KUALA LUMPUR (April 18): The High Court here has thrown out a suit brought by two subsidiaries of Prolexus Bhd to compel South Malaysia Industries Bhd (SMI) to provide them with its record of depositors (ROD) in their attempt to call for an extraordinary general meeting (EGM) to remove the current directors of SMI, and declared the units have abused the court process.

The suit was struck out with RM20,000 costs to SMI and RM4,000 costs to Tricor Investor & Issuing House Services Sdn Bhd, SMI's share registrar, SMI said in a statement Tuesday (April 18).
  
In dismissing the suit, the court said the two Prolexus subsidiaries — Honsin Apparel Sdn Bhd and HiQ Media (Malaysia) Sdn Bhd, who collectively own a 10.01% stake in SMI — had intentionally cited the wrong legislation in their legal action.

It said the parties had relied on paragraphs 7.16(1) and 7.16(2) of the Main Market Listing Requirements of Bursa Malaysia, which dealt with requests to the depository to issue the ROD to whom notices of general meetings are given by the company, and that the ROD is to be issued in not less than three market days before the EGM.

Instead, the relevant sections were Section 34(5) and Section 34(6) Securities Industry (Central Depositories) Act 1991. The first provides that an ROD obtained by a company should be made available for inspection by anyone for RM1 or less, while the second stipulates that anyone can ask the company for a copy of the ROD for RM1 or less — as long as it only contains the names, addresses and securities held.

The court, according to SMI, also noted that the filing of the lawsuit was pre-planned and an abuse of the court process as Honsin and HIQ had set up a situation for their EGM requisition deadline to not be complied with, and then filed a suit to seek their reliefs the next day.

Honsin and HIQ, which acquired their stakes in SMI on Feb 15, sent a notice of intention to SMI two days later to remove SMI's current five-member board at an EGM they want to be held on March 24, and to replace them with two they nominated. They also wanted only shareholders whose names appear on the ROD as at Feb 20 to attend the EGM.

In response, SMI said its board was only able to meet on Feb 24 to discuss their request for the ROD and their notice of intention. But a day before the board meeting, Honsin and HIQ filed a suit at the KL High Court to compel SMI to provide the ROD. SMI was served with the originating summons to SMI on the day the board met to deliberate their request.

"By intentionally citing the wrong legislation to justify their demand for ROD within two working days and then filing an originating summons when the demand was not met, Honsin and HIQ have taken advantage of their own wrong by filing their suit, which cannot be allowed," SMI said.

“The KL High Court decision gives us renewed hope in protecting the company’s and shareholders’ interests. Honsin and HIQ were presumptuous in their approach to demand SMI provide the ROD in one working day and took to the courts to push through their agenda. With the KL High Court decision and no ROD, we would like to emphasise that no notice of EGM had been validly issued by Honsin and HIQ. We hope this clarifies any confusion that shareholders might have on this matter,” SMI added.

SMI had also lodged a complaint earlier this month with the Securities Commission Malaysia (SC), alleging that over 20 parties — comprising companies and individuals acting in concert — have accumulated more than 33% equity stake in the company without making a mandatory general offer.  

SMI alleged that the group was acting in concert with Honsin and HIQ and included YB Ventures Bhd, another listed company, an executive director and a substantial shareholder of both Prolexus and YB Ventures, alongside “some close relatives”.

On April 10, the SC confirmed that it was looking into SMI's complaint. Prolexus, meanwhile, has denied its acquisition of shares in SMI had breached any regulations and said it would not succumb to demands to make a mandatory general offer for SMI.

Prolexus still wants an EGM

Following the court ruling, Prolexus has issued a fresh notice to SMI to requisition for an EGM, again to remove the current board of directors and to nominate two new directors.

Prolexus’s executive director Tan Eik Huang said in a statement that it is seeking the EGM in pursuit of shareholders' statutory rights, and that the group will continue to explore all legal avenues available and is committed to advocating for the interests of its members.

"We wish to emphasise it is important to note that the court did not dismiss the merits of our rights as members of the company to request the ROD. We understand and respect the court's decision and are committed to conducting ourselves lawfully and respectfully," Tan added.

SMI's shares closed 8.5 sen lower at 80 sen on Tuesday, valuing the group at RM167.95 million. The counter has dropped over 12% in the past five days.

Prolexus, on the other hand, closed half a sen or 1.09% higher at 46.5 sen, valuing the group at RM127.31 million. The counter has slipped 2.11% in the past five days. 
 

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