KUALA LUMPUR: The court will announce its decision today (March 16) on whether it could consider granting an injunction to block Ho Hup Construction Co Bhd’s EGM planned for tomorrow (March 17).
Judicial Commissioner Mah Weng Kwai is expected to rule on the preliminary issue of whether Extreme System Sdn Bhd, a private company controlled by Ho Hup deputy chairman Datuk Vincent Lye Ek Seang, could initiate a legal action against the listed company or if the matter fell under the Securities Commission’s (SC) jurisdiction.
The court yesterday (March 15) heard lengthy submissions from lawyers representing Extreme System and some of the 27 defendants named in a suit brought by the former.
The defendants included Ho Hup, former managing director Datuk Low Tuck Choy, Low’s wife Datin Chan Bee Ling, Low’s sister Low Lai Yoong, APT Avenue Sdn Bhd and Tung Yin Peng. Wong Kian Kheong is representing Ho Hup while the other five defendants are represented by Rabindra Nathan.
If Mah rules that Extreme System could bring legal action against Ho Hup, the former’s injunction application, which forms part of the suit, could be heard today.
However, according to Gopal Sreenevasan, who is representing some of the defendants, Mah could still invoke his powers to grant the injunction even if the latter ruled that Extreme System could not bring a private action against Ho Hup.
Gopal said the injunction could be granted based on the other grounds raised in Extreme System’s suit.
This is the second injunction application by Extreme System, Ho Hup’s largest shareholder with a 27.95% stake, to stop an impending EGM requisitioned for the removal of seven of the company’s eight existing board members.
Tuck Choy, who holds a 24.6% stake in Ho Hup, has called for the EGM to remove the existing board and replace them with others.
The first EGM was scheduled for Feb 4 but it was scrapped at the eleventh hour after Extreme System obtained an injunction on grounds that the notice given for the resolutions to remove the directors fell one day short of the mandatory 28-day notice period.
Lye has been at odds with Low since the former bought into the company. The two parties were in dispute over several of the company’s land sales last year.
The current shareholder fight originated from the board’s proposed restructuring exercise that includes a substantial capital dilution to revive Ho Hup’s ailing financial health.
Low intends to replace the existing board members to push through his bid for the implementation of an “alternative” restructuring scheme.
Lye’s faction claims that Low intends to remove the present board for “collateral purposes” as the new directors would likely not investigate the alleged wrongdoings in the company during Low’s tenure as MD.
In another twist of events, Ho Hup was last week served with an ex-parte injunction order obtained by the Registrar of Companies (ROC). The injunction is to prohibit Low, his sister Lai Yoong and the family’s vehicle Low Chee & Sons Sdn Bhd or their agents from voting at the EGM and/or any other shareholders’ meetings of Ho Hup.
It appears that Low faces an uphill task to win the shareholder battle.
In the suit, Extreme System is seeking various remedies including court declarations that Ho Hup and the other defendants had breached the Malaysian Code On Take-Overs and Mergers (Amendment) 2004.
The company is also seeking a court order for the defendants to comply with the takeover code and make a mandatory offer. Apart from the alleged breach, Extreme System is also alleging a “conspiracy” and that the EGM had been called “for collateral purposes”.
In court yesterday, S Suhendran, who represents Extreme System in the suit, argued that there was a prima facie right for the company to commence private cause of action.
Suhendran argued that the injunction should be granted for the takeover code to be effective and he said he understood that the SC was currently investigating the dispute.
Gopal, on the other hand, submitted that Extreme System should only ask the court to examine any action or inaction by the SC. He said court intervention in the matters was undesirable as the process could take years.
This article appeared in The Edge Financial Daily, March 16, 2010.
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