JERASIA

0.005

(%)

BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS AND/OR FINES JERASIA CAPITAL BERHAD AND 8 DIRECTORS

JERASIA CAPITAL BERHAD

Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded Jerasia Capital Berhad (JERASIA) and 8 of its directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR).  In addition, the 8 directors of JERASIA were imposed total fines of RM600,000.

 

JERASIA was publicly reprimanded for breaches of the following provisions of the Main LR:-

 

1. Disclosure Breach – Defaults in Payment

 

Paragraphs 9.19A(1)(a) & (b) of the Main LR for failing to make an immediate announcement of the defaults in payment of various credit facilities by the company’s wholly owned subsidiaries, Jerasia Fashion Sdn. Bhd. (JFSB), Jerasia Apparel Sdn. Bhd. (JASB) and Canteran Apparel Sdn. Bhd. (CASB) as set out in Table 2 below (Defaults in Payment).

 

2. Misstatement Breach

Paragraph 9.35A(1)(a) of the Main LR for failing to ensure that the company’s announcements dated 23 August 2021 and 26 November 2021 (Announcements) on the dates of the Defaults in Payment to the various lenders were accurate.

 

3. Disclosure Breach – Material Litigations & Winding-Up Petition

  • Paragraph 9.03(1) read together with paragraph 9.04(f) of the Main LR for failing to make an immediate announcement of the writ of summons (Writ) and statement of claim (SOC) filed by the lenders against the subsidiaries of JERASIA and/or JERASIA (Litigations) and the summary judgments obtained by AmBank (M) Berhad (AmBank) and Alliance Bank Malaysia Berhad (Judgments); and
  • Paragraph 9.19(19)(a)(i) of the Main LR for failing to make an immediate announcement of the winding-up petition dated 21 July 2021 filed by AmBank against JFSB (Winding-Up Petition).

All the 8 directors f JERASIA at the material time had breached paragraph 16.13(b) of the Main LR for permitting the company to commit the breaches as follows and were imposed the following penalties:-

 

Table 1

No. Directors Breach Penalties
1.

Datuk Phang Ah Tong

Independent Non-Executive Chairman

(retired on 26 April 2022)

Disclosure Breach –Defaults in Payment

Public reprimand and fine of RM50,000

Disclosure Breach –Winding-Up Petition
2. 

Datuk Yap Fung Kong

Executive Deputy Chairman

(resigned on 24 March 2022)

Disclosure Breach –Defaults in Payment

Public reprimand and fine of RM100,000

Disclosure Breach –Material Litigations & Winding-Up Petition
3.

Pronob Kumar Sen Gupta

Group Managing Director

Disclosure Breach –Defaults in Payment

Public reprimand and fine of RM150,000

Misstatement Breach
Disclosure Breach – Material Litigations & Winding-Up Petition
4.

Debbie Yap May Se

Executive Director

(resigned on 24 March 2022)

Disclosure Breach –Defaults in Payment

Public reprimand and fine of RM100,000

Disclosure Breach –Material Litigations & Winding-Up Petition
5.

Dato’ Dr. Yong Yuan Tan

Non-Independent Non-Executive Director

Disclosure Breach –Defaults in Payment

Public reprimand and fine of RM50,000

Disclosure Breach –Winding-Up Petition
6.

Andrew Hong Tat Beng

Independent Non-Executive Director

Audit Committee member

Disclosure Breach -Defaults in Payment

Public reprimand and fine of RM50,000

Disclosure Breach –Winding-Up Petition
7.

Arnold Kwan Poon Keong

Independent Non-Executive Director

Audit Committee Chairman 
Disclosure Breach -Defaults in Payment

Public reprimand and fine of RM50,000

Disclosure Breach –Winding-Up Petition
8.

Rajaretnam Soloman Daniel

Independent Non-Executive Director

Audit Committee member

Disclosure Breach -Defaults in Payment

Public reprimand and fine of RM50,000

Disclosure Breach –Winding-Up Petition

 

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

 

Bursa Malaysia Securities views the contraventions seriously as the requirements to make an immediate and accurate announcement of material default in payment of credit facilities, litigations and winding-up petitions are fundamental to enable investors to make informed investment decisions concerning the listed issuer’s financial condition.  In addition, the numerous delays in making an immediate announcement on the Defaults in Payment and Litigations displayed blatant disregard of the Main LR and reflected poor governance of the company.

 

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

 

BACKGROUND

 

Based on the company’s announcements and the letters of demand (LOD) from the lenders/lenders’ solicitors, there were clearly material defaults in payment of various credit facilities by JFSB, JASB and CASB as early as 25 October 2020 as set out in Table 2 below:-

 

Table 2

No.

 

Lender

 

 

 

Subsidiaries

 

 

Am ount outstanding/in arrears/overdue based on the LOD

(A)

 

% of (A) over JERASIA’s Net Assets (NA)

Date of Announcement

Length of Delay (approx.)

