Compiled CS Report - Final

GSM 5119- CORPORATE SECRETARYSHIP
GSM 5119: CORPORATE

SECRETARYSHIP
GROUP PROJECT
CASES ON DIRECTORS AND COMPANY
SECRETARIES MISCONDUCT
LECTURER :PROF. DR. ZUBAIDAH ZAINAL ABIDIN
NAME MATRIC NO
MOHD FIRDAUS BIN ZAKARIA GM03806
NORHAZWANI HANIS BINTI ISMAIL GM03845
LEKSHMI GUNASEKARAN GM03661
HAMIZAN WASOH GM03838
CONTENTS
1
TABLE OF CONTENTS PAGE
PART 1: 6 CASES OF DIRECTORS AND COMPANY 5-56

+ CASE I: ANNUAL GENERAL MEETING

Pacifica Pinang Sdn Bhd’s Director convicted Under The Companies Act 1965
+ CASE II: UNDISCHARGED BANKRUPTS ACTING AS DIRECTORS
Companies Commission of Malaysia Secures Conviction Against
Bankrupt Director In Court
+ CASE III: REMOVAL OF DIRECTORS IN PUBLIC COMPANY
Indian Corridor Sdn Bhd & Pembangunan Qualicare Sdn Bhd
vs
Golden Plus Holdings Berhad
+ CASE IV: REQUISITION FOR A MEETING
SJA Berhad
vs
HLB Nominees (Tempatan) Sdn Bhd
+ CASE V: INTERPRETATION, RESTRICTIONS ON APPOINTMENT OR
ADVERTISEMENT OF DIRECTOR
Yap
vs
Public Prosecutor
+ CASE VI: FINANCIAL REPORTING DEFICIENCIES
NASIONCOM HOLDINGS BERHAD
PART 2: 4 NEW CASES DEVELOPED, ADOPTED FROM 56 -86

THE 6 CASES OF DIRECTORS AND
2
COMPANY SECRETARIES MISCONDUCT
+ CASE I: LEKSH ZAUZA SDN BHD

+ CASE II: THE DUTIES OF DIRECTORS
+ CASE III: FINANCIAL REPORTING DEFICIENCIES
+ CASE IV: AOKAM PERDANA - SURVIVING THE ODDS
3
6 CASES OF
DIRECTORS AND COMPANY
CASE I: ANNUAL GENERAL MEETING

Pacifica Pinang Sdn Bhd’s Director convicted Under The Companies Act 1965
4
Executive Summary
Other than first annual general meeting after incorporation, all companies must hold an
annual general meeting at least once in every calendar year and not more than fifteen months
after the last AGM. After the first AGM held within 18 months after incorporation, a company
need not hold an annual general meeting in the year of its incorporation.
Default in holding an annual general meeting is an offence by the company and any
default officer. The court may order that a general meeting be convened on the application of any
member.
Necessary accounts and reports are required to be laid before the AGM. These include
copies of the profit and loss account, the balance sheet, the director’s report, auditor’s report and
a statement by directors. Further matters of an annually recurring nature also constitute the
ordinary business of the annual general meeting. These include election of directors, declaration
of dividends and appointment and fixing payment of auditor.
The annual general meeting is the only meeting of members which must be held by the
company. It enables the members to obtain information and to question the directors regarding
the affairs of the company. One of the main powers of the general meeting is the right to remove
directors. In addition the general meeting may also transact other business allowed by the
articles.
This case study of Pacifica Pinang Sdn Bhd’s (733221-W) director whom convicted
under the companies Act 1965 and involves the interpretation of Section 143(1) for failing to
hold the company’s AGM, Section 165(4) for failing to submit annual return and Section 169(1)
for failing to submit the audited account.
Introduction
5
Pacifica Pinang Sdn Bhd was incorporated in Malaysia on 10 th May 2006. It is a local
private company which have share capital. The nature of this company is to provide general
trading and engage in real estate and also activities of investment holding. Arusakumaran S/O
Vadeveloo (I/C790719-14-5323) and Predeba D/O Vadeveloo (801228-10-5686) are the current
directors of this company. Currently there is no company secretary available in this company and
the last known company secretary was Thiagarajan S/O Nadasan Veeriah. The company
secretary licence number is LS02993 and he resigned from this company on 12 th November
2009. The company has an authorized share capital of RM100,000 of which RM2 is the total
issued share. The current shareholders of this company are Mohammad Khan Bin Saithu and
Hasniza Binti Wazer with each have 1 number of shares. They are also known as the first
director of the Pacifica Pinang Sdn Bhd as mentioned in the company articles. The last known
registered office of the Pacifica Sdn Bhd was No.45-1, Tingkat 1, Jalan Dewan Sultan Sulaiman
Satu, Off jalan Tuanku Abdul Rahman, 50300 Kuala Lumpur.
In this case of Pacifica Pinang Sdn Bhd, both Arusakumaran S/O Vadeveloo and
Predeba D/O Vadeveloo whom acting as directors since 15 th January 2007 fail to comply their
duty as director under Companies Act 1965.
Study
Both directors were charged under three sections of the Companies’ Act 1965 by the
registrar, the Companies Commission of Malaysia (CCM). They are Section 143(1) for failing to
hold; Section 165(4) for failing to submit annual return and Section 169(1) for failing to submit
the audited account. Pacifica Pinang Sdn Bhd is identified for not holding AGM for the year
2007, 2008 and 2009 and also for not lodging both audited report and annual report for this 3
years. The hearing was held at Kuala Lumpur Sessions Court and the judge was Tuan Jajit Singh
S/O Bant Singh. Miss Fadilah Binti Abdul Wahab from the Prosecution Section prosecuted on
behalf of CCM.
Through continues monitoring on the companies in Malaysia, the Enforcement Section of
CCM has identified that Pacifica Pinang Sdn Bhd fail to hold any AGM since the day it
6
incorporated which is on 10th May 2006. The company also failed to lodge an audited report and
annual report to the registrar. A total compound of RM3700 has been issued on 23 rd January
2009 by CCM on the Pacifica Sdn Bhd for not complying the three sections. Then, one of the
directors V Thiagarajan appealed to CCM for reduction of compound on 26 th March 2009 and
the appeal is approved with new compound of RM2050 to be paid. The director again made a
second appeal to CCM to reduce the compound more on 1 st October 2009 and the appeal has
been approved with new total amount of RM 1450.
Yet the compound is never paid by the company. CCM took an action to bring this case
to the court. On 2nd June 2010, both directors are pleaded guilty to charges under Section 14(3),
Section 165(4) and Section 169(1). Both directors were fined RM 1,700 each for committing
offences under the Companies Act 1965. The judge also convicted and fined the company
RM700 for the same offences. The director appealed to the court to impose a minimum fine.
CCM viewed the breaches committed in this case seriously. The practice of failing to
lodge statutory documents deprives the public from having access to information relating to the
companies concerned and it also creates doubt in the public mind as to its existence. CCM
wishes to remind company directors and their officers on the need of strictly adhere to the
requirements of the Companies Act 1965.
On 8th July 2010, the company has applied to the registrar for a strike off to shut the
company. The process of strike is currently under process.
Analysis
7
Section 169 (1) “the directors of every company shall at some date or date not later than
eighteen months after the incorporation of the company and sub subsequently once at least in
every calendar year at intervals of not more than fifteen months lay before the company at its
annual general meeting a profit and loss account for the period since the preceding account made
up to date not more than six months before the date of the meeting.’
It is ultimately the duty of the director to prepare the profit loss account every year to be
laid in the AGM. The first profit and loss account of the company should be prepared before 18
months from the date of incorporation and lay it in AGM before six months from the date of
profit and loss account. The following profit and loss account must be prepared every year
according to the year ending preferred.
Section 143 (1) “a general meeting of every company to be called the annual general
meeting shall in addition to any other meeting be held once in every calendar year and not more
than fifteen months after the holding o the last preceding annual general meeting, but so long as a
company holds its first annual general meeting within eighteen months of its incorporation, it
need not hold it in the year of its incorporation or in the following year”
Section 143 (4)(a) if default is made in holding an annual general meeting, the company
and every officer of the company who is in default shall be guilty of an offence against this act
(Penalty: RM5000; Default penalty: RM10-)
It is also the responsibilities of the director to hold the AGM every calendar year. The
first AGM shall be held before 18 months from the date of incorporation and before six month
from the date of profit and loss account. The subsequent AGM should be held every calendar
year and also within 15 months from the previous AGM. Not comply to this section is an offence
and the company and all the directors of the company will be penalized accordingly.
8
Section 165(4) “The annual return signed by director or secretary of the company shall be
lodged with the Registrar within one month or in the case of a company keeping pursuant to its
articles a branch register in any place outside Malaysia within two months after the AGM”.
Second schedule of the Companies Act 1965 - 26A on the late lodgment of any document of a
company under this Act after the period prescribed by law or regulation, in addition to any other
fee is as follows:
a) Fees applicable to a public company
(i) more than 7 days but not more than 3 months RM 150.00
(ii) more than 3 months but not more than 6 months RM 250.00
(iii) more than 6 months but not more than 12 months RM 300.00
(iv) more than 12 months RM 500.00
b) Fees applicable to a private company
(i) more than 7 days but not more than 3 months RM 50.00
(ii) more than 3 months but not more than 6 months RM 100.00
(iii) more than 6 months but not more than 12 months RM 150.00
(iv) more than 12 months RM 200.00
COMPANIES ACT 1965: SSM’S PRACTICE NOTE NO 1/2008

1. This Practice Note serves to inform the requirements under Section 165 of the Companies
Act 1965 (CA 1965) relating to the lodgement of annual returns with the Registrar of
Companies.
Lodgement of Annual Returns
2. Section 165 of the CA 1965 requires all companies to lodge annual return within one (1)
month after the annual general meeting (AGM). The annual return of a company shall be
in accordance with the Eighth Schedule to the CA 1965 and be accompanied by such
copies of documents as required or such certificates or other particulars as prescribed in
Part II of that Schedule.
3. Part II of the Eighth Schedule requires the following attachments:

i. a copy of the last audited accounts comprising the balance sheet and
profits and loss accounts (including every document required to be
attached thereto); and
9
ii. a copy of the auditor’s report.

This practice note 1/2008 is effective from year 2008 whereby any annual return without
the attachment of audited account will not be accepted by the registrar.
Section 143 (2) “Notwithstanding subsection 143(1), the Registrar on the application of the
company, may if for any special reason he thinks fit so to do, extend the period of fifteen months
or eighteen months referred to in that subsection, notwithstanding that such period is so extended
beyond the calendar year.
A company can apply for an extension of holding AGM with a written letter to the
Registrar and the Registrar may approve the extension with appropriate reason.
Conclusion and recommendation
From the case above, it is clear that holding AGM every year is for the main reason of
tabling the account. This both annual report and account is necessary to be lodged with the
registrar.
The main way in which the act seeks to protect members and the public in their dealings
with companies is to require companies to disclose certain information regarding their affairs and
financial positions. These requirements assume that members, creditors and potential members
and creditors will be able to make more rational and better informed decisions regarding a
company, on the basis of accurate and complete information.
If a company faces any trouble to hold an AGM for the required calendar year; it can
always apply for extension subject to under Section 143(2). Other than that, the Registrar and
related parties must make sure that the directors of the company are aware of these rules and
regulation and the consequence of not comply it. This will help to enhance the compliance level
at least at minimum level.
CASE II: UNDISCHARGED BANKRUPTS ACTING AS DIRECTORS
Companies Commission of Malaysia Secures Conviction Against
Bankrupt Director In Court
10
Executive Summary
A board of directors is a body of elected or appointed members who jointly oversee the
activities of a company or organization. The body sometimes has a different name, such as board
of trustees, board of governors, board of managers, or executive board. It is often simply referred
to as "the board."
A director is an officer of the company and he is liable to the prescribed penalties in the
event of default in complying with the Companies Act 1965. Every company must have at least 2
directors who each has his principal or any place of residence within Malaysia. An alternate
director or a substitute director would not be taken into consideration in determining the number
of directors resident in Malaysia.
The minimum requirements for a directorship are that the person must be a natural
person, 18 years old and above, be of sound mind and not be disqualified under the companies
act 1965. A person who does not obtain the qualification shall be disqualified and prohibited
from acting as a director. This includes an undischarged bankrupt. An undischarged bankrupt
cannot be a director or promoter or in any way take part in the management of a company
without the leave of the court (125(1)).
Introduction
Constant Unity Sdn Bhd was incorporated in Malaysia on 30th June 1997. It is a local
private company which have share capital. This company engages in investment holding.
11
Zulzurin Merican Bin Zaghlul Merican (I/C: 580708-07-5467) and Rosyadi Bin Abdul Rashid
(731213-13-5013) are the current directors of this company. Ng Bee Chin (MAICSA0858126) is
the company secretary. The company has an authorized share capital of RM5,000,000.00 of
which RM2,000,000 is the total issued share. The current shareholders of this company are
Zulzurin Merican Bin Zaghlul Merican and Rosyadi Bin Abdul Rashid with each has 1,000,000
numbers of shares. The last known registered office of the Constant Unity Sdn Bhd was Suite
30C, 3rd Floor, Wisma TCL, 470, Jalan Ipoh, 3rd mile, 51200 Kuala Lumpur. Wilayah
Persekutuan. Its business address was held at 2, Lorong Dungun, Damansara Heights, 50490
Kula Lumpur, Wilayah Persekutuan.
In this case one of the directors of Constant Unity Sdn Bhd, Zulzurin Merican Bin
Zaghlul Merican failed to comply the requirement to act as a director of a company under the
Companies Act 1965.
Study
On 21st April, the Kuala Lumpur Sessions court convicted Zulzurin Merican Bin Zaghlul
Merican, the company director of Constant Unity Sdn Bhd for committing an offence under
Section 125(1) of the Companies Act 1965. He had acted as a director of Constant Unity Sdn
Bhd while still an undischarged bankrupt. Zulzurin Merican Bin Zaghlul Merican pleaded guilty
to the charge. An offence under section 125(1), Companies Act 1965 carries a maximum penalty
of fine of RM100,000.00 or imprisonment for a term not exceeding 5 years or to both. The
session Court Judge, YA Jagjit Singh sentenced the accused to a fine of RM 6,000 in default, to
4 months imprisonment.
Zulzurin Merican Bin Zaghlul Merican is appointed as the company director on 23 rd July
1997 and lodged a Form 49 dated 23rd July 1997 with the registrar. At the time of appointment,
his residential address was 1301-E, Lorong Perwira, Jalan Telok Wanjah, 05200 Alor Setar. He
also lodged with the registrar a Form 48A which is a statutory declaration by a person before
appointment as director or by a promoter before incorporation of corporation dated 23rd July
1997. In this form, he declared himself as not undischarged bankrupt. He did this declaration and
12
took oath in front of the commissioner at Kuala Lumpur at the state of Wilayah Persekutuan.
Through the lodgement of Form 49 to the Registrar, it was known that he did not have any
participation in other companies as a director.
Through the collaboration with Malaysia Department of Insolvency With CCM, it was
identified by the Registrar that Zulzurin Merican Bin Zaghlul Merican is an undischarged
bankrupt. CCM then charged him under Section 125(1) Companies Act 1965 and brought the
case to the court. Mr. Steve Chin Yun Cheong prosecuted on behalf of CCM.
CCM views the conduct of undischarged bankrupts acting as company directors as a

