected to the approvals of the company’s shareholders.

FITTERS had represented that the Acquisitions were not classified as RPTs as the Common Major Shareholder was holding only 7.90% and less than 10% interest in FITTERS.  However, the Common Major Shareholder was the largest shareholder of FITTERS and hence, a major shareholder of the company as defined in paragraph 1.01 of the MAIN LR.  FITTERS had failed to undertake the necessary verification and only confirmed in the announcement dated 13 March 2023 that the Common Major Shareholder was the largest shareholder of FITTERS upon Bursa Malaysia Securities’ engagement. 

Despite Bursa Malaysia Securities’ further engagement with FITTERS on 16 March 2023 informing the company that the Acquisitions were RPTs, FITTERS had –

•       only announced the Acquisitions Ratification on 4 April 2023, approximately 2 weeks later; and
•       further proceeded with the disposals of all CFM shares on 21 & 22 March 2023 without obtaining prior shareholders’ approval and disclosing the Disposals.  FITTERS had concealed the Disposals until the announcement of the Disposals Ratification on 26 June 2023, more than 3 months after the Disposals.

FITTERS had also failed to demonstrate reasonable and expeditious steps taken to obtain its shareholders’ ratification where the company had only announced the circular to shareholders on the Acquisitions Ratification and Disposals Ratification on 7 September 2023 (Circular) and obtained the ratification by its non-interested shareholders on 22 September 2023, approximately 6 months after the Acquisitions and Disposals and despite the appointment of the independent adviser for the Acquisitions on 16 March 2023.

It was mandatory for FITTERS and its directors to obtain prior shareholders’ approval in accordance with paragraph 8.29(1) of the MAIN LR regardless of whether the Acquisitions and Disposals were undertaken in the best interest of the company and/or the Common Major Shareholder had in fact benefitted from or influence over the decision of the Acquisitions and Disposals.  The Acquisitions and Disposals had adverse effects on the financials of FITTERS as set out in the Circular, in particular, there was a loss on the Disposals of RM26.3 million (which represented 7.2% of the company’s net assets at the material time) which could have been avoided if the Acquisitions did not take place. The independent adviser was also of the view that the Acquisitions and rationale/considerations for the Acquisitions were not reasonable and detrimental to the non-interested shareholders of FITTERS and the overall financial effects of the Acquisitions were detrimental to the interest of the non-interested shareholders of FITTERS.

The subsequent Acquisitions Ratification and Disposals Ratification did not absolve and/or mitigate the breaches and could not substitute the procedural safeguard under paragraph 8.29(1) of the MAIN LR to ensure that shareholders are aware of and approve of any proposed corporate transactions that will materially affect the company, due to the magnitude of the same or the effects it may have on the company.

The Directors had failed to undertake any/reasonable enquiries, assessment and verification on the Acquisitions and Disposal to ensure timely and proper disclosure of the Acquisitions and Disposals and that prior shareholders’ approval was obtained in accordance with the MAIN LR.  Although Hoo Swee Guan, Wong Kok Seong and Kho See Yiing who were the common directors in FITTERS and CFM had abstained from deliberating and voting on the Acquisitions and Disposals in accordance with paragraph 10.08(6) of the MAIN LR, their obligation in this respect did not negate their duty and failure to ensure that the Acquisitions and Disposals complied with the MAIN LR.