 

  1.

 

 

AmBank

JASB

RM13,253,039.38

 (as at 25 October 2020)

        37.7%

 

  23 August 2021

 

10 months

(from 25 October 2020)

JFSB

RM22,828,966.44

(as at 25 October 2020)

TOTAL:

RM36,082,005.82

   2.

Alliance Bank Malaysia Berhad (Alliance Bank)

JASB

RM369,085.06

(as at 12 January 2021)

        0.87%

 

6 months, 2 weeks

(from 12 January 2021)

JFSB

 

RM369,085.45

(as at 12 January 2021)

 

TOTAL:

RM738,170.51

   

 

   3.

 

 

 

RHB Bank Berhad (RHB Bank)

JFSB

 

RM1,086,719.15

(as at 4 August 2021)

        5.1%

 

2 weeks

(from 4 August 2021)

RM1,017,000

(as at 4 August 2021)

TOTAL:

RM2,103,719.15

   4. 

Bank of China (Malaysia) Berhad (BOC)

 

CASB

 

RM1,213,815.17

(as at 18 May 2021)

        2 .7%

 

 

  26 November     2021

6 months

(from 18 May 2021)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

However, JERASIA had only announced –

  • the Defaults in Payment to AmBank, Alliance Bank and RHB Bank on 23 August 2021, after receiving the Winding-Up Petition on 6 August 2021; and
  • the Default in Payment to BOC on 26 November 2021, after receiving BOC’s Writ and SOC on 23 November 2021.

JERASIA had also failed to make an immediate announcement of the Litigations, Judgments and Winding-Up Petition as set out in Table 3 below:-

 

Table 3

Plaintiff

 

Defendant

 

Date of Writ and SOC/ Judgment/Winding-Up Petition

Date of receipt

Amount claimed

Date of announcement (length of delay)

AmBank

JFSB

 

24 December 2020

(Writ and SOC)

29 December 2020

 

 

RM26,045,300

(as at 15 December 2020)

 

-

 

6 April 2021

(Summary Judgment)

 

6 April 2021

21 July 2021

(Winding-Up Petition)

6 August 2021

23 August 2021

(10 market days delay)

 

JASB

24 December 2020

(Writ and SOC)

 

29 December 2020

RM20,717,797.80

(as at 15 December 2020)

-

 

18 June 2021

(Summary Judgment)

 

21 June 2021

Alliance Bank

JFSB & JERASIA (as guarantor)

 

10 March 2021

(Writ and SOC)

 

17 March 2021

RM1,023,911.16

(as at 1 February 2021)

 

-

 

4 August 2021

(Summary Judgment)

 

5 August 2021

JASB & JERASIA (as guarantor)

 

10 March 2021

(Writ and SOC)

 

17 March 2021

RM1,023,956.01

(as at 1 February 2021)

-

 

26 August 2021

(Summary Judgment)

26 August 2021

BOC

CASB & JERASIA (as guarantor)

15 November 2021

(Writ and SOC)

 

23 November 2021

RM1,252,177.94

(as at 20 October 2021)

26 November 2021

(3 market days delay)

 

 

Further, JERASIA had misstated the dates of Defaults in Payment to AmBank, Alliance Bank, RHB Bank and BOC in the Announcements and the announcement dated 23 August 2021 was  incomplete as it did not disclose the Defaults in Payment to BOC, the Litigations by AmBank and Alliance Bank and Judgments.

         

JERASIA and the directors had represented that the delay in announcing the Defaults in Payment, Litigations, Judgments and Winding-Up Petition was because of the negotiations with the lenders for an extension of time/to withdraw the notices of demands, the Group was appealing to stay the proceedings and the Company had relied on paragraph 9.05 of the Main LR to withhold disclosure as it would prejudice the company’s ability to pursue its corporate proposal.

 

However, the delay in making an immediate announcement of:-

  • the Defaults in Payment was in contravention of paragraph 9.19A(1) of the Main LR where the total amount outstanding either singly or collectively was 5% or more of JERASIA’s NA and the numerous Defaults in Payment alluded to JERASIA’s adverse financial condition at the material time. Further, JERASIA had represented that it was insolvent in the announcement dated 23 August 2021 and triggered the prescribed criteria under paragraph 2.1(f) of Practice Note 17 where the company was unable to provide the solvency declaration to Bursa Malaysia Securities;
  • the Litigations was in contravention of paragraph 9.03(1) read together with paragraph 9.04(f) of the Main LR as the commencement of the Litigations which culminated in the Judgments constituted further developments arising from and subsequent to the Defaults in Payment; and
  • the Winding-Up Petition was in contravention of paragraph 9.19(19)(a)(i) of the Main LR.

 

The Defaults in Payment and further developments i.e. the ensuing Litigations, Judgments and Winding-Up Petition were material to shareholders and investors to make informed investment decisions.