serious governance issue and reiterates that only fit and qualified persons are appointed to
oversee the operations of a company in Malaysia. CCM reminds companies and its officers
including company secretaries of their duty to continue to play a vital role in ensuring that
companies are governed only fit and qualified directors.
Currently, this company is under liquidation. Aliquidator has been appointed by the court
on 24th June 2004. Suriyati Hasimah Binti Mohd Hashim, Assistant Official Receiver on behalf
of the official receiver Malaysia is given a notice to act as a liquidator of the company.
Analysis
Section 125(1) of the Companies Act 1965 provides that “Every person who being an
undischarged bankrupt act as director of, or directly or indirectly takes part in or is concerned in
13
the management of, any corporation except with a leave of court shall be guilty of an offence
against this Act.
(Penalty : Imprisonment for five year or RM100,000 or both)
An undischarged bankrupt prohibited from being appointed or act as a director in a

company without the leave of the court. The period of disqualification for this case is 5 years
where within the period of 5 years after his conviction or he is being sentenced to imprisonment,
after his release from prison.
Malaysian Development of Insolvency (MdI) is a premier government agency leading the

national administration and regulation of insolvency matters in Malaysia. MdI has evolved and
expanded over the years since its inception in 1924 into a principal regulatory body with over
1,200 employees in a network of offices across Malaysia. MdI operates under a statutory
framework comprising of the Bankruptcy Act 1967, Companies Act 1965, Societies Act 1984
and Trade Unions Act 1959. Its aim is to protect the integrity of the insolvency system and
committed in providing excellent services to the clients in parallel with its core values.
The Department of Insolvency performs the following functions:

 To administer the affairs of debtors and bankrupts pursuant to Bankruptcy Act 1967 and
Bankruptcy Rules 1969;
 To act as Provisional Liquidator or appointed Liquidator for companies that has been
wound up pursuant to the Companies Act 1965 and Companies Rules (Winding-up)
1972;
 To administer the affairs of societies that has been deregistered pursuant to the Societies
Act 1966 and Societies Rules 1984;
 To administer the affairs of trade unions that has been deregistered pursuant to the Trade
Unions Act 1959 and Trade Unions Rules 1959;
 To conduct investigation and enforcement of relevant laws in relation to any offences
allegedly done by bankrupts pursuant to the Bankruptcy Act 1967, company directors
14
pursuant to the Companies Act 1965, the Societies Act 1984, the Trade Unions Act 1959
and any laws in relation to bankruptcy and winding-up;
 To conduct prosecution of all criminal and quasi-criminal cases pursuant to the
Bankruptcy Act 1967 and the Companies Act 1965;
 To be the reference for the Government of Malaysia and its departments on any legal
issues related to bankruptcy, companies winding-up, deregistered societies and trade
unions.
 To represent the Government of Malaysia, its departments, bankrupts, and wound-up
companies in all civil proceedings in court;
 To provide search services on individual bankruptcy status and companies status;
 To manage and supervise the administration of the headquarters and all state and branch
offices of the Department of Insolvency throughout Malaysia.
Conclusion and recommendation
A person before to act as a director must make sure that he is not an undischarged
bankrupt. This is because one of the qualifications of director under Companies Act 1965 is a
director must not be an undischarged bankrupt and he must declare himself by taking oath in
front of commissioner. The declaration also must be lodged to the Registrar as a proof of he is
qualified under stated statement in the form.
However this does not mean an undischarged bankrupt can never act as a director
forever. He can act as a director under circumstances such as by court order. Other than that this
person can act as director after 5 years from the date he was charged as undischarged bankrupt.
CASE III: REMOVAL OF DIRECTORS IN PUBLIC COMPANY
Indian Corridor Sdn Bhd & Pembangunan Qualicare Sdn Bhd

v
15
Golden Plus Holdings Berhad
Executive Summary
General meeting is one of the important ways in which the members of a company can
express their views and concerns about the management of the company. The power to convene
a company members’ meeting is normally under the power of a board of directors. However, for
a specified minimum number of members, the members can either request the directors to call a
meeting (Section 144 of the Companies Act 1965) or convene one themselves (Section 145 of
the Companies Act 1965).
Generally, a company’s articles of association will state who can arrange for a meeting of
members to be held. The board of directors may convene general and class meetings when those
meetings are necessary for the administration of the company’s affairs.
This case study, Indian Corridor Sdn Bhd & Pembangunan Qualicare Sdn Bhd v Golden
Plus Holdings Berhad, involves the interpretation of Section 145 of the Companies Act 1965, the
shareholders’ right to convene a general meeting and the requirements to remove directors under
Section 128 of the Act. In this case study, the meeting is convened to allow the members to vote
on the removal and replacement of the directors.
Introduction
Golden Plus Holdings Berhad was incorporated in Malaysia as an investment holding and
management company on 16th January 1984. It was successfully listed on the Main Board of
16
Bursa Malaysia Securities Berhad on 29 th November the same year. The company has an
authorized share capital of RM300,000,000 of which RM146,850,675 is issued and fully paid-
up. Over the years, Golden Plus Holdings Berhad, through its subsidiaries, gradually built-up its
businesses and expanded its operations to emerge as a major force in the building and
construction industry.
The company has four business segments: investment, which is engaged in property and
investment holding; property development, which is engaged in the development of residential
and commercial properties; construction, which is engaged in the construction and engineering
works, and leisure and food, which is a water theme park operator, as well as restaurant
franchisee and operator. It has operations in Malaysia and People's Republic of China.
Below are the facts of the company:

i. Paid-Up Capital : RM146.85 million
ii. Board of Directors :
a. Dato' Abdul Halim Bin Dato' Haji Abdul Rauf
Non-Independent and Non-Executive Chairman
b. Low Thiam Hoe
Executive Director
c. Goh Sin Tien
Executive Director
d. Dato' Jeyaraj a/l V. Ratnaswamy
Independent and Non-Executive Director
e. Yeoh Hor San
Independent and Non Executive Director
f. Tan Sri Dato' Haji Lamin bin Haji Mohd Yunus
Independent and Non Executive Director
iii. Major Shareholders :

a. Indian Corridor Sdn Bhd 18.6%
17
b. Employees Provident Fund 14.4%

c. Lai Su-Chen 5.06%
d. Pembangunan Qualicare Sdn Bhd 1.15%
In the case of Indian Corridor Sdn Bhd and Pembangunan Qualicare Sdn Bhd v Golden
Plus Holdings Berhad, the two appellants, Indian Corridor Sdn Bhd (Indian Corridor) and
Pembangunan Qualicare Sdn Bhd (Pembangunan Qualicare), are shareholders of Golden Plus
Holdings Berhad (GPlus) which hold 18.6% and 1.15% interest respectively. On 27th December
2007 as reported in The Star (2008), acting under Section 145 Companies Act 1965, they served
a Special Notice on GPlus and requisitioned for an extraordinary general meeting to be held on
26th January 2008 in Penang. The purpose of the meeting was to seek shareholders’ approval for
the removal of all six current directors in GPlus and to appoint others in their place (Penang
EGM).
On 9th January 2008, the Board of Directors of GPlus contested against the Special Notice
and called for a separate EGM of the Company to be held on the same day and time in Kuala
Lumpur (KL EGM). The agenda of the KL EGM is to get shareholders’ approval to pass an
ordinary resolution to determine the validity of the Special Notice served on the Company on
27th December 2007.
Further to the seeking of declaratory relief which impugned the validity of the requisition,
on 16th January 2008, the Board of GPlus filed an application for an injunction against Indian
Corridor and Pembangunan Qualicare to restrain them from convening and proceeding with the
Penang EGM.
Study
Indian Corridor and Pembangunan Qualicare, relevant shareholders of GPlus

requisitioned an extraordinary general meeting (EGM) to remove the directors of the company
18
and to appoint others in their place. As reported in The Star (2008), Indian Corridor was seeking
to remove the directors of GPlus to protect shareholders and assets of the company following a
dispute over the agreement signed between GPlus subsidiary, Yanfull Investments Ltd (YIL),
and Hong Kong-based China Idea Development Ltd (CIDL).
According to the agreement, CIDL would provide services in relation to the management
and daily operations of YIL unit, which involves in the high-end Royal Garden residential
project in Shanghai. CIDL agreed to reimburse YIL a sum of RM650 per sq m from sales of the
properties, with payment starting after the former achieves 40% of the gross saleable area based
on each of the four phases of the Royal Garden project.
From a search conducted on the Hong Kong registrar of companies, GPlus’ chief
executive officer, Datuk Alex Ooi (2008) discovered that CIDL was nothing more than company
with a paid-up capital of only HK$9, and is run by two Chinese nationals. It is also discovered
that CIDL does not even have any employees or a proper business premise. Indian Corridor is
against the agreement as it considers the reimbursement rate as too low compared with the
prevailing market price, which is said to be approximately 15,000 yuan (RM6,832).
Indian Corridor and Pembangunan Qualicare hence proposed a resolution to remove the
directors of the Company and to appoint others in their place at an EGM, where the call for an
EGM arose following a dispute over the agreement signed in July 2007 between YIL and CIDL.
Analysis
From the facts of the case, Indian Corridor and Pembangunan Qualicare, shareholders of
GPlus requisitioned an extraordinary general meeting (EGM) to remove the directors of the
19
company and to appoint others in their place. Following to the requisition, GPlus commenced an
action in the High Court to impugn the validity of the requisition and obtained declaratory relief.
The relevant shareholders then took action by appealing to the Court of Appeal where the court
allowed the appeal and ruled against the High Court’s declarations.
The appeal is allowed based on the reasons as follows:
i. EGM under Section 145

The Court of Appeal disagreed that Article 55 of the Articles of Association of the
company prohibited the relevant shareholders from exercising their right to requisition the EGM.
Article 55 of the GPlus’ articles of association is as follows:
‘The Directors may, whenever they think fit, convene an Extraordinary General Meeting and
Extraordinary General Meetings shall also be convened by such requisitionist, as provided by
Section 144 of the Act. If at any time there are not within Malaysia sufficient Directors capable
of acting to form a quorum at a meeting of Directors, any Director or any two Members may
convene an Extraordinary General Meeting in the same manner as nearly as possible as that in
which Meetings may be convened by the Directors.’
The Court held that Article 55 does not restrict the shareholders to Section 144 to
requisition a meeting. Article 55 provides that the directors have the discretion to convene an
EGM and must do so upon the requisition by the shareholders. In the event the directors fail to
comply with such a requisition, the requisitionists may convene a meeting in accordance with
Section 144 of the Act. Nothing in Article 55 prevents the shareholders from relying on Section
145 of the Act. This decision confirms that the option remains open for the shareholders to call
for a meeting under Section 145.
ii. Special notice for resolution to remove directors
The Court of Appeal disagreed with the High Court’s finding that Section 145 cannot be
invoked by the relevant shareholders because of the special notice provision in Section 153 of
the Act. The Company argued that Section 153 is compatible with Section 144, not Section 145.
20
Section 128(2) of the Act requires that special notice be given to the Company on any
resolution to remove a director. Section 153 prescribes that such special notice shall not be less
than 28 days from the date of the meeting. The Court of Appeal held that there is no conflict
between these provisions and the right under Section 145. Having been given special notice, the
burden is on the Company to give notice of meeting to the shareholders. Failure to do so could
not be a ground to preclude the shareholders from relying on Section 145 to convene a meeting.
iii. Notice of resolution need not contain grounds of removal

The Company further argued that Sections 128(2) and 128(3) require grounds of removal
to be furnished in the notice of resolution. Failure to furnish such grounds, the Company
contended, would render the notice of resolution void. The Court of Appeal however, noted the
setting out of the grounds for proposing the removal is not a requirement of Section 128. The
notice requirement in Section 128 meets the element of fairness, which makes the directors
aware of this proposal, and it is up to the director’s concern to respond by a representation on
why they should not be removed. This sufficiently meets the requirements of fairness and justice.
Conclusion and Recommendations
From the case, it is clear that apart from the usual route of requisitioning an EGM under
Section 144 of the Act for the purpose of removing a director of a public company, the option is
open to the shareholders to adopt the route under Section 145. The difference between the two
Sections is that Section 145 allows the shareholders to decide on the timing and venue of the
meeting while Section 144 places such decisions squarely in the hands of the directors, giving
the directors the opportunity to determine the process and timing of the EGM to suit their
personal agenda or that of the Company.
On the other hands, Section 128 of the Act requires a plain notice of resolution to be
given to the Company without the necessity of furnishing the grounds of removal or to be
accompanied by an explanatory statement. However, this may give rise to some concern. As it
21
relates to removal of directors in a public company, the shareholders may be ignorant of the
motivation and grounds for the removal of the directors. In the absence of such grounds, the
directors concerned will face difficulties in seeking to answer the allegations leveled against him.
A balance needs to be maintained between compliance with the strict statutory requirements and
good corporate governance which requires keeping all parties concerned informed of the grounds
of removal of directors.
CASE IV: REQUISITION FOR A MEETING
SJA Berhad
v
22
HLB Nominees (Tempatan) Sdn Bhd
Executive Summary
The power to convene a company members’ meeting is normally under the power of a
board of directors. However, for a specified minimum number of members, the members can
either request the directors to call a meeting (under Section 144 of the Companies Act 1965) or
convene one themselves (Section 145 of the Companies Act 1965). Generally, a company’s
articles of association will state who can arrange for a meeting of members to be held. The board
of directors may convene general and class meetings when those meetings are necessary for the
administration of the company’s affairs. If the company adopts Table A Art 44, then any single
director may convene a general meeting.
This case study, SJA Berhad v HLB Nominees (Tempatan) Sdn Bhd involves the
interpretation of Section 144 of the Companies Act 1965. The section provides that the board
must convene a meeting of members when requested to do so by (i) members with at least 10%
of such of the paid-up capital with voting rights at general meetings; or (2) for a company not
having a share capital, members representing at least 10% of the total voting rights of all
members entitled to vote at general meetings.
The meeting must be called within 21 days and held within two months after the request
is given to the company. If the members have requisitioned a meeting under Section 144 for a
proper purpose, and the board has failed to convene the meeting within the required time,
members with more than 50% of the votes held by members who made the original request can
proceed to convene the meeting at the expense of the company under Section 144(3) of the
Companies Act 1965.
Introduction
SJA Berhad which was formally known as South Johore Amalgamated Holdings Berhad,
is a leading public bus transport company in the Southern and North-Western regions of
Peninsular Malaysia. It manages the only consortium of bus operators in the states of Johor and
23
Penang, and is the sole operator of buses that provide services between Penang Island and the
mainland.
The directors of the company are:

