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BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS AND/OR FINES ANZO HOLDINGS BERHAD AND 3 DIRECTORS

ANZO HOLDINGS BERHAD

Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded Anzo Holdings Berhad (ANZO) and 3 of its directors for breaches of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, the 3 directors of ANZO were imposed total fines of RM300,000.

 

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

 

(1)     Paragraph 9.03(1) of the Main LR for failing to make an immediate announcement of the Supply Agreement between

         ANZO and its subsidiaries (ANZO Group) and CSTME Resources Sdn. Bhd. (CSTME) for the supply of copper scrap

         (ISA) which was approved by the Board of Directors on 16 June 2020 (9.03 Breach). ANZO had only announced the ISA

         on 25 June 2020. 

 

(2)     Paragraphs 10.08(2)(a) & (b) read together with paragraph 8.29(1) of the Main LR, paragraph 10.08(2)(c) and paragraph

         10.08(4) of the Main LR (RPT ISA Breach) for failing to:

 

         (a) issue a circular and obtain shareholders’ prior approval in relation to the ISA entered on 25 June 2020 (which was a

              related party transaction (RPT) as CSTME and the director and controlling shareholder of CSTME had emerged as  

              the major shareholders of ANZO on 23 June 2020) of which the percentage ratio was 908.2% based on the estimated

              total contract value of RM1.3 billion; and

 

         (b) appoint an independent adviser and a main adviser before the terms of the ISA (which exceeded the percentage ratios

              of 5% and 25% respectively) were agreed upon.

 

         ANZO had only appointed an independent adviser and a main adviser on 27 July 2020, issued a circular to shareholders  

         in relation to, amongst others, the proposed conditional Supply Agreement between Anzo Trading Sdn. Bhd., a  

         subsidiary of ANZO and CSTME dated 5 October 2020 (which replaced and superceded the ISA) on 30 November 2020

         and obtained its shareholders’ approval on 17 December 2020.

 

(3)     Paragraphs 10.08(2)(a) & (b) read together with paragraph 8.29(1) of the Main LR for failing to issue a circular and obtain

         shareholders’ prior approval in relation to the transactions that were carried out under the ISA from 26 June 2020 to 30

         October 2020 of which the aggregated percentage ratio was 27.87% based on the transacted value of RM39.9 million 

         (RPT Transactions Breach). ANZO had only issued a circular to shareholders on the proposed ratification of the

         transactions on 30 November 2020 and obtained its shareholders’ approval on 17 December 2020.

 

(4)     Paragraph 10.13(1) read together with paragraph 8.29(1) of the Main LR for failing to obtain prior shareholders’ approval          in respect of the diversification of the existing business of ANZO Group to include trading of industrial products and 

         related business pursuant to the ISA of 25 June 2020 (Diversification Breach). ANZO had only obtained its shareholders’

         approval on 17 December 2020.

 

(5)     Paragraph 9.35A(1)(a) of the Main LR for failing to ensure:

 

         (a) the announcement dated 25 June 2020 on the ISA vis-à-vis the representation that none of the directors, major  

              shareholders and/or persons connected to ANZO has any interest, either directly or indirectly in the ISA was

              accurate; and

 

         (b) the announcement dated 29 June 2020 in response to Bursa Malaysia Securities’ enquiry on whether the ISA

              signified a proposed diversification in ANZO’s business operations pursuant to paragraph 10.13 of the Main LR was 

              factual, clear, unambiguous and contained sufficient information to enable securities holders and investors to make

              informed investment decisions.

 

(6)     Paragraph 10.08(1) of the Main LR for failing to ensure that the announcement of the ISA dated 25 June 2020 contained

         the information required in Appendix 10A of the Main LR on the risks of the ISA and items (1) – (3), Appendix 10C of the

         Main LR. ANZO had only on 29 June 2020 (in response to Bursa Malaysia Securities’ query to disclose, amongst others,

         the risks in relation to the ISA) and 1 July 2020 (in response to a further request by Bursa Securities to provide a more 

         comprehensive reply) announced the risks associated with the ISA and the detailed risks were only disclosed in the

         announcement dated 6 October 2020 and circular dated 30 November 2020. Further, the information required in Appendix

         10C of the Main LR on the additional contents of an announcement in relation to RPT were announced by ANZO on 2

         July 2020.