 

 Further, Bursa Malaysia Securities had clearly clarified at –

  • paragraph 1.17 of the Corporate Disclosure Guide issued on 22 September 2011 that a listed issuer should make an immediate announcement of –

            1. the material default in payment upon occurrence of a default (even if negotiations with the lender are still pending),                 irrespective of whether a demand has been made by the lender; and

            2. the commencement of or involvement in material litigation upon filing or receipt of court papers (i.e. Writs and                        SOCs);

  • paragraph 9.07A of the Questions and Answers to the Main LR (Q&A) that a listed issuer cannot rely on the exceptional circumstances of “prejudicing the ability of a listed issuer to pursue its corporate objectives” to delay disclosure of material information when there is a material default in a loan by a listed issuer and it is in the process of negotiation with the bank or when a listed issuer is involved in a material litigation which adversely impacts the listed issuer. In such instances, while disclosure of the information may have an unfavourable impact to the listed issuer, such information is critical for investors to make informed investment decision and the non-disclosure of the material information is prejudicial to the interest of investors. Hence, the announcement of the default and litigation must be made immediately; and
  • paragraph 9.17 of the Q&A that a listed issuer must make an immediate announcement of any presentation of winding-up petition against the listed issuer or any of its subsidiaries or major associated companies irrespective of whether the listed issuer is in negotiations with the petitioner to arrive at a settlement agreement. 

Despite the numerous advice/guidance of the company secretary since 29 December 2020 on the requirement to make an immediate announcement (CoSec’s Advice), JERASIA had persistently failed, refused and/or neglected to announce the Defaults in Payment even after receipt of the numerous LODs, the recall and termination of the credit facilities and commencement of the Litigations including the Judgments obtained by AmBank and Alliance Bank and the Winding-Up Petition.

 

Pronob Kumar Sen Gupta, the Group Managing Director of JERASIA at the material time was primarily responsible to ensure the company’s compliance with the Main LR by virtue of his roles and responsibilities, in particular his role/involvement in negotiations/liaising with the lenders and solicitors. Despite his knowledge of the Defaults in Payment since 4 November 2020, there was blatant disregard and/or blatant failure in the discharge of his obligations to ensure the company made an immediate announcement of the Defaults in Payment, Litigations, Judgments and Winding-Up Petition in accordance with the Main LR. In particular, he had –

  • repeatedly disregarded the CoSec’s Advice and persistently informed the company secretary/the Board that there was no need to make any/an immediate announcement; and
  • failed to escalate to the Board the Defaults in Payment and the developments arising therefrom including proper information/advice to enable proper assessment/ deliberation by the Board towards ensuring compliance with the Main LR . Such conduct was not acceptable particularly as the Board has the right to obtain full access of any information pertaining to the company pursuant to paragraph 15.04 of the Main LR.

Datuk Yap Fung Kong and Debbie Yap May Se, the Executive Deputy Chairman and Executive Director of JERASIA at the material time had merely relied on the representations of the management/Group Managing Director not to make an immediate announcement despite their executive roles and knowledge of the LODs dated 30 October 2020 from AmBank’s solicitors since 4 November 2020.

 

Datuk Phang Ah Tong, Arnold Kwan Poon Keong, Andrew Hong Tat Beng, Dato’ Dr. Yong Yuan Tan and Rajaretnam Soloman Daniel, the Independent Non-Executive Chairman/Directors of JERASIA at the material time had failed to take effective and expeditious steps/actions to ensure that the announcement of the Defaults in Payment and Winding-Up Petition were made immediately upon their knowledge of the same on 29 July 2021 and 6 August 2021 respectively.  There was a prolonged delay in announcing the Defaults in Payment and Winding-Up Petition only on 23 August 2021 despite the following:-

  • the specific advice by the company secretary to make an immediate announcement vide emails dated 3 & 6 August 2021; and
  • they were and/or should be aware that JERASIA had already defaulted in its repayment to AmBank since 25 October 2020 and had failed to announce the numerous Defaults in Payment.

In addition, arising from the Covid-19 pandemic, the Board should have undertaken the necessary enquiries/assessment to ascertain the impact of the Covid-19 pandemic on, amongst others, the company’s cash flow including the state of bank borrowings/financial difficulties in meeting the company’s debt obligations, guided by ICN 1/2020 – Disclosure Guidance on Covid-19 Related Impacts and Investment issued by Bursa Malaysia Securities on 10 June 2020.   Hence, the representations that the prolonged delay in announcing the Defaults in Payment and Winding-Up Petition only on 23 August 2021 was due to the time taken to seek legal advice and collate details which was attributed to the restriction of movement arising from the Covid-19 pandemic, were not acceptable.


Announcement Info

Company Name JERASIA CAPITAL BERHAD
Stock Name JERASIA
Date Announced 14 Feb 2023
Category Listing Circular
Reference Number ILC-14022023-00041