i. Tan Sri Dato’ Azahari bin Mohd. Taib
ii. Dato' Haji Ahmad Hasmuni bin Haji Hussein
iii. Hamidah bte Abdul Ghafar
iv. Tan Hock Chan
v. Dato' Tan Hooi Chong
vi. Tung Soo Aik
vii. Tan Hui Meng
viii. Tan Hui Swang
ix. Che Joha Bin Abdul Jalil
In the case of SJA Berhad v HLB Nominees (Tempatan) Sdn Bhd, on 22 nd April 2002, HLB
Nominees (Tempatan) Sdn Bhd deposited with SJA Berhad a requisition for an extraordinary
general meeting (EGM) together with a special notice of intended resolutions to remove a
number of named directors of SJA Berhad including Tan Hock Lai @ Tan Hock Chan and to
appoint two named persons as independent and non-executive directors pursuant to Section
144(1) of the Companies Act 1965. The directors of SJA Berhad did not take any step to act on
the requisition and as a result of that, HLB Nominees (Tempatan) Sdn Bhd on 9 th July 2002,
pursuant to Section 144(3) of the Companies Act 1965, issued a notice for an EGM to be held on
7th August 2002.
However, on 24th July 2002, SJA Berhad filed the Originating Motion No. 24-1259-2002 at
the Penang High Court to restrain HLB Nominees (Tempatan) Sdn Bhd from holding the EGM
on 7th August 2002 on the ground that under Section 144(3) of the Act the time to hold the
meeting had lapsed.
Study
24
There are two main issues in this case study:

i. Whether the three months time frame for convening the EGM as stipulated in Section
144(3) of the Companies Act 1965 commences from the date of the deposit of the
relevant requisition or from the expiry of 21 days of the date of the deposit of the said
requisition
ii. Whether the HLB Nominees (Tempatan) Sdn Bhd’s notice to SJA Berhad dated 9 th July
2002 indicating its intention to hold the Extraordinary General Meeting (EGM) was in
contravention of the time limit prescribed by the aforesaid section and therefore null and
void
Analysis
It is common ground that HLB Nominees (Tempatan) Sdn Bhd on 22 nd April 2002
deposited a requisition with the SJA Berhad to convene an EGM to remove certain directors of
the SJA Berhad. The requisition was made under Section 144 of the Companies Act, 1965.
Section 144 provides:
Convening of extraordinary general meeting on requisition
(1) The directors of a company, notwithstanding anything in its articles, shall on the
requisition of members holding at the date of the deposit of the requisition not less than
one-tenth of such of the paid-up capital as at the date of the deposit carries the right of
voting at general meetings or, in the case of a company not having a share capital, of
members representing not less than one-tenth of the total voting rights of all members
having at that date a right to vote at general meetings, forthwith proceed duly to convene
an extraordinary general meeting of the company to be held as soon as practicable but in
any case not later than two months after the receipt by the company of the requisition.
(2) The requisition shall state the objects of the meeting and shall be signed by the
requisitionists and deposited at the registered office of the company, and may consist of
several documents in like form each signed by one or more requisitionists.
25
(3) If the directors do not within twenty-one days after the date of the deposit of the
requisition proceed to convene a meeting the requisitionists, or any of them representing
more than one-half of the total voting rights of all of them, may themselves, in the same
manner as nearly as possible as that in which meetings are to be convened by directors
convene a meeting, but any meeting so convened shall not be held after the expiration of
three months from that date.
However, the directors of SJA Berhad did not take any step to act on the requisition and as a
result of that, HLB Nominees (Tempatan) Sdn Bhd on 9 th July 2002, issued a notice for an EGM
to be held on 7th August 2002 at Sri Mas 2 & 3, The City Bayview Hotel, 25-A Farquhar Street,
Penang.
The date for holding the meeting as stated in the notice exceeded the three months provided
by Section 144(3). Hence, the notice is null and void. Pursuant to Section 144(3), the directors
themselves shall proceed to convene the EGM of the company but in any case not later than two
months after the receipt by the company of the requisition, provided that any of them
representing more than one-half of the total voting rights at general meetings.
This means that when the requisitionists or any of them who qualifies to do so to convene the
EGM, the company is given another month to do so in order to take into account the period of 21
days which is given to the directors to convene the EGM. It is only after the expiration of the 21
days without the directors convening the EGM that the respective shareholders or members can
themselves proceed to convene the EGM.
In this case, since the requisition was received by SJA Berhad on 22 nd April 2002, the
EGM should have been convened and held at the latest on 22 nd June 2002 by the directors.
However, since the directors of the SJA Berhad did not, between 22 nd April 2002 and 13th May
2002, issue any notice calling for an EGM then pursuant to Section 144(3) of the Companies Act
1965, starting from 14th May 2002 onwards, HLB Nominees (Tempatan) Sdn Bhd is entitled to
issue a notice calling for an EGM which should have been held at the latest on 22nd July 2002.
26
The case of SJA Berhad has clarified the legal interpretation of the provision in Section
144 of the Companies Act 1965 especially Section 144(3). This case is a reminder to any
company secretary or shareholders who like to invoke their right to convene an EGM under the
provision of Section 144 of the Companies Act 1965. The legal effect of Section 144(3) is that
time for calculating the three months for convening the EGM stipulated in the section, runs from
the deposit of the relevant requisition.
CASE V: INTERPRETATION, RESTRICTIONS ON APPOINTMENT OR

ADVERTISEMENT OF DIRECTOR
Yap
27
v
Public Prosecutor
Executive Summary
This case is about the definition of ‘director’ in Companies Act 1965. Whether in the
company, there is the non-compliance of the Companies Act 1965. It was related whether a
person in the company can be a director of a private limited company. In this case also defined a
person who is being charged as an agent or as a director of a private limited company. What is
the capacity of her/him to be held to act as an ad-hoc agent?
A private company limited by shares, usually called a private limited company (Ltd)
(though this can theoretically also refer to a private company limited by guarantee). It has
shareholders with limited liability and its shares may not be offered to the general public, unlike
those of a public limited company (plc).
This case study, Yap v Public Prosecutor, involves the interpretation of Section 4, Section
123(1) and (4) and Section 409 of the Companies Act 1965.
Introduction
In this case, three charges against the appellants on which they were convicted and which were
connected with the four questions were as follows:
28
First charge
On 30 April 1985, Yap was being agents of Lien Hoe Sawmill Sdn Bhd at the Hongkong and
Shanghai Banking Corporation and he was being as a directors. He also has a committed amount
of $12,000,000 criminal breach of trust that offence punishable under Section 409 of the
Companies Act 1965.
Second charge
On 10 May 1985, Yap was being agents of Yap Sing Hock Holdings Sdn Bhd and also being as
directors in the company. He was entrusted with the property amount of $ 2,500,751 criminal
breach of trust that offence punishable under Section 409 of the Companies Act 1965.
Third charge
On 30 April 1985, Yap was being officers of Lien Hoe Sawmill Sdn Bhd. He also being as
directors and gave financial assistance to Sing Hock Holdings Sdn Bhd for the purpose of
purchase of 4,413,284 shares in his former company. This is offence punishable under Section
67(3) of the Companies Act 1965.
Company Profile
Lien Hoe Sawmill Sdn Bhd. started out as a building and construction materials
manufacturer in 1969 but enjoyed only modest success. In early 1994, the company started to
diversify via the acquisition of North Sumatera Timber Sdn Bhd, a small timber moulding plant
complete with long-term log supply contracts covering 180,000 ha of forest in North Sumatra,
Indonesia. Lien Hoe also owns 70% of Indonesian company PT Budi Tri Sakti, which
manufactures timber mouldings.
In 1997, it was reported that Lien Hoe owned 51% of Carlton Resources, a logging
company with a 25 year logging concession covering 152,000 ha in Liberia. The company made
the deal in 1995, paying US$2.50 per ha, but production was disrupted due to political unrest in
29
the country. Logging resumed in November 1996 and the company was forecasting that profits
would start coming in by March 1997.
Study and Analysis
Directors’ and Officers’ (D&O) Liability
D&O potential liability are contained in various enacted legislation including the
Companies Act 1965 (“CA”), the Income Tax Act 1967, the Employees’ Provident Fund Act
1991, the Copyright Act 1987 and the Environmental Quality Act 1974. This memorandum
highlights some of these legislations and provides an overview of the principal areas of risk
specifically applicable to directors. It should not be taken as a comprehensive list of all potential
liabilities specific to directors under Malaysian law. In addition, directors may also be subjected
to criminal liability under the Penal Code for such offences as fraud and criminal breach of trust
and/or civil liability arising out a breach of their fiduciary duties or a failure to exercise due care
and skill in carrying out their duties. These are not within the scope of this memorandum.
The comments as to any trends in the exposure of directors or officers and/or the level of
risk given in this memorandum are based on known prosecutions and civil actions reported in
law reports in Malaysia.
Overall, there is a gradual increase in the emphasis on directors’ accountability

particularly in relation to offences under the Securities Commission Act 1993 (“SCA”) and other
offences in relation to the securities industry, which are not covered in the scope of the
memorandum.
Malaysian Companies Act 1965 (“CA”)

For the purposes of the CA, references to a “director” or “officer” have been defined in Section 4
of the CA to include the following:
30
“Director” includes any person occupying the position of director of a corporation by whatever
name called and includes a person in accordance with whose directions or instruction the
directors of a corporation are accustomed to act and an alternate or substitute director.
“Officer” in relation to a corporation includes any director, secretary or employee of the
corporation.
Although criminal liability is not always expressly provided under the specific sections of the
CA discussed below, there is a general penalty provision contained in section 369 of the CA
which provides that a person is guilty of an offence if:
(a) He does any prohibited act under the CA;

(b) Omits to do what he is required to do under the CA; and
(c) Otherwise contravenes or fails to comply with any provision of the CA.
Section 67 of the CA – Prohibition in giving Financial Assistance

Type of Breach and Description of Offence
Save for specific exceptions contained in the CA, a company is generally prohibited from the
following:
(a) Giving direct or indirect financial assistance (including a loan guarantee, security or
otherwise) to any person for the purpose of or in connection with a purchase or subscription of
any shares in the company or, where the company is a subsidiary, in its holding company;
(b) In any way purchase or deal in its own shares; or

(c) Lend money on the security of its own shares. The exceptions to this general prohibition
include where
(a) A financial institution lends money to customers in the ordinary course of
business other than for the specific purpose of purchasing shares in that
institution; or
(b) A company provides assistance to its employees to purchase shares in the
company. Criminal and civil liability applies.
31
This act is applies to Directors and Officers as defined in the CA.
Potential Penalties
In the event of any contravention of this section, the company giving such assistance is
not guilty of an offence but each officer of the company who is in default is guilty of an offence
against the CA. The penalty for such contravention is imprisonment for up to 5 years or a fine of
up to RM100,000.00.
In addition, where a person is convicted of an offence under this section, and the Court is
satisfied that the company or another person has suffered loss or damage as a result of such
contravention, the Court may order the convicted person to pay compensation to the company or
person (as the case may be) of such amount as the Court specifies.
In Yap Sing Hock & Anor. v. PP [1992] 2 MLJ 714, the Malaysian Supreme Court
upheld the conviction of the directors of Lien Hoe Sawmill Co. Sdn. Bhd. (“Lien Hoe”) for
causing Lien Hoe to give financial assistance to Yap Sing Hock Holdings Sdn. Bhd. to purchase
shares in Lien Hoe. The directors were fined RM2,500.00 or in default 3 months imprisonment
CASE VI: NASIONCOM HOLDINGS BERHAD:

FINANCIAL REPORTING DEFICIENCIES
Introduction
32
NasionCom Holdings Berhad (NasionCom) is an ambitious and fast growing Malaysian

telecommunication service provider. The company was incorporated in 1993 and later was
converted into a public company on 28 January 2004 and subsequently listed on the MESDAQ
Market of Bursa Malaysia Securities Berhad on 25 February 2005. Nasioncom portrayed their
identity as an innovative company that deliver innovative voice and data services, broadband
internet access, interactive entertainment systems and information technology solutions.
It is the aimed of the company to make their customer happy and more importantly is to enhance
shareholders value. It is evidenced on the Annual Report of the company by the following tagline
"Our Commitment: To keep our Customers happy and continue to enhance value to our
shareholders." As a result of their commitment, the company received an award of Most
Promising Service Provider of the Year at the Frost & Sullivan Malaysia Telecom Awards 2005.
Again, in the year 2006, they received the same award.
Their latest products in the market are 'Nasion 1' and 'NasionTouch™015'. Nasioncom pointed
out that Nasion 1, a VoIP-enabled mobile phone services offers 2 exciting phone models
equipped with the latest in mobile technology. It offers low rates at the touch of one button
anytime, anywhere (AR, 2005). On the other hand, NasionTouch^™015 offers voice
communication through broadband connections. Indeed, NasionCom has projected their image as
an aggressive and dynamic Malaysian telecommunication company that offers cost-effective
Voice over Internet Protocol (VoIP) telephony services. The company also brings together
multimedia interactive entertainment systems in their portfolio of highly innovative
telecommunication services.
Achievement
NasionCom involvement in Malaysian telecommunication market has been recognised by the
authority when the Malaysian Communications and Multimedia Commission (MCMC) awarded
them the status of Network Facilities Provider (NFP) and Network Services Provider (NSP). The
33
company is allowed to provide a full suite of value-added services such as Internet Protocol
Telephony services, broadband internet access services, Managed Internet Protocol - Virtual
Private Network (IP - VPN) services and info-communication application services to customers
throughout Malaysia.
Good Corporate Governance Practices
The board of directors of Nasioncom Holdings Berhad believed that they have adopted high
standard of corporate governance practices by complying all of the requirements put into practice
by Malaysian regulators.
Table 1: Fast Facts
2004 2005
Members of Board of Directors 7 9
 Independent Directors 3 3
 Non-Independent Directors 4 6
Financial Expert on the Board of
Directors
3 3
i.e member of MIA, CACA(UK),
CIMA
Stock Exchange MESDAQ MESDAQ
i. Audit Committee i. Audit Committee
ii.Remuneration & ii. Remuneration &
Committees
Nomination Nomination
Committee Committee
Number of Meetings Not disclosed 6
i. Statement of Corporate Governance
ii. Audit Committee Report
Corporate Governance Report in
iii.Statement on Internal Control
Annual Report
iv.Additional Compliance Information
v. Director’s Responsibility Statement
Consistent with their commitment to enhance shareholders value and to have good corporate
governance practices, the company engaged the right mix of directors. As of 31st December
2005, the company's board of directors comprised of 9 members of which 3 independent and 6
34
non-independent directors. The independent directors are Dato' Seri Mohamad Noor bin Abdul
Rahim (Non-Executive Chairman), Tan Sri Dato' Hj Hanafiah bin Hj Ahmad (Non-Executive
Director) and Wan Azizul bin Wan Yusuf (Non-Executive Director). The 6 non-independent
directors are Alfian bin Mohamed Basir (Executive Vice Chairman), Peter Tham (Group
Managing Director), Shamsul Khalid bin Ismail (Executive Director), Azam Azi bin Rusdi
(Executive Director), Chan Chun Fee (Executive Director) and Dato' Chee Kok Wing (Non-
Executive Director) – Founder). The directors’ interest in the company are summarised in the
following table.
35
Table 1: directors’ shareholdings in nasionCom as at 18 May 2006