 

3 directors of ANZO at the material time were publicly reprimanded and fined for breach of paragraph 16.13(b) of the Main LR for permitting the following breaches:

 

No.

Director

Breach

Penalty

  1.  

Dato’ Seri Abdul Azim Bin Mohd Zabidi

Independent Non-Executive Chairman

Audit Committee Member

(Resigned on 30 May 2022)

9.03 Breach

Public Reprimand and Fine of RM25,000

RPT Transactions Breach

Public Reprimand and

Fine of RM25,000

Diversification Breach

Public Reprimand and

Fine of RM25,000

       2.

Datuk Chai Woon Chet

Managing Director

 

9.03 Breach

Public Reprimand and Fine of RM50,000

RPT ISA Breach & RPT Transactions Breach

Public Reprimand and Fine of RM50,000

Diversification Breach

 

Public Reprimand and Fine of RM50,000

       3.

Chong Khing Chung

Independent Non-Executive Director

Audit Committee Member

(Resigned on 1 June 2022)

 

9.03 Breach

Public Reprimand and Fine of RM25,000

RPT Transactions Breach

Public Reprimand and

Fine of RM25,000

Diversification Breach

 

Public Reprimand and

Fine of RM25,000

 

The findings of breaches and imposition of the above penalties on ANZO 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 ANZO 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 announcement of material information and obtain prior shareholders’ approval for material related party transactions and diversification in operations are fundamental to aid investors to make informed investment decisions, protect the interest of shareholders and allow them an opportunity to consider, in a timely manner, transactions which have the potential of adversely affecting their interests.

 

Bursa Malaysia Securities has also reminded ANZO 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

 

I.       9.03 Breach - Failure to Make an Immediate Announcement of the ISA

 

On 16 June 2020, the Board of ANZO had approved and authorised the company to enter into the ISA with CSTME for the supply of 60,000 metric tonne of copper scrap over 40 months at the prevailing market price and based on the existing market price of RM23,000 per metric tonne, the contract had an estimated value of RM1.3 billion, representing 908.2% of ANZO’s net assets as at 31 July 2019. 

 

The ISA was material to investors to make an informed investment decision and there was no reasonable justification for ANZO to only announce the ISA on 25 June 2020. This was particularly as:-

  • all the salient terms had been agreed upon and there was no evidence of further negotiations or discussions between the parties or change in the terms and conditions of the ISA which were tabled and approved by the Board on 16 June 2020;
  • ANZO’s share price had increased by 77.8% from 15 June 2020 to 17 June 2020 after the Board of Directors meeting on 16 June 2020. There was an overall increase of 288.9% in ANZO’s share price from 15 June 2020 to 26 June 2020 after the announcement of the ISA on 25 June 2020; and
  • there were rumours and speculation of ANZO venturing into a new business as evidenced by articles published online by The New Straits Times (NST) on 23 June 2020 and 24 June 2020. In this respect, it was also noted that Bursa Malaysia Securities had on 23 June 2020 queried ANZO on the NST article and yet, the company did not disclose or announce the ISA.  

 

Datuk Chai Woon Chet, who was the Managing Director responsible for the day-to-day business of ANZO Group and finalisation of the ISA including the release and approval of announcements to Bursa Malaysia Securities, had failed to ensure that the ISA was announced immediately and particularly where there was significant price movement and trading activity in ANZO’s securities between 16 June 2020 to 24 June 2020.

 

The other 2 directors, namely Dato’ Seri Abdul Azim Bin Mohd Zabidi and Chong Khing Chung had merely relied on the Managing Director to make an announcement of the ISA after the Board of Directors meeting on 16 June 2020 and had failed in the discharge of their duties, particularly to undertake reasonable enquiries on the necessity of disclosing the ISA in approving the Company’s announcement on 23 June 2020 in response to Bursa Malaysia Securities’ query on the NST article.

