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BURSA MALAYSIA SECURITIES PUBLICLY REPRIMANDS WINTONI GROUP BERHAD (IN LIQUIDATION), THE LIQUIDATOR AND FINES 7 FORMER DIRECTORS A TOTAL OF RM165,400

06 May 2019

Kuala Lumpur, 6 May 2019 - Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded Wintoni Group Berhad (In Liquidation) (WINTONI or the Company), 7 of its former directors and the Liquidator of WINTONI for breaches of the Bursa Malaysia Securities Ace Market Listing Requirements (ACE LR).  In addition, the 7 former directors of WINTONI were imposed total fines of RM165,400.

 (A)       WINTONI was publicly reprimanded for committing the following breaches:- 

No.

Breach

1.

Financial Reporting Breaches

 

WINTONI had breached:-

 

(1)        Rules 9.22(1) and 9.23(1) of the ACE LR for failing to announce and/or issue the following financial statements within the timeframe stipulated by Bursa Malaysia Securities:-

 

  • the quarterly report for the financial period ended (FPE) 30 September 2015 (QR3 2015) which was only announced on 26 February 2016;
  • the quarterly report for the FPE 31 March 2016 (QR1 2016) which was only announced on 2 June 2016;
  • the quarterly report for the FPE 31 December 2016 (QR4 2016) which was only announced on 23 March 2017;
  • the quarterly reports for the FPE 30 September 2017 (QR3 2017), 31 December 2017 (QR4 2017), 31 March 2018 (QR1 2018) and 30 June 2018 (QR2 2018) which have yet to be announced;
  • the annual report that included the annual audited financial statements together with the auditors' and directors' reports for the financial year ended (FYE) 31 December 2015 (AR 2015) which was only issued on 29 November 2016; and
  • the annual report that included the annual audited financial statements together with the auditors' and directors' reports for the FYE 31 December 2016 (AR 2016) and 31 December 2017 (AR 2017) which have yet to be issued.

 

(2)        Rule 9.16(1)(a) of the ACE LR for failing to ensure that the company's announcement dated 29 February 2016 on the fourth quarterly report for the FYE 31 December 2015 (QR4 2015) took into account the adjustments as stated in the Company's announcement dated 29 August 2016 (the Adjustments).

 

WINTONI had reported an unaudited loss after taxation and minority interest of the Company of RM49,864,000 in the QR4 2015 compared to an audited loss after taxation and minority interest of RM56,909,000 in the audited financial statements for the FYE 31 December 2015 (AFS 2015) announced on 29 August 2016. The difference of RM7,026,799 between the QR4 2015 and AFS 2015 represented a variance of 14.11%.

 

The Adjustments were mainly in respect of:-

  • the waiver of debts of RM3.94 million owing by the holding company to the subsidiaries after the disposal of the subsidiaries which were not recognised by the auditors in the AFS 2015 as the Company did not have documents to substantiate the same; and
  • the losses in foreign exchange of RM2.29 million which were due to the Company’s error.

 

2.

Corporate Governance Breaches

 

WINTONI had failed to comply with the following requirements on the composition of its board of directors (BOD) and audit committee (AC):-

 

(1)        Rule 15.02(1) read together with Rule 15.02(3) of the ACE LR for failing to ensure that there were at least 2 independent directors in the BOD from 1 July 2016 to 18 September 2016 and from 27 May 2017 to 19 June 2017.

 

(2)        Rule 15.09(1)(a) read together with Rule 15.19 of the ACE LR for failing to ensure that there were at least 3 members in the AC from 1 July 2016 to 22 September 2016 and from 29 March 2017 to 10 September 2017.

 

(3)        Rule 15.10 read together with Rule 15.19 of the ACE LR for failing to elect a chairman among the AC members after 3 months from the resignation of the AC Chairman, Chaang Kok Fai on 8 December 2015.

 

(4)        Rule 15.09(1)(c) of the ACE LR for failing to appoint at least 1 AC member with the prescribed qualifications after 3 months from the resignation of the AC Chairman, Chaang Kok Fai on 8 December 2015 until 22 September 2016.

 

3.

Internal Audit Function Breach

 

WINTONI had failed to comply with the following requirements on internal audit function:-

 

(1)        Rule 15.27(1) of the ACE LR for failing to establish an internal audit function for the FYE 31 December 2016 and 31 December 2017.

 

(2)        Rules 15.12(1)(e) and (f) of the ACE LR as the AC had failed to review the adequacy of the internal audit function and internal audit plan and/or report for the FYE 31 December 2016 and 31 December 2017.

 

(B)       The following penalties were imposed on 7 former directors of WINTONI for breach of Rule 16.13 of the ACE LR where they had caused and permitted WINTONI’s failure to announce/issue the QR3 2015, AR 2015 and/or AR 2016:-

No.

Director

Breach

Penalty Imposed

1.

 

Dato’ Seri Mohd Shariff Bin Omar (DS Mohd Shariff)

Independent Non-Executive Chairman

(appointed on 10 September 2015)

 

Audit Committee member

(appointed on 23 September 2016)

 

Removed as a director on 20 June 2017

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to:-

  • announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR; and
  • issue the AR 2015 and AR 2016 on or before 30 April 2016 and 30 April 2017 respectively in accordance with Rule 9.23(1) of the ACE LR.

Public reprimand and total fines of RM30,200

2.

 

Ahmad Amryn Bin Abd Malek (Ahmad Amryn)

Executive Director

(appointed on 20 November 2015 and removed on 20 June 2017)

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to:-

  • announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR; and
  • issue the AR 2015 and AR 2016 on or before 30 April 2016 and 30 April 2017 respectively in accordance with Rule 9.23(1) of the ACE LR.

 

Public reprimand and total fines of RM75,500

 

3.

 

Raja Kamarudin Bin Raja Adnan (Raja Kamarudin)

Executive Director