No. of share Held % of issued capital
Name of director
Direct Indirect Direct Indirect
Dato’ Seri Mohamad Noor bin

200,000 - 0.03 -
Abdul Rahim
155,626,68
Alfian bin Mohamed Basir 1,200,000 0.15 19.45
6
155,626,68
Dato’ Chee Kok Wing 90,426,650 11.30 19.45
6
Shamsul Khalid bin Ismail 1,200,000 31,626,666 0.15 3.95
Peter Tham 1,200,000 - 0.15 -
Tan Sri Dato’ Hj. Hanafiah bin Hj

200,000 - 0.03 -
Ahmad
Among the directors, Dato’ Chee Kok Wing has strong interest to the success of the company as
he is the founder and the person who responsible in building up the company from scratch to the
public listed company. As the managing Director since its incorporation, Dato’ Chee was the
master mind of the company. In addition, Dato’ Chee also serve as an officer and director for
various direct and indirect subsidiaries of NasionCom. His role of NasionCom Group business
oppurtunities.
Board Committees
36
The board of directors has 2 sub-committees namely audit committee and remuneration &
nomination committee. Among the members of board of directors, 3 of them are qualified
accountants who could be classified as financial expert that are able to understand and appreciate
the preparation and presentation of financial information. The company has complied with the
expectation of the Malaysian Code on Corporate Governance and the Bursa Malaysia Listing
Requirements, where at least one of the members of audit committee is a financial expert. The
following are some characteristics of audit committee of NasionCom.
Table 2: Characteristics of Audit Committee
2005
Total Number of members 4 (1 resigned on 14.12.05)
Number of Independent/Non Executive 3 (1 resigned on 14.12.05)
Number of Non Independent / executive 1
2 (each is Independent Non Executive and

Number of financial Expert
Non Independent Executive
Number of Meetings 5
Some details on activities undertaken

Audit Committee Report
during the year
Auditor
It is commonly known to the users of financial statements that auditor's role is to provide
assurance services that add value to the information reported in the statements. In 2004,
NasionCom's auditor, PriceWaterHouse has audited the accounts and of opinion that the
37
accounts show true and fair view of the company financial affairs. The auditor gave a clean
report without any qualification. In the year of 2005, the company has changed its external
auditor to Deloitte KasimChan. The new auditor found that the company has kept proper
accounting record and the accounts are credible and showed true and fair view of the financial
affairs of the company. Indeed, they have issued a clean report and agreed that the financial
statements were prepared in accordance to the standards.The following are information related to
the external auditors of the company.
Table 3: Audit Function
2004 2005
Auditor PwC Deloitte KasimChan
Audit Fees RM 90,000 RM 82,000
Non-Audit Services Fees* RM 264,019 RM 793, 434
Express willingness to
√ √
continue in financial year
Unqualified Unqualified
Audit Opinion
(Clean Report) (Clean Report)
Internal Audit Function None** None**
*Non Audit Services provided by the auditor of the company
**” The Company does not have an internal audit department. The Board has determined that the
current control mechanisms are sufficient for the size of the Company. The Board will set up an
internal audit function in the current financial year” (AR, 2004).
*** “Efforts are ongoing towards establishing an internal audit function for the Group beginning
with the setting up of the organization & method department during the financial year”
(AR,2005).
Investment
With the aim to capture large number of customers, NasionCom has invested RM65million in an
Internet Data Center with 10 terabyte capacity at Mid Valley City in Kuala Lumpur. The project
is very ambitious and utilises technologies from various companies such as Cisco, Compaq,
38
Microsoft, EMC Corporation, Oracle, Veritas, Citrix and Trend Micro. They plan to further
invest RM 300 million in the broadband deployment in Malaysia.
Excellent Financial Performance
The company had recorded relatively well growth in the competitive telecommunication market.
The company has broadened their line of products by offering attractive program to capture the
customer's attention. For example, the marketing of Voice over Broadband (VoB) product,
customers were offered a creative sign-up program which included free holidays (Annual Report,
2005). Thus, the company has increased their turnover and recorded excellent business
performance. The following are financial information of the company.
39
Table 4: Financial Performance of NasionCom Holdings Berhad1

2003 2004 2005
Revenue 0 160,935,248 194,184,186
Profit / (Loss) before tax (40,320) 7,770,632 11,161,483
Profit / (Loss) after tax (40,320) 4,702,444 7,592,737
Net Profit / (Loss) for the year (40,320) 3,763,559 7,582,941
Earnings per share (12.1) 5.2 1.0
Non-current assets 148,593,337 158,171,259 157,111,764
Property, plant and

64,510,092 74,213,503 74,835,865
equipment
Development costs 546,064 1,292,080 1,251,013
Other Investment 575,600 3,749,000 742,000
Deferred tax assets 11,300,000 9,590,800 6,105,600
Goodwill 71,751,581 71,751,581 71,751,581
Current assets 42,451,669 47,099,684 106,069,788
Inventories 1,366,983 3,507,975 414,974
Trade receivables 37,622,689 25,789,147 67,979,594
Other receivables, deposits

14,105,706 31,482,681
and prepaid expenses
Amount due from contract

155,185 -
customers
Cash and bank balances 3,461,997 3,541,671 6,192,539
Current liabilities 68,673,187 31,882,561 36,317,203
Trade payables 56,387,492 6,678,169 12,567,309
Other payables and accrued

15,825,424 11,460,288
expenses
40
Borrowings 12,148,470 8,150,229 11,303,020
Tax liabilities 137,225 1,228,739 986,586
Non-current and deferred

43,285,285 29,981,939 59,589,109
liabilities
Borrowings 43,238,885 23,601,272 51,774,942
Government Grant 0 6,290,167 7,814,167
Deferred tax liabilities 46,400 90,500 -
Shareholders’ Equity 78,959,682 142,340,706 166,199,707
Issued capital 35,300,002 74,000,000 80,000,000
Reserves 43,659,680 68,340,706 86,199,707
Minority Interests 126,852 1,065,737 1,075,533
Net cash from / (used in)

500 (8,409,942) (33,979,584)
operating activities
Net cash / (used in) investing

0 (12,143,756) (9,008,467)
activities
Net cash from / (used in)

(5,554,813) 21,532,606 46,629,206
financing activities
1
There are discrepancies of disclosures in the accounts for the year ended 31/12/2004 as
disclosed in the Annual Report for the year ended 2004 and comparative figures in the Annual
Report for the financial year ended 2005.
Revenue Recognition
The increasing level of sophistication and the demands for convenience and competitive services
in telecommunication industry requires the market participants to continuously innovate better
products. NasionCom has deployed its resources in building up their capacity and competency
that consistent with the technological changes. Their product innovation i.e. Nasion 1 and Nasion
Touch™015 has attracted interest among users of telecommunication industry. As a result, the
41
turnover of the company has continuously increased consistent with the amount of effort to
ensure that the company is on track. To ensure proper revenue recognition, the following policies
have been instituted by the management of the company.
-Revenue from provision of postpaid telecommunication services are recognised upon invoicing
to customer, net of sales tax and discounts.
-Revenue on prepaid telecommunication services are recognized upon actual usage of the said
services.
-Revenue from provision of other services are recognised upon delivery of services to customers
over a\ stipulated period of time, net of sales taxes and discounts.
-Revenue on sale of computers and telecommunication products are recognised upon delivery of
products and customer acceptance, if any, or performance of services, net of sales taxes and
discounts.
-Unearned income arising from monies received from customers but for which services have not
been rendered is reflected as unearned income under current liabilities.
-Revenue relating to long term contracts are accounted for under the percentage of completion
method. The stage of completion is measured by reference to the actual cost incurred to date to
estimated total costs for each contract.
-Interest income and rental income are recognised on an accruals basis.
During the financial year of 2005, NasionCom has showed excellent performance where the
company registers more than RM30million increment in revenue. This has resulted in a better
profit for the company as shown in Table 4. The following are the company revenue for the
financial year 2004 and 2005.
Table 5 : Revenue of the Company
2005 2004
Sale of telecommunication prepaid cards 103,202,551 82,683,106
Provision of Voice over Internet Protocol (‘VolP’) services 71,622,726 52,324,033
Provision of internet broadband connectivity services 17,959,030 7,939,788
Advertising income 1,152,848 5,730,900
System integration services 1,043,437 4,979,766
Sale of computers and telecommunication products - 7,106,165
Management fees receivable from subsidiary companies - -
42
(Note 12)
Others 3,594 171,490
194,984,186 160,935,248
Charges
NasionCom faced financial difficulties in the year of 2007, when they unable to service their
debts. As a result, the company was brought to the court due to failure to service its loans owed
to the Malaysian Development and Infrastructure Bank and later was put under receivership.
Several key executives of NasionCom i.e. Dato' Chee Kok Wing and Shamsul Khalid bin Ismail,
both directors of NasionCom, and Mah Soon Chai, a shareholder of Express Top-Up Sdn Bhd, a
subsidiary of NasionCom were charged in court for falsifying accounting records. The shares of
the company have been suspended due to the release of misleading financial statements to the
public.
Reprimand and Court Charges

Acting on the financial irregularities in Nasioncom, the Securities Commission has charged Dato'
Chee Kok Wing for the submission of false information. He was accused for issuing a prospectus
which contained misleading information, namely the top 10 customers of NasionCom, for listing
on the MESDAQ Market. This information is essential to be supplied to the Securities
43
Commission with regard to their proposal to be listed on the MESDAQ Market of Bursa
Malaysia Securities Berhad. Also, the Companies Commission of Malaysia (CCM) has charged
Dato' Chee Kok Wing for 'authorizing the making of false statements in NasionCom Sdn Bhd's
documents, namely invoices, dealer agreements, ledgers and bank deposit slips'(SC, 2007). The
following are the press release issued by the SC on the charge towards Dato' Chee Kok Wing.
 under sS5(1)(a) of the Securities Commission Act 1993 (SCA) for causing the issuance
of NasionCom Prospectus for listing on the MESDAQ Market, which contained
misleading information. This offence is punishable under s55(3) of the SCA which
carries a maximum penalty of RM3 million f ne or 10 years imprisonment or both;
 under sl22B(a)(bb) Securities Industry Act 1983 (SIA) read together with sl22 of the
same Act, in his capacity as a director, is deemed to have submitted false information to
the SC contained in the 2005 Annual Report of NasionCom, in particular, its revenue for
the FYE 31 December 2005. This offence is punishable under sl22B of the SIA, which
carries a maximum fine of RM3 million or imprisonment not exceeding 10 years or both;
and
 under s364(2) of the Companies Act 1965 for authorising the making of false statements
in the documents of NasionCom Sdn Bhd which are required to be kept under s167(1) of
the Companies Act 1965. These false statements were used for the preparation of
NasionCom's Financial Statementfor the FYE 31 December 2005. This offence is
punishable under s364(2) of the Companies Act 1965 which carries a maximum
imprisonment of 10 years or RM250, OOO fine.
44
SC has also charged Shamsul Khalid due to his capacity as director of NasionCom that primarily
responsible for the financial management of the company and "therefore is deemed to have
committed the offence under section s122B(a)(bb) SIA read together with sl22 of the same Act"
(SC, 2007).
The SC has issued a press release titled "SC raps Nasioncom and directs company to reissue
2005 financial statements - Ensures investors have true financial figures" dated 15 th February
2007 that reprimanded Nasioncom Holding Berhad and the following are extract of the press
release.
"The Securities Commission (SC) today publicly reprimanded Nasioncom Holdings Berhad
(NHB) and directed the company to rectify and re-issue its financial statements for the financial
year ended 31 December 2005 within a month."
"NHB had submitted false information to the SC with respect to revenue on sales that were not
transacted, in its 2005 financial statements. In doing so, NHB had breached section 122B(a)(bb)
of the Securities Industry Act 1983."
"The SC's investigation revealed that NHB's group revenue of R M194,984,186 as reflected in its
2005 financial statements contained a total of R M143, 109, 727 sales that were not transacted.
These sales were recorded in the financial statements of two NHB subsidiaries, namely
Nasioncom Sdn Bhd and Express TOP-MP Sdn Bhd."
As a result of the trial of these three individuals, the SC has publicly reprimanded NasionCom on
15 February 2007 and requires the company to resolve the issue and reissue its financial
statements for the financial year ended 31 December 2005. Further, the company unable to
comply with many of the Bursa Malaysia Securities Berhad's Listing Requirements such as the
announcement of quarterly reports (QR) and audited annual accounts (AAA) for the year of
2006. Accordingly, Bursa Securities, on 18th December 2007, has publicly reprimanded and fines
NasionCom's directors as follows:
45
Position/date of Appointment Failure to Penalty

No Directors
& resignation submit imposed
Public
Managing Director 4th QR reprimand and
(Appointed on 30 April 2005 2006 fine of
and resigned on 11 may 2007) RM8,500
1. Tham Kok Sing
(appointed as Audit Committee Public
member on 9 February 2007 reprimand and
AAA 2006
and resigned on 11 May 2007) fine of
RM3,500
Public
1st QR reprimand and
Executive Director 2007 fine of
Omar bin (Appointed on 9 February 2007 RM13,000
2. Zolkifli and the aforesaid appointment Public
continues to date reprimand and
AR 2006
fine of
RM12,800
3. Tan Sri Dato’ Independent Non-Executive Public

Seri Mohamad Chairman 4th QR reprimand and
Noor bin Abdul Audit Committee Member since 2006 fine of
Rahman 2005 and resigned on 22 RM12,400
October 2007 (Appointed on 6 Public
January 2004 and resigned on reprimand and
AAA 2006
22 October 2007) fine of
RM12,800
1st QR Public
2007 reprimand and
46
fine of
RM13,000
Public
reprimand and
AR 2006
fine of
RM12,800
Public
4th QR reprimand and
2006 fine of
RM12,400
Independent Non-Executive Public

Director reprimand and
AAA 2006
Audit Committee Chairman fine of
Wan Azizul bin since 2005 and resigned on 1 RM12,800
4. Wan Yusoff October 2007 Public
(Appointment on 3 January 1st QR reprimand and
2005 and resigned on 1 October 2007 fine of
20070 RM13,000
Public
reprimand and
AR 2006
fine of
RM12,800
Independent Non-Executive
Director (Appointed on 23
Public
Datuk Wan March 2007 and the aforesaid
reprimand and
5. Kassim bin appointment continues to date) AR2006
fine of
Ahmed (Appointed as Audit Committee
RM12,800
Member on 4 June 2007 and the
appointment continues to date)
47
Public
4th QR reprimand and
2006 fine of
RM6,200
Non-Independent Non- Public

Executive Director (Appointed reprimand and
AAA 2006
as executive Director on 12 fine of
Dato’ Chee Kok December 2003 and has bee re- RM6,400
6. Wing designated as Non-Independent Public
Non-Executive Director in 28 1st QR reprimand and
February 2006 and resigned on 2007 fine of
8 August 20070 RM4,900
Public
reprimand and
AR 2006
fine of
RM2,800
48
Datukship Suspended
The whole NasionCom's case has received attention from many interested parties including the
Sultan of Selangor who awarded Datukship to Dato' Chee Kok Wing. Due to the allegation of his
involvement in the submission of false information to the SC, the Sultan of Selangor has
suspended Chee's Datukship.
Analysis and Remedies
Revenue recognition practices
Revenue recognition practices of the company found to be the biggest default in NasionCom. It
all started in the year 2007, where NasionCom was thrown into receivership after it failed to
service its loans owed to the Malaysian Development and Infrastructure Bank that resulted to
cause several key executives of NasionCom were charged in court for falsifying accounting
records. SC revealed that 73 per cent of the company's revenue that year (RM 143,109,727 from
RM 194,984,186) was based on deals that were not transacted. The practice may seem to work in
a short term but after a while, it caused disastrous financial situation to the company.
Furthermore, NasionCom was in such a volatile kind of industry which dealt with ‘shorter shelf
life’ products which refer to communication devices that expands in fast pace product and
market development.
Concentration of Shares
If refer to table 1, Dato’ Chee’s shares covered 11.3% of the total direct share alone. It such a big
amount if compared to other directors. It shows that he had the highest interest on the company
and it might be possible that he had overruled some of the decisions made for the company.
Auditor’s Accountability
One of the main issues here is the switch of auditor from PriceWaterhouse Cooper to Deloitte
KassimChan in the year of 2005. It is found out that PWC did a good job in 2004 and of opinion
that the company’s accounts show true and fair view of the company financial affairsa. Thus,
why and for what reason NasionCom changed their auditor to Deloitte KassimChan in the
49
following year (2005)? Based on Table 3, we can see that the fee for 2005 audit and non-audit
exercise was higher if compared to the previous year? Besides that, ‘non-audit services’ fee from
Deloitte KassimChan exceeded 5% total amount paid by the company to its auditor during the
same fiscal year in which the non-audit services are provided. It is easy to compare the situation
here with the turmoil in corporate America – in those days when the likes of Enron, WorldCom
and Tyco dominated the headlines – that lead to the controversial reform that included the
introduction of the Sarbanes-Oxley Act. Prior to the adoption of the Sarbanes-Oxley Act
("SOA"), there was some confusion over what types of non-auditing services the outside
accountant could perform for a public corporation. In fact, some of the major accounting firms
sold their consulting units in recent years in order to avoid any possible conflicts of interest. The
SOA endeavours to eradicate particular possible conflicts of interest occur out of "non-audit
services" and gives additional power to the Audit Committee. The SOA clearly forbid large
scale, big fee financial information systems design and implementation or information
technology work. This was a very high profit area for the non-audit arms of the large accounting
firms. The SOA also bars internal audit outsourcing and "expert" services.
Set forth below are the nine prohibited activities for a registered accounting firm performing an
independent audit of a public company:
 bookkeeping or other services relating to the accounting records or financial statements

of the audit client;
 financial information systems design and implementation;
 appraisal or evaluation services, fairness opinions or contribution-in-kind reports;
 actuarial services;
 internal audit outsourcing services;
 management functions or human resources;
 broker or dealer, investment advisor, or investment banking services;
 legal services and expert services unrelated to the audit;
 and any other service that the accounting board determines, by regulation, is
impermissible.
50
The Audit Committee must understand the nature of the proposed non-audit service to be
provided and consider whether that proposed service raises independence concerns
Even the professionals who failed to discharge their due diligence responsibilities have not been
spared. Historically, Deloitte KassimChan was the auditor for NasionCom's accounts that year,
according to the company's 2005 annual report. According to Bernama, the accounting firm even
declined to comment when contacted about this case. Not only that, Deloitte KassimChan have
some bad history where SC also reprimanded Deloitte KassimChan and Hwang- DBS Securities
Bhd over Ocean Capital Bhd's restructuring plan previously and not only that, they are also
involved in Trabnsmile case. Due to this, Deloitte was also barred from submitting any proposal
as the reporting accountant for six months. This shows the lack of accountability of the audit
firm itself that somehow tarnish the whole picture of directors’ commitment on financial
reporting.
Failure of the audit committee and Internal Audit Function
In this case, it seems like the audit committee failed to serve the company well. As all of us
concern, the fight against fraud or mismanagement in corporations should be a team effort by all
parties, including directors of companies, Bursa Malaysia, the SC, the Malaysian Institute of
Certified Public Accountants and audit committee. They all play a role to ensure good corporate
governance is practised.
Audit committee should view these findings or reports as proof that the accounting standards and
audit practices are in place to detect corporate wrongdoings. They can have all the standards in
place, but in this case, we can assume that the tone at the top was negative and they failed to take
action on findings of audited reports, especially when there is something very wrong with the
company, then there was problems in this case, irregularity in revenue recognition that caused
inability to serve debt in long term.
In order to operate effectively, independent, vigilant, experienced, proactive, and willing to ask
challenging questions about the company's management. Similarly, non-executive directors
who sit on various committees in the company, including the audit committee, must be
51
independent of the management of the company and be willing to ask hard questions. Obviously,
none of any directors in the audit committee for NasionCom were acting as whistleblower! The
utilization of Section 99e should takes place here; whistle blowers' provision which allows
auditors to report to the SC on the conduct of companies without fear or favour some auditors
resorted to the provision. Otherwise, the audit committee is rendered an ineffective corporate
governance mechanism or a “toothless tiger.”
On the other hand, the existence of internal audit function also became a big matter here where
as NasionCom didn’t even have internal audit department in their company. According to the
Companies Act 1965, S. 167A requiring directors of public companies to have in place “a
system of internal control that will provide a reasonable assurance…..” . It makes us wonder why
Internal Audit Function was not in place for those 2 particular years. The role of internal auditors
had never been as challenging, especially in terms of financial control and financial reporting
and companies were now turning to internal auditors to help with governance concerns. We may
assumed that no auditors were invited to be in board meeting to explain their findings to show
that top management now values the audit committee's findings and suggestions when making
decisions on behalf of the company but none of Internal Audit function existed in the company.
References
1. Bursa Malaysia Securities Berhad (24 April 2007) New admission into GN3, available at
http://www.klse.com.my
2. Bursa Malaysia Securities Berhad (10th July 2007) Delay in submission of financial
statements, available at http://www.klse.com.my
3. Bursa Malaysia Securities Berhad (13th July 2007) Deferment of imposition of suspension
against NasionCom Holdings Berhad, available at http://www.klse.com.my
4. Bursa Malaysia Securities Berhad (16 July 2007) Imposition of suspension against
NasionCom Holdings Berhad, available at http://www.klse.com.my
5. Bursa Malaysia Securities Berhad (6th August 2007) New admission into Guidance Note
No. 3/2006, available at http://www.klse.com.my
52
6. Bursa Malaysia Securities Berhad (19th October 2007) Commencement of delisting

procedures against NasionCom Holdings Berhad for failure to submit financial
7. Bursa Malaysia Securities Berhad (18 December 2007) Commencement of delisting
procedures against NasionCom Holdings Berhad for failure to submit financial
8. Bursa Malaysia Securities Berhad (18th December 2007) (i) Public Reprimand on
Nasioncom Holdings Berhad ("Nscom" or "The Company"), Breach of Rules 9.22(1),
9.23(1) and 9.24 of Bursa Malaysia Securities Berhad's Listing Requirements for The
MESDAQ Market ("MMLR") and (ii) Public Reprimand and Fine on Directors of
Nscom, available at http://www.klse.com.my
9. Burrsa Malaysia Securities Berhad (21st Jan 2008) De-listing decision on NasionCom
Holdings Berhad, available at http://www.klse.com.my
10. Bursa Malaysia Securities Berhad (5th March 2008) NasionCom Holdings Berhad to be
delisted, available at http://www.klse.com.my
11. Bursa Malaysia Securities Berhad (25th March 2008) NasionCom Holdings Berhad's
appeal disallowed, available at http://www.klse.com.my
12. Bursa Malaysia Securities Berhad (3rd April 2008) Deferrnent of the removal of
NasionCom Holdings Berhad, available at http://www.klse.com.my
13. Bursa Malaysia Securities Berhad (1 8th April 2008) GN3, Commencement of delisting
procedures against NasionCom Holdings Berhad, available at http://www.klse.com.my
14. Bursa Malaysia Securities Berhad (22nd May 2008) GN3: NasionCom Holdings Berhad
and Wimems Corporation Berhad to be de-listed, available at http://www.klse.com.my
15. Mahmood, W., Mansor, W. and Syed-Tazhili, S. N. (2008) What's Went Wrong With
MESDAQ Market. MPRA Paper No. 14603 available at
http://mpra.ub.unimuenchen.de/14603/
16. Minority Shareholders Watchdog Group (MSWG) (20 April 2007) MSWG Comments on
(1) Securities Commission (SC)'s Prosecution Against Two (2) Directors and Co-
Founders of GP Ocean Food Berhad for Submission of Misleading Information and (2)
NasionCom Challenges SC in Court and SC Likely To Fight NasionCom (NSTP,
53
Business Times on 19 and 20 April 2007 respectively), available at

http://www.mswg.org.my
54
4 NEW CASES DEVELOPED,

ADOPTING FROM THE 6 CASES OF
DIRECTORS AND COMPANY
NEW CASE I: LEKSH ZAUZA SDN BHD

The company secretary
55
Leksh Zauza Bhd initially incorporated as a private local company on 28 th March 1978.
The company converted to a public company on 13 January 1990. It engages in sporting goods
industry and delivering sports footwear, apparel and accessories. The company’s aim is to be a
global leader in the sporting goods industry and offers a broad portfolio of products. With the
authorised capital of RM 500,000.00 and issued shares is RM500,000.00 the company was
performing well.
History
The founder of this company is Leksh Canny John. In 1940 at the age of 20 Canny John made
his first shoe using the few materials available. His vision was to produce the most durable and
safest footwear for athletes in different sports. By 1966 he was making 30 different styles of
shoes for different sports and employed 100 workers. His products were successful in the market,
especially to the youth athlete since the shoes are stylish. In 1978 canny John formerly
registered his company as Leksh Zauza, which is the combination of his first name and his wife
whom Zauza Kelly. Cany John was an ambitious person and he wanted to expand his products
variety by producing not only shoes but also sport apparels and accessories. To expand his
business he needs more capital and then he decided converts his company to a public company
by remaining his and his wife position still as the director of the company. In the year of 1990 at
the age of 70 his company converted to public company and he and his wife retired from the
company after one year. The business was then took over by became the management. They are
Michel & Rockcy. They brought the company product mainly targeting younger athletes and the
response was good. Continuing with their momentum, in 2000 the company became of the top
athletic footwear, apparel and sports hardware producers in the Malaysia.
Vision
56
The vision of the company is to be the global leader in the sporting goods industry with sports
brands built on a passion for sports and sporting lifestyle.
Product and services

The company consists of the largest segment of product. They are sport shoes, sport apparels and
sport accessories. Among these three products the sports shoes perform well than others. They
distribute their products through outlets and retail stores. These days were the glories days of the
company.
Income Statement for the year ended 30 June 2008

2008 2007
(RM) (RM)
Revenue 1265,251 1131,882

Depreciation expense (4,747) (9,686)
Borrowing costs expense (16,097) (12,952)
Share based payments (8,822) (12,030)
Other expenses (425,711) (361,624)
Loss before income tax benefit (530,126) (564,410)

Income tax benefit 645,528 44,739
Net loss attributable to members 925,276 215,919
Balance Sheet as at 30 June 2009

2009 2009
(RM) (RM)
CURRENT ASSETS
57
Cash and cash equivalents 408,340 1,079,772

Trade and other receivables 16,297 352,782
Inventories - 201,698
Other 23,133 61,088
TOTAL CURRENT ASSETS 447,770 1,695,340
NON-CURRENT ASSETS
Other financial assets -
Property, plant and equipment 2,129,378 2,324,129
TOTAL NON-CURRENT ASSETS 2,129,378 2,564,129
TOTAL ASSETS 2,577,148 4,259,469
CURRENT LIABILITIES 409,095 521,144
Trade and other payables 119,044 324,558
Borrowings 290,051 196,586
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings - 272,587
TOTAL NON-CURRENT LIABILITIES - 272,587
TOTAL LIABILITIES 409,095 793,731
NET ASSETS 2,168,053 3,465,738
EQUITY
Issued capital 13,068,445 12,568,489
Accumulated losses (11,811,594) (9,891,923)
TOTAL EQUITY 2,168,053 3,465,738
Organizational structure
Name of officer Position
Dato Michael Vincent CEO
Rockey Jai Managing Director
Mr. Ajay Johnson BOD
Mdm. Alicia Yu
Mr. Kumar a/l Karu
En. Akmal Bin Ali
Encik Ahmad Tajuddin Bin Abdul Carrim Independent Non-Executive Director
Anderson Kelly Board Executive Committee
58
Ms Vimala Menon Board Audit Committee

Encik Oh Kim Sun
Dato’ Mohd Nadzmi Bin Mohd Salleh Board Nomination &
Encik Md Ali Bin Md Dewal Remuneration Committee
Ms jenniefer Company secretary
Jeng & Ji asc. Auditor & consultant
Shareholders
More investors would like to invest in this company looking at their growing in the sports good
industry. Other than that the investors also interested in their financial statement with high
revenues and also profit. More and more people keep on buying their share because they
confident with the company’s corporate performance statement. In the year 2009 the total
shareholder of this company is 20.
The company secretary

Jenifer was an accounting student as an undergrad at University Putra Malaysia, Serdang. Her
ambition is to become a successful accountant and also to own her own business in accounting
services. She later became the member of Malaysian Institute of Accountant(MIA) to start her
carrier as a company secretary. Her company licence number is MIA001245.
Jenifer joins Leksh Zauza Sdn Bhd in the year 2007 replacing the previous company secretary
Abraham. Her service to the company almost two years and she was performing well and gain
the trust of the management. At the same time she also engages herself in the business of her
close friend whom is also undergrad student in Business Administration. Her friend namely Tina
started business of providing business clerical related works with the modal she got from their
parents. Tina than requested Jenifer to join the business as one of the director as she is her close
friend. Jenifer except the offer and became one of the director of the business. The business than
incorporated as a local private company with the company name Tina Sdn Bhd on 28 November
2008.
Even though Jenifer is one of the director in Tina Sdn Bhd, she very seldom involve in that
business progress and decisions. Almost every decision and move of the company is by Tina.
59
This is because Jenifer doesn’t have any knowledge on that business and she trust her close
friend Tina on the business conduct. Tina & jenifer applied personal loans in bank to cover the
maintenance of the company. But what happen was the company did not perform well and
everytime Tina faces problem , the action or decision she took never favour her or the company.
This is all just because lack of experience in the business environment since she is a fresh
graduate. Finally the company end up being in bankruptcy. Both faced so many loses after that.
They try their best to payback all the bank debts. But they couldn’t effort to cover that much
money as they already try to ask their friends and relatives. Then Tina & Jenifer has been
charged as an undischarged bankrupt since they did not able to pay back the money on 12
October 2009.
Jenifer was very frustrated because the of loses she faces, since she is from a moderate income
family. The only source of money for her to depend now is the job as a company secretary at
Leksh Zauza Berhad. She decided to keep herself quiet about what happen to her and keep on
performing her job as a company secretary in Leksh Zauza Bhd. Somehow majority shareholder
of the company, Mr.Vinod Krish got to know that she is an undischarged bankrupt. Mr. Vinod
Krish found out this through his continues monitoring on the company since he is the majority
shareholder and have huge interest on the company. When Mr. Vinod Krish called and ask
Jenifer about this she declined it because she dun wan lose her job. But the shareholder input this
info to the company directors Mr. Ajay Johnson and Mdm. Alicia Yu requested them to collect
evidence and investigate on her.
These directors did not take any action immediately. They hold the issue since they were busy
with their report for year annual report 2009. Jenifer has close relationship with the directors and
from that she got know about the complaint on her. She began to fear of the investigation and its
feedback. Before she faces any problem and unwanted things she plans to leave the Leksh Zauza
Bhd. silently.
She immediately applies for a one month leave with a reason she is going for outstation for a
long vacation. The leave was approved and she left the company with taking with her necessary
60
things. Then she applies to vacant the office through form 48E to the registrar without the
knowledge of Leksh Zauza Bhd.
The management of Leksh Zauza knows nothing with what happen until after one month Jenifer
still not present at the company. They try to contact the company secretary and no response from
her. Since it is time for call for AGM, the management became more worry. The management
when cannot trace her through the phone and also at her residential address became more panic.
Then they requested one of the management staff to handle all the AGM works such as passing
the notices and so on.
At the meeting than, Mr.Vinod Krish the shareholder whom reported on Jenifer ask for the
feedback and then only Board of directors remember about the issue. Then they suspect that she
actually left the company. Mr.Vinod Krish became very disappointed because the BOD did not
take an immediate action on his complains. It became a huge ‘hawakc’ in the meeting that day
among the members and management.
The shareholders than felt that those directors involve as an irresponsible person and they
decided to remove the directors from the board. With the majority vote the shareholders than
removed the both directors Mr. Ajay Johnson and Mdm. Alicia Yu in the AGM 2009.
Other than that the company also charged by the Registrar under section 139 (1B) of the
Companies Act 1965 where the office of a company secretary left vacant for more than one
month.
Consequences of this entire incident Mr.Vinod Krish, the majority shareholder of Leksh Zauza
Bhd pull back all his shares because he lost confidence on the management. Referring this more
shareholder of the company pull back their share as well. This issue than became hot topic in
among the investors in the market.
Finally Leksh Zauza face so many financial problems because no investors volunteer to invest in
the company. After so much of effort bring back the brand name in the market and yet they
failed. The decided sell the company to other one of leading company in sports good industry
61
which is Lekshmi Win bhd. Lekshmi Win acquired the company with the branding on 28 March
in year 2010.
Leksh Zauza Bhd with the money they received manages to pay their creditor and settle the other
payments almost.
NEW CASE II
The Duties of Directors
Introduction
Telcast is a telecommunications company which was established by Aqilah and Badrul.

Telcast attempted to create a youth-oriented image to sell their mobile phones and Tel.Net
internet services, with a slogan “You’ll tell your friends about Telcast”, to draw the connection
between the brand and personal communication.
Teclcast was listed on the Bursa Malaysia not long after it was founded in 1995 to 2001.
It went into voluntary administration on 29 th May 2001 and into liquidation, upon a decision
made by creditors in the administration on 24th July 2001. It began business in May 1995 with a
total initial issued capital of approximately RM5 million. The ownership structure of the
company was: Camelia 28.5%; Daniel 18%; Emelia 5%; Aqilah and Badrul Investment 50%
(approximately). Aqilah and Badrul Investment was owned by Aqilah and Badrul.
62
The original thought process began with a simple initiative: they wanted to start a new
telephone company, one that the average person would understand. The company was very
people focused and focused on the residential market, as opposed to corporate business. They
wanted the consumer or everyday person in the street, to have access to the entire suite of
telephony products, which is why the company was marketed with the catch phrase “100%
telephone Company”. Telcast had three core product offerings: fixed wire long distance, Internet
service provision and mobile telephony.
Its business expanded greatly and included operations in the United Kingdom and several
other countries; it came to have 2.4 million customers world-wide including 500,000 in the
United Kingdom. A huge expansion of activities and liabilities was involved in constructing the
network, including contracts committing expenditure of more than RM1.1 billion with lucent
Technologies. The Group associated with Telcast employed 3000 persons throughout the world
and had many subsidiaries. In 1999, News Ltd and Publishing and Broadcasting Ltd made
investment around RM1 billion in Telcast.
Telcast experienced huge trading losses and reductions in net realizable value in 2001 up
to 29th May 2001. During this period, Telcast incurred net trading loss of at least RM92 million.
In these months, the liquidity position of Telcast worsened by very large amounts; from a
deficiency of RM24.5 million on February 2001 to a deficiency of RM98.7 million on 29 May
2001. The deficiency in liquidity precipitated the failure of Telcast’s business. Facts were
established on the deterioration which occurred in the financial position and performance of
Telcast from 1 January 2001 onwards. By 28 February 2001, Telcast actually requires a cash
injection at least RM270 million to continue its existing operations and meet current and
reasonably foreseeable liabilities, and the requirement for cash injection was at least RM287
million by 31 March 2001. Telcast would also incur additional indebtedness to Lucent
Technologies of approximately RM365 million for capital works relating to the construction of
the network.
Telcast Collapse
63
The company was specifically geared to making money through stockmarket speculation.
Reports indicated the bonuses paid to Aqilah and Badrul were specifically tied to the rise of the
company’s share rather than profit or any other indicator of the overall viability of the company.
Telcast’s rapid expansion was way beyond its financial capacity coupled with its
misguided management decision. The company’s high risk, low yield strategy, with generous
incentives for new customers could not be sustained in the small market which had three major
mobile phone providers. The fatal flaw in the business model of the company was that the
telecom services were offered to subscribers at lower than the price the company was paying for
them itself. It could only survive as long as it could raise new capital investment more rapidly
than it was burning money.
PERIOD PROFIT/LOSS
Year to June 1999 9.9m profit*
Year to June 2000 295.9m loss**
Half-year to Dec. 2000 132.0m loss**
The first public indication that the company was in trouble was the resignation of Aqilah
and Badrul. An investigation is initiated into company’s books and promised a RM132 million
cash injection aimed at reassuring the markets. However, the investigation found that the
company needed at least RM400 million to remain viable, and the offer was withdrawn.
The thread leading to the collapse of Telcast including: inappropriate management

compensation; creative accounting; failure of directors and managers to exercise due diligence;
lack of adequate regulation; and lack of independence in audit function
Aqilah and Badrul – Founder & Joint Managing Director

Aqilah and Badrul used their marketing skills and unwavering positive public statements to
promote the company and made assurance that Telcast would have RM103 million at June 30.
Badrul did not understand the true position of Telcast; he wholly misunderstood the facts
64
Telcast’s financial position and performance. Aqilah, particularly, was misleading the market
and shareholders by saying that the company is having big cash surpluses and heading to profits;
and the company was on target to meet its subscriber numbers and gross profit projections.
Through the last quarter of 2001, Aqilah gave the board and directors Johan and Laila
repeated upbeat assurances that the company’s cash position and profitability is improving
Aqilah and Badrul were very much running the show at Telcast, and they presented the accounts
to Ghaddafi as they wanted him to see, large sum of money were being moved around the group
between the subsidiaries to disguise the true situation.
In financial year ended 30 June 2000 Telcast reported loss of RM291 million. The share
price plummeted to below RM1. Despite the loss, Aqilah and Badrul each received a RM560,000
basic salary and a RM6.9 million bonus.
Maizura – Finance Director

She did not exercise powers with respect to the company with due care and diligence;
allegingly misled the board as to Telcast’s true financial position. Telcast’s accounts was kept by
juggling the creditors, deferring payments of million dollars repatriating money from overseas
subsidiaries.
Jamsari – Chief Financial Officer

He fails to exercise his judgement with duty of care of an expert being a Chartered Accountant,
with extensive background in finance function of public company and as chief financial officer at
Telcast. As a Chartered Accountant, he should be able to properly assess Telcast’s financial
performance and spot the discrepancies in the books thus alerted the board.
Radziah – Company Director

She dumps Telcast’s stock in the tumbling market. She is known to have sold off 6 million
Telcast shares raising RM2.2m after directors meeting on May 17
65
Johan and Laila – Board Directors

They are responsible for approving the bonus deals and pumping in hundreds of millions that
triggered these very bonus payments which then helped destroy confidence in the company. As
board director, they did not exercise their rights looking after the Telcast as they attended to the
major parts of their multi billion empires. They should not have sat on the board when there is no
way in the world they had the time to keep an eye on Aqilah and Badrul and hold them
accountable.
Analysis
The directors of a company are responsible for the management of the company’s
business. Management encompasses not only the day-to-day running of the company’s
operations but also the development an implementation of a long-term strategy; ensuring proper
balance between the interest of various stakeholders; ensuring any activity concerning the
company is carried out in the interest of the company. Directors, individually and as a board,
bear the primary duty to carry out the corporate governance policies of the company.
Below is the summary of the responsibilities of the board:

1. Lay solid foundations for management and oversight, including its control and
accountability system;
2. Structure the board to add value by ratifying, appointing and removing the chief
executive officer (or equivalent), and the company secretary;
3. Promote ethical and responsible decision-making, input into and final approval of
management’s development of corporate strategy and performance objectives;
4. Safeguard integrity in financial reporting, reviewing and ratifying system of risk
management and internal compliance and control, code of conduct and legal compliance;
5. Make timely and balanced disclosure;
66
6. Respect the rights of shareholders;

7. Recognize and manage risk, approving and monitoring the progress of major capital
expenditure, capital management, acquisitions and divestitures, and approving and
monitoring financial and other reporting;
8. Encourage and enhanced performance, monitoring senior management’s performance
and implementation of strategy, and ensuring appropriate resources are available; and
9. Remunerate fairly and responsibly
10. Recognize the Legitimate interest of stake holders Fiduciary Duties
Amran- Company Director

Amran failed to ensure Telcast make affordable expansion and loans and fails to ensure the
company has a proper system of controls and audits in its business to avoid defalcations by other
Officers and employees. Immediately after the directors meeting on May 17 2001, he sold off 6
million Telcast shares raising RM2.2 million. He did not care for the benefits of shareholders,
company and employees of Telcast. He is in for getting as much as he can before the company
collapse. None of the “Business Judgement” rule nor acting in good faith matters to him. By
selling his shares, he is using his position as a director in Telcast to gain advantage for himself
by using the information gained in the board’s meeting. He is using privileged information
gained at the board for trading in his own benefits and gains. It does not matter to him the
implications or consequences to the company by his act of dumping Telcast’s share.
Maizura – Finance Director

She fails to supervise Telcast’s finances adequately and failed to keep the board informed and
she might have fiddle with the accounts by simply juggling the creditors, deferring payments and
repatriating money from overseas subsidiaries. And this had mislead the board of the actual cash
flow of Telcast.
Jamsari – Chief Financial Officer
67
Jamsari relied on the financial information supplied to him by others, including the executing
directors. The financial information supplied to Jamsari was limited and inaccurate in material
respects. He fails to take reasonable steps to:
 promptly ensure that he and the board were aware of certain financial circumstances,
including cash balances and the aging of debtors, in January, February and March 2001;
 monitor the management of Telcast to properly assess the financial position and
performance and detect material adverse developments;
 ensure that all material information was available to the board, particularly concerning
the adequacy of cash reserves, and the actual financial position of various segments of the
business; and
 ensure that systems (billing and accounting system) were maintained and monitored
which resulted in accurate and financial information flowing from management to the
board.
Being a qualified Chartered Accountant and with his expertise he should not rely on the
information provided by others. He should take an active role in ensuring the accounts of the
company has been correctly reported and the accounting system is in place and alert to Maizura’s
act of keeping the accounts simply by juggling the creditors, deferring payments and repatriating
money from overseas subsidiaries.
Johan and Laila – Board Directors

Both, being otherwise engaged in their other more lucrative business empire. They did not
monitor the business and left the running of the business to both Aqilah, Badrul, and Maizura.
They did not know the true financial position of the company and make judgement according to
information or promises made by Aqilah. They further approved bonuses of RM6.9 million to
Aqilah and Badrul in financial year ended 30 June 2000 despite reporting a loss of RM291
million.
68
Aqilah and Badrul – Founder & Joint Managing Director

As joint managing director, both failed to mange their responsibilities including responsibility to
properly assess the financial position and performance of the group and detect and assess any
material adverse development; and taking reasonable steps in ensuring that the directors are fully
informed of all material financial information about the adequacy of cash reserves and Telcast
actual financial position and performance.
They did not take steps to either to apprise themselves of the financial situation and the
deterioration from about the end of January until about the end of April 2001, or to ensure that
the board was aware of them. They also made public statements about Telcast’s financial
position and performance which is entirely incorrect and no reasonable factual basis for them. It
is also their duty to notify Bursa Malaysia the actual circumstances of the company’s financial
position and performance, which they did not and thus did not comply with their duty. Failures to
ensure the establishment of proper system to produce accurate and reliable financial information,
failure to maintain cash reserves at a level which ensured liquidity and failure to employ an
appropriately qualified finance director. On top of that, the two help themselves to a lucrative
salary and bonuses.
Conclusion
All the directors has breached the corporate governance rule as a director of a company one way
or another. They failed to carry out their fiduciary duties by acting in their own interest which do
not include taking any active participation or interest in caring for the benefit of the company and
shareholders’ interest. They are not interested to investigate on the actual financial performance
and ensure the correct accounting reporting of Telcast’s accounts. They failed to employ their
expertise to the management of the company and failed to carry out the fiduciary duties as
company director: to act in bona fide in the best interest of the company; to exercise powers for
their proper purposes; to avoid conflicts of interests and to act with care, skill and diligence.
69
It is obvious that Aqilah and Badrul pursued their self interest or obsession in building
their own mobile network by expanding too fast and investing all the cash in Telcast without
having a thought for maintaining cash reserves at a level which ensured liquidity. They also did
not stop to apprise the accounting system used to control the payments and collections system.
When being queried, they presented a version of account which is incorrect to the public and
Bursa Malaysia. They did not act in good faith and honestly without fraud or collusion. They do
not care for the financial performance of the company instead plays on the share prices by giving
baseless statement and expanding the company to push up the share prices so that they can get
their director’s bonuses. As a director, they are expected to run a business aimed at making a
profit with calculated risk instead they keep expanding beyond Telcast’s financial capability.
They also help themselves to hefty bonuses when the company is at the eve of collapsing.
References
1. Company Secretarial Practice In Malaysia, Kang Shew Meng, Lexis Nexis ,Business
Solutions
2. Lipton & Herzberg’s Understanding Company Law In Malaysia by Krishnan Arjunan
and Low Chee Keong
3. Companies Act 1965
70
NEW CASE III

Financial Reporting Deficiencies
Company Background
When Abu and Ali founded the ABC Sendirian Berhad in Bangi in 1987 they probably never
expected that the company would be facing ethical and financial dilemmas more than ten years
later. Like many corporations, the firm has changed and faced many crises. It has acquired rival
companies, added totally new product lines, gone public, rebounded, restructured, relocated, and
hired and fired many CEOs, including "Amat"
Listed in the KLSE by 1994, ABC Berhad is a well-known and recognized designer,
manufacturer, and marketer of consumer products. ABC Berhad products are considered
household staple items and are known for their use in cooking, health care, and personal care.
During its hundred years of operation, ABC Berhad has grown and changed according to societal
needs. A few of the most recognized products ABC Berhad marketed included Health-O-Meter,
Powermate, and Campingaz.
Defaulters’s Background
71
In June 1996 Sunbeam had more than twelve thousand stock-keeping units (SKUs). SKUs are
individual variations of product lines; every different style or color of a product results in an item
having a different SKU. Sunbeam also had twelve thousand employees, as well as twenty-six
factories worldwide, sixty-one warehouses, and six headquarters. That was the situation when
Amat came into the picture.
Amat was known for his ability to restructure and turn around companies that were failing
financially. ABC Berhad needed help. Its earnings had been declining rapidly since December
1995, and by 1996 the shares was down 52 percent and earnings had declined by 83 percent.
Amat's reputation and business theory preceded him throughout the world. His operating
philosophy was to make extreme cuts in all areas of operations, including extensive layoffs, to
streamline business. Amat stressed that making money for shareholders is the most important
goal of any business.
In July 1996 Abu and Ali hired Amat as the CEO and chairman of the board for ABC Berhad.
By hiring Amat, Abu and Ali knew full well that his reputation and operating theory would mean
huge cuts in all areas of the company, as well as extensive layoffs. They believed, however, that
he was the one person who could turn the company around and increase stock prices and profits.
The increase in stock prices did occur, almost instantly. On July 19, 1996, the day Amat was
named chairman and CEO of ABC Berhad, the stock jumped 49 percent. The jump increased the
share price from 12% to 18%, adding RM500 million to ABC Berhad market value. The stock
continued to increase and reached a record high of RM52 per share in March 1998.
Amat’s reputation and his acceptance of the position at ABC Berhad caused the initial stock
increase. Dunlap realized, however, that his reputation alone would not hold the stock price up
and that he needed to start the process of turning Sunbeam around.
72
Method used by Amat to cut back to the lowest costs was to reduce the number of SKUs from
twelve thousand to fifteen hundred. When Dunlap took over at ABC Berhad, it had thirty-six
variations of styles and colors of a clothes iron. Variation, of course, allows differentiation,
which is an acceptable strategy in business. But having thirty-six variations of a consumer
product such as an iron can be viewed as unnecessary and costly. Eliminating variation and
duplication helps eliminate cannibalization. Companies need to differentiate themselves from the
competition in areas that are not easily duplicated, or they end competing on price alone. Dunlap
pursued service as the area to differentiate ABC Berhad from competitors in the appliance
business.
Eliminating ten thousand five hundred SKUs enabled Amat to rid the company of factories and
warehouses—another cost-saving method. The layoff of thousands of employees, coupled with
the reduction of SKUs, factories, and warehouses meant that fewer headquarter locations would
be needed. Thus the six headquarters located throughout the country were consolidated into one
facility in Kajang- Amat’s primary residence.
Once the cost-cutting strategies had been carried out, Amat began to practice his third rule: that
is, to focus on ABC Berhad's core business, which first needed to be defined. Dunlap and his
Dream Team for ABC Berhad defined the core business as electric appliances and appliance-
related businesses. Five categories surrounding the core business were identified as vital to ABC
Berhad's success: kitchen appliances, health and home, outdoor cooking, personal care and
comfort, and professional products. All products that did not fit into one of the five categories
were sold. The criterion Amat used to decide whether to keep or sell a product line was simple.
Since he believed firmly that consumers recalled the ABC Berhad brand name fondly, if the
product related to the ABC Berhad brand name, it was kept. Identifying ABC Berhad's core
business and paring down to it was the goal in implementing the third rule.
The final of Amat's four rules of business called for a real strategy. Dunlap and his team defined
ABC Berhad's strategy as driving the growth of the company through core business expansions
by further differentiating the products, moving into new geographic areas around the globe, and
73
introducing new products that were linked directly to emerging customer trends as lifestyles
evolved around the world. Amat made all these changes within seven months of taking up the
challenge to turn around ABC Berhad besides merged with Coleman, First Alert, and Signature
Brands. The stock rose to more than RM48 per share, a 284 percent increase since July 1996.
At the time, Amat's management philosophy seemed to underlie his success at ABC Berhad. He
streamlined the company and even attained what he considers the most important goal of any
business: he made money for the shareholders. In February 1998 the board of directors expressed
satisfaction with Amat's leadership and signed a three-year employment contract with him that
included 3.75 million shares of stock.
The Story Begins; Amat’s Accounting Practices Raise Questions
Dunlap accomplished what he had set out to do at ABC Berhad, but the shareholder wealth did
not last. ABC Berhad again faced rough times—and not because of excessive costs or lack of a
strategy. The three purchases that more than doubled ABC Berhad’s size and helped push the
price per share to RM52 are part of what caused the upheaval and restricting of ABC Berhad a
second time. Rumors began surfacing that these purchases had been made to disguise losses by
write-offs.
KLSE’s analyst Andrew Shore had been following ABC Berhad since the day Amat was hired.
Shore's job as an analyst was to make educated guesses about investing clients’ money in stocks.
Shore had been scrutinizing ABC Berhad's financial statements every quarter and considered the
reported levels of inventory for certain items to be high for the time of year. He noted massive
increased in sales of electric blankets in the third quarter, although they usually sell well in the
fourth quarter. He also found that sales of grills to be sold, and noted that accounts receivable
were high. On April 3, 1998, hours before ABC Berhad announced a first quarter loss of RM44.6
74
million, Shore downgraded the stock. By the end of the day ABC Berhad's stock prices had
fallen 25 percent.
Shore's findings were indeed cause for concern. Amat had been using a “bill-and-hold” strategy
with retailers, which boosted ABC Berhad’s revenue, at least on the balance sheet. The bill-and-
hold strategy entails selling products at large discounts to retailers and holding them in third-
party warehouses to be delivered at a later date. By booking sales month ahead of the actual
shipment or billing, ABC Berhad was able to report higher revenues in the form accounts
receivable which inflated its quarterly earnings. Basically, what the strategy did was to shift sales
from future quarters to the current one, and in 1997 the strategy helped Amat boost ABC
Berhad’s revenues by 18 percent.
The strategy Amat used is not illegal and follows the Malaysian Accounting Standards of
financial reporting. Nevertheless, ABC Berhad shareholders filed lawsuits, alleging that the
company had made misleading statements about its finances and delivered them so that they
would buy ABC Berhad’s artificially inflated stock. A class-action lawsuit was filed on April 23,
1998, naming both ABC Berhad and Amat as defendants. The lawsuit alleged that ABC Berhad
and Amat had violated the sl22B(a)(bb) Securities Industry Act 1983 (SIA) read together with
sl22 of the same Act and s364(2) of the Companies Act 1965 by misrepresenting and/or omitting
material information concerning the business operations, sales, and sales trends of the company.
The lawsuit also alleged that the motivation for artificially inflating the price of the common
stock was so that ABC Berhad could complete millions of dollars or debt financing so as to
complete the mergers with Coleman, First Alert, and Signature Brands. ABC Berhad's
subsequent reporting of earnings significantly below the original estimate caused a huge drop in
the stock. Acting on the financial irregularities in ABC Berhad, the Securities Commission has
charged Amat for 'making of false statements in ABC Berhad's financial report’. The following
are the charges by the SC towards Amat.
 under sl22B(a)(bb) Securities Industry Act 1983 (SIA) read together with sl22 of the
same Act, in his capacity as a director, is deemed to have submitted false information to
75
the SC contained in the 1997 Annual Report of ABC Berhad, in particular, its revenue
for the FYE 31 December 1997. This offence is punishable under sl22B of the SIA, which
carries a maximum fine of RM3 million or imprisonment not exceeding 10 years or both;
and
 under s364(2) of the Companies Act 1965 for authorising the making of false statements
in the documents of ABC Berhad which are required to be kept under s167(1) of the
Companies Act 1965. These false statements were used for the preparation of ABC
Berhad's Financial Statement for the FYE 31 December 1997. This offence is punishable
under s364(2) of the Companies Act 1965 which carries a maximum imprisonment of 10
years or RM250, OOO fine.
Amat’s Reputation Backfires

Amat called an impromptu board meeting on June 9, 1998, to address and rebut the reported
charges. A partner of ABC Berhad's outside auditors, Arthur Andersen LLP (limited liability
partnership), assured the board that the company's 1997 numbers were in compliance with
accounting standards and firmly stood by the firm's audit of ABC Berhad's books. Hashim, the
controller at ABC Berhad, was also present at the board meeting and did not counter the auditor's
statement. The meeting seemed to be going well until Amat was asked if the copy was going to
make the projected second-quarter earnings. His response that sales were soft was not what the
board expected to hear. Nor was his statement that he had document in his briefcase outlining a
settlement of his departure from ABC Berhad. The document was never reviewed. However,
Amat's behavior made other board members suspicious, which led to an in-depth review of
Dunlap's practices.
The review took place during the next four days in the form of personal phone calls and
interviews between the board members and select employees—without Amat's knowledge. A
personal conversation revealed that the 1998 second-quarter sales were considerably below
76
Amat's forecast and that the company was in crisis. Amat, had forecasted a small increase but the
numbers revealed by Fannin showed that Sunbeam could lost as much as RM60 million that
quarter. Outside the boardroom and away from Amat, the controller revealed that the company
had tried to do things in accordance with Malaysia Accounting Standards, but allegedly
everything had been pushed to the limit.
ABC Berhad Forward
There were legal ramifications regarding Amat's firing. Amat stated in an interview on July 9,
1998, that he intended to challenge ABC Berhad's efforts to deny him severance under his
contract. Amat claimed that his mission was aborted prematurely and that three days after
receiving the board of director's support, he was fired without being given a reason. On March
15,1999, Amat filed an arbitration claim against ABC Berhad to recover RM 5.5 million in
unpaid salary, RM 58,000 worth of accrued vacation, and RM 150,000 in benefits, as well as to
have his stock options reprised at RM 7 a share. Additionally, he sued the company for dragging
its feet in reimbursing him for more than RM 1.4 million in legal and accounting fees racked up
in defending himself in lawsuits that alleged securities fraud. Although the board made it clear
that they had no intention of paying Dunlap anymore money, a judge ruled in his favor in June
1999.
The bad news continued with the announcement by ABC Berhad on February 6, 1999, of its plan
to reorganize under PN-17 of the KLSE. The company expected no interruption in production or
77
distribution. Senior management committed to remain in place and lead ABC Berhad throughout
the delisting process and beyond.
PN-17 reorganization provides a legal framework that allows us to keep the business running
normally while we put their financial house in order.
NEW CASE IV
Aokam Perdana - Surviving the odds
Introduction
Much of the recent interest in the field of corporate governance has been driven by corporate
scandals in the Malaysia, involving firms such as Aokam Perdana, Idris Hydraulic, Omega
Securities, Ekran, and Renong. In what seems like a recent flurry of cases involving corporate
misdeeds, the fact remains that the Malaysia market is still perceived as one which lacks
enforcement against white collar crooks. The situation was even more worrisome in the past. In
the mid-1990s, before the 1997 financial crisis, Aokam Perdana Bhd, Idris Hydraulic (M) Bhd,
PWE Industries Bhd and Hwa Tai Industries Bhd were some of the more infamous companies
where share price manipulation was believed to have taken place.
Following that, the second board used to be rife with excessive speculation as share prices soared
to unimaginable levels. Repco Holdings Bhd was the most infamous of such cases. Its share
78
price prior to the Asian crisis in 1997 hit a high of RM140.50. The stock has since been delisted.
Biscuit maker Hwa Tai Industries Bhd’s share price had tipped over RM200 a share prior to the
1997 crisis. Hwa Tai closed on Thursday at 45.5 sen.
In 2005, the Fountain View Development Bhd case took centre stage and caused huge losses
among brokers. In 2006, there was Iris Corp Bhd, which saw its share price rocket from from a
paltry 12 sen to a bold peak of RM1.38 in five months. More recently, there were the cases of
Kenmark Industrial Co (M) Bhd, Linear Corp Bhd and Axis Inc Bhd, all emerging in the space
of several weeks and which have renewed concerns over corporate governance and shareholder
protection issues.
Company Profile
Aokam Perdana Bhd located at B-11-3, Megan Phileo Promenade, 189, Jalan Tun Razak, Kuala
Lumpur, Malaysia. Java Incorporated Berhad Formerly known as Aokam Perdana Berhad. The
Group's principal activities are harvesting, trading and manufacturing of timber products. Other
activities include oil palm plantation and investment holding. The Group operates solely in
Malaysia. Timber products accounted for 97% of fiscal 2006 gross revenues and Investment, 3%.
Aokam Perdana
In the early 1990s, Teh Soon Seng got investors’ hearts racing with his many corporate moves.
Apart from his own company, Aokam Perdana, and a majority stake in Golden Plus Holdings
Bhd, Teh snapped up small stakes in high-fliers like Idris Hydraulic and Granite Bhd. Investors
would jump into whatever stock Teh was purportedly in, and the stock would fly. That was the
power and charm of Teh. However, a negative analyst report brought the stock crashing down. In
April 1993, Phileo Peregrine Securities said Aokam Perdana’s share price of RM13.30 was
grossly overvalued.
79
It argued that since the key to Aokam Perdana’s future earnings was the Sagisan timber
concession in Sabah, the share valuation had to reflect that. The research house said valuing
Aokam Perdana on a price-earnings basis would overstate its true worth. As its assets were on a
depleting basis, the discounted cash flow method was the accurate way. It thus valued the shares
at RM4.06 on a fully diluted basis. The report caused panic among the funds. Aokam Perdana’s
share prices fell by RM3. Teh personally bought into the company until the share price
recovered. It touched a high of RM31.50 at the height of the subsequent bull run. But the
fluctuations in timber and plywood prices started to hurt Aokam Perdana’s bottomline. Its shares
started to fall from late 1994. The stock plunged to a low of RM6.15 on May 12, 1995.
Teh eventually sold Aokam Perdana and resigned as managing director on March 8, 1997, before
the Asian financial crisis erupted. He subsequently left Malaysia for good.
Teh was also suspected of being involved in the short-selling of Aokam Perdana shares. The SC
investigated him for “possible breach of securities law”. They interviewed him for two days in
Kuala Lumpur in 2003. Teh has maintained his innocence to this day.
Surviving the odds
Once hounded by the authorities for alleged market impropriety, former Aokam Perdana
Teh Soon Seng says his conscience is clear. Malaysian Business speaks to the one-time
corporate high-flyer in Shanghai, where he is now based.
Teh Soon Seng is a survivor. His shrewdness and tenacity in taking on adversity have been
demonstrated many times before. First was in the early 90s when his company, Aokam Perdana
Bhd, suffered a run on its stock following a damaging analyst report. Phileo Peregrine Securities
had, in April 1993, claimed that Aokam's market price of RM13.30 was grossly overvalued. It
said that since the key to Aokam's future earnings was the Sagisan timber concession in Sabah,
Aokam's share valuation had to reflect that.
80
The research house argued that valuing Aokam on a price-earnings basis would overstate its true
worth and that since its assets were depleting ones, a discounted cash flow method was the only
correct way. It thus valued Aokam shares at RM4.06 on a fully diluted basis.
Phileo's report caused near panic-selling among fund managers. Aokam's share prices fell by
RM3. And what did Teh do? He personally bought into the company until the share price
recovered. It touched a high of RM31.50 at the height of the subsequent 1993 market bull run.
In 1994, Aokam's shares were hit again. Teh was in Europe in late May promoting Aokam's
euroconvertible bonds to finance the company's expansion into China when the Kuala Lumpur
stock market crashed. Aokam's stock plunged by over 20% to RM15.
To add to the problem, there was virulent market rumor that Teh's Bumiputera partner, Datuk
Samsudin Abu Hassan, was in financial trouble and had been arrested while he himself was
under house arrest. Teh managed the issue by arranging a meeting with the fund managers,
where he clarified the issue and denied the allegations. The move somehow prevented the fund-
raising exercise from being derailed. Aokam raised US$135 million. The tycoon's successful
foray into China is another testimony of his ability to survive. When he first ventured into
property development in Shanghai in late 1994, he was faced with the daunting task of making
his billion-ringgit investment work.
Doing business in China was not easy as many a Malaysian investor would readily testify. 'It is
still difficult now because we are trained in the open market system,' he says, while China is a
command economy whose workings have stumped even experienced investors. But despite the
difficulties and intricacies of doing business in the country, Teh has successfully developed
several large property projects there. His first, the RM1 billion Huang Du Garden in Shanghai,
saw its ground-breaking ceremony in September 1994 officiated by the then Malaysian Deputy
Prime Minister, Datuk Seri Anwar Ibrahim.
His latest project is the 400,000-sq meter The Royal Garden in Shanghai, which is being
undertaken by his company Yanfull (Shanghai) Co Ltd, a wholly owned subsidiary of Golden
Plus Holdings Bhd. Located in Minghang District, the property is the epitome of modern living
with luxury homes, penthouses and split-level townhouses, apart from schools, shops, restaurants
81
and recreational facilities. 'We can put our house design anywhere … in London, Tokyo and
New York and it will sell,' he claims with a grin. 'You must feel good about your products. It's
embarrassing if people tell you that your design is ugly.' The Royal Garden is divided into three
phases with an expected gross development value of about RM2.1 billion. Launched in 2000, the
project will be completed in 2014. But with the slowdown in the global economy, Teh has started
calculating his next move. 'With the way the economy is going today, maybe I will be less of a
developer,' he says.
He wants to get more into design and, surprisingly, music. As it is, Teh is already spending a lot
of his time working on the interior and exterior design of his property projects - a passion he
started developing fairly recently. He employs world-renowned designers such as Piero Lissoni,
Patricia Urquiola, Carlo Columbo and Mauro Lipparini.
'I spend more time designing and thinking about what the next generational hotel should be like.
What the next generational housing and mall should be like … this is something I enjoy doing
now,' he says. 'I also believe in minimalism.' Teh utilizes the minimalist concept in his property
project. The design follows an understated approach in providing maximum comfort and
convenience without excessive design and clutter.
As for music, he has partnered some of the top music companies in Shanghai to organize
concerts, including the mega concert of Taiwanese-American pop idol Wang Lee Hom at
Shanghai Stadium on Oct 18 last year. He also operates a discotheque in Shanghai where he
occasionally spends his time 'listening to the music' as well as to entertain business friends and
partners. The entertainment business is not exactly new to him as he and his brothers ran a
discotheque in Singapore in the 80s.
Teh shuttles regularly between London, Hong Kong and Shanghai. His teenage daughter studies
in England while his wife lives in Hong Kong. 'My daughter is in university. When I am in
Shanghai, it's half a holiday for me. I shuttle between London, Shanghai and Hong Kong and
have homes in these places.'The former Sabah timber tycoon, once dubbed the 'timber maverick
wunderkind', says he is no longer interested in building a business empire or doing mergers and
82
acquisitions. 'People go through different phases. I am nearly 50 now … those things are not in
my playbook anymore,' he says.
In fact, people who used to know him as a seasoned corporate player in Malaysia in the 90s may
not be able to instantly recognize him now. He has traded his suits for casual jeans and tees, and
keeps his hair long but well groomed. In the early 90s, Teh was the corporate darling of the
Malaysian stock market. Aokam was by then a high-flying timber company on the Kuala
Lumpur Stock Exchange (now Bursa Malaysia). The hardnosed businessman had parlayed the
loss-making tin mining company in 1991 into a RM2-billion giant. He also snapped up small
stakes in high-fliers like Idris Hydraulics Bhd, Granite Bhd and a majority stake in Golden Plus
Bhd. Such was his mystique that the share prices of the companies surged on news that he had
entered the fray. Investors had thought that he could perform the miracle for those counters that
he did for Aokam - doubling profits almost every year. But the fluctuations in timber and
plywood prices started to hurt Aokam's bottom line. Its shares started to fall from late 1994. Teh
had to eat humble pie when the stock plunged to a low of RM6.15 on May 12, 1995.
'We cannot push the responsibility to the weather or prices. All we have got to blame is
ourselves. Ultimately, we are the ones running the company and I have to take full
responsibility,' he was quoted as saying then. Teh was suspected of being involved in short-
selling Aokam's shares. The Securities Commission (SC) subsequently investigated him for
'possible breach of securities law'. They interviewed Teh for two days in Kuala Lumpur in 2003.
Teh has maintained his innocence to this day. 'I did not do anything wrong … my conscience is
clear,' he tells Malaysian Business in Shanghai. The SC confirms this. In a written reply to
Malaysian Business, it says: 'The SC had previously conducted an investigation involving Teh
Soon Seng for possible breach of the securities law. However, the investigation revealed no
evidence for action to be taken against him.'
Teh eventually sold Aokam and resigned as its managing director on March 8, 1997 before the
Asian Financial Crisis became full blown. He subsequently left Malaysia for good. Nine months
later, it was reported that the Malaysian police were seeking his help in connection with the
alleged theft of logs and misappropriation of funds of about RM55 million belonging to Aokam.
83
In 1998, Aokam declared it was insolvent and could not pay some RM33.3 million in debts. But
Teh has left those bitter episodes behind him. He has moved on with his new life outside
Malaysia. He has also uprooted his family, including his parents and brothers, from Sabah to
Shanghai and says he has no intention of returning to Malaysia.
He is happy with his life and with his new-found passion for design and music. But knowing his
insatiable appetite for success, he is still capable of pulling more surprises. 'I may be going into
film production in Hong Kong soon … I have not told anyone yet,' he says. So don't be surprised
if his films hit your TV screen in the not-too-distant future.
Teh Soon Seng Holds a Direct Stake of 650,000 Shares in Property Company Golden Plus
Holdings Bhd (GPlus). While that forms only 0.44% of GPlus' share capital, it is believed that he
has a significant influence over the company through his nominees. Teh held 26.6% of GPlus in
2004 but pared down his holdings as he increasingly focused on his business activities in
Shanghai.
The tycoon first bought into GPlus in December 1993 when he acquired an 18.1% stake from
Grand Care Sdn Bhd, making him the single-largest shareholder then. He was appointed as
managing director in August 1994 but later resigned. He is now the chairman of Yanfull
(Shanghai) Co Ltd, the developer of the RM2.1 billion The Royal Garden property project in the
Chinese city. Yanfull is a wholly owned company of GPlus. GPlus has had a difficult year in
2008 when its major shareholders engaged in a bitter boardroom tussle. The company also failed
to submit its annual audited accounts for its 2007 financial year (FY) ended Dec 31, resulting in
the suspension of the counter on Aug 1, 2008. The suspension was lifted on Sept 9, 2008 after
the company submitted the accounts and quarterly report for first-quarter FY08. At the time of
writing, GPlus shares were trading at RM0.77 each.
84

Compiled CS Report - Final

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Compiled CS Report - Final

Uploaded by

Copyright:

Available Formats

GSM 5119- CORPORATE SECRETARYSHIP

GSM 5119: CORPORATE

LECTURER :PROF. DR. ZUBAIDAH ZAINAL ABIDIN

MOHD FIRDAUS BIN ZAKARIA GM03806

NORHAZWANI HANIS BINTI ISMAIL GM03845

LEKSHMI GUNASEKARAN GM03661

HAMIZAN WASOH GM03838

TABLE OF CONTENTS PAGE

PART 1: 6 CASES OF DIRECTORS AND COMPANY 5-56

+ CASE I: ANNUAL GENERAL MEETING

PART 2: 4 NEW CASES DEVELOPED, ADOPTED FROM 56 -86

COMPANY SECRETARIES MISCONDUCT

+ CASE I: LEKSH ZAUZA SDN BHD

CASE I: ANNUAL GENERAL MEETING

COMPANIES ACT 1965: SSM’S PRACTICE NOTE NO 1/2008

3. Part II of the Eighth Schedule requires the following attachments:

ii. a copy of the auditor’s report.

Conclusion and recommendation

CCM views the conduct of undischarged bankrupts acting as company directors as a

An undischarged bankrupt prohibited from being appointed or act as a director in a

Malaysian Development of Insolvency (MdI) is a premier government agency leading the

The Department of Insolvency performs the following functions:

Conclusion and recommendation

CASE III: REMOVAL OF DIRECTORS IN PUBLIC COMPANY

Indian Corridor Sdn Bhd & Pembangunan Qualicare Sdn Bhd

Golden Plus Holdings Berhad

Below are the facts of the company:

iii. Major Shareholders :

b. Employees Provident Fund 14.4%

Indian Corridor and Pembangunan Qualicare, relevant shareholders of GPlus

The appeal is allowed based on the reasons as follows:

i. EGM under Section 145

iii. Notice of resolution need not contain grounds of removal

Conclusion and Recommendations

CASE IV: REQUISITION FOR A MEETING

HLB Nominees (Tempatan) Sdn Bhd

The directors of the company are:

There are two main issues in this case study:

Conclusion and Recommendations

CASE V: INTERPRETATION, RESTRICTIONS ON APPOINTMENT OR

Study and Analysis

Directors’ and Officers’ (D&O) Liability

Overall, there is a gradual increase in the emphasis on directors’ accountability

Malaysian Companies Act 1965 (“CA”)

(a) He does any prohibited act under the CA;

Section 67 of the CA – Prohibition in giving Financial Assistance

(b) In any way purchase or deal in its own shares; or

This act is applies to Directors and Officers as defined in the CA.

Conclusion and Recommendations

CASE VI: NASIONCOM HOLDINGS BERHAD:

NasionCom Holdings Berhad (NasionCom) is an ambitious and fast growing Malaysian

Table 1: directors’ shareholdings in nasionCom as at 18 May 2006

Dato’ Seri Mohamad Noor bin

Shamsul Khalid bin Ismail 1,200,000 31,626,666 0.15 3.95

Peter Tham 1,200,000 - 0.15 -

Tan Sri Dato’ Hj. Hanafiah bin Hj

Table 2: Characteristics of Audit Committee

Total Number of members 4 (1 resigned on 14.12.05)

Number of Independent/Non Executive 3 (1 resigned on 14.12.05)

Number of Non Independent / executive 1

2 (each is Independent Non Executive and

Some details on activities undertaken

Table 3: Audit Function

Excellent Financial Performance