 

II.      RPT ISA Breach, RPT Transactions Breach and Disclosure Breach Relating to RPT

 

The ISA entered into and announced on 25 June 2020 was a RPT as CSTME and the director and controlling shareholder of CSTME had emerged as the major shareholders of ANZO on 23 June 2020. However, ANZO had stated in the announcement of the ISA on 25 June 2020 that none of the directors, major shareholders and/or persons connected to them had any interest, either directly or indirectly in the ISA. Further, the announcement failed to contain the information as required in Appendix 10C of the Main LR on additional contents of announcement in relation to RPT (Additional RPT Disclosures). 

 

Notwithstanding ANZO’s representation that it had conducted prior verification and was only made aware of the new major shareholders’ interest on 29 June 2020, the Company had the obligation to ensure compliance of the Main LR at the juncture of entering into and making the announcement of the ISA on 25 June 2020.

 

ANZO had only announced that the ISA was a RPT requiring shareholders’ approval and the Additional RPT Disclosures on 2 July 2020 upon Bursa Malaysia Securities’ query on 1 July 2020. In addition, despite the announcement, ANZO had proceeded to carry into effect the ISA without prior shareholders’ approval by commencing to supply the products to CSTME on 26 June 2020 until 30 October 2020 with the total transacted value of RM39.9 million, representing 27.87% of ANZO’s net assets as at 31 July 2019 (Transactions). This was a blatant breach of the clear obligation under paragraph 8.29 of the Main LR and the reasons for proceeding with the Transactions, amongst others, these were arm’s length transactions without influence of CSTME or persons connected and CSTME had insisted ANZO fulfil the obligations under the ISA were not acceptable. It was crucial for ANZO to obtain prior shareholders’ approval of the ISA and the Transactions particularly in view of the rationale, prospects, materiality, contribution, effects and risk factors of the same as disclosed in the circular to shareholders dated 30 November 2020. 

 

The directors had blatantly disregarded the Main LR in agreeing to continue with the ISA and carry out the Transactions without prior shareholders’ approval. Datuk Chai Woon Chet had also failed to undertake the necessary and further verification on related party interest to ensure compliance of the Main LR when entering into and announcing the ISA on 25 June 2020.    

 

III.     Diversification Breach and Disclosure Breach in relation to the Diversification of ANZO Group’s Existing Business   

 

ANZO Group is principally involved in investment holding, provision of management services, property development, construction and trading of construction materials, provision of marketing services, provision of timber processing services, timber kiln drying, sawmilling and marketing sawn timber. The ISA signified a diversification in ANZO’s existing business to include trading of industrial products and related business (Diversification) and ANZO had represented that the Diversification triggered paragraph 10.13(1) of the Main LR where –

  • the company expected that 25% or more of its net assets will be diverted to the copper scrap trading business; and
  • the copper scrap trading business was likely to contribute more than 25% of the net profits of the Group.

There was no deliberation, enquiry and assessment undertaken by the directors as to whether the ISA would have resulted in a diversification and triggered paragraph 10.13(1) of the Main LR in approving the ISA during the Board of Directors meeting on 16 June 2020. It was not acceptable for ANZO to represent that an assessment was only made around 10-15 July 2020 after the company had commenced trading with CSTME with the sales order which had come in early July 2020. Further, when queried by Bursa Malaysia Securities on 26 June 2020 specifically on whether the ISA signified a diversification in ANZO Group’s business operations pursuant to paragraph 10.13 of the Main LR, Datuk Chai Woon Chet had failed to undertake proper assessment and approved the company’s announcement which had merely responded that it was mindful of the diversification threshold percentage and would monitor the profit contribution from the copper scrap trading business and the ISA’s impact on the net assets of ANZO to ensure compliance with the Main LR.

 

The directors had also agreed for ANZO to carry into effect the Diversification via proceeding with the Transactions without prior shareholders’ approval in clear contravention of paragraph 8.29(1) of the Main LR. The Diversification was only announced on 6 October 2020 and approved by the shareholders on 17 December 2020.


Announcement Info

Company Name ANZO HOLDINGS BERHAD
Stock Name ANZO
Date Announced 01 Sep 2022
Category Listing Circular
Reference Number ILC-01092022-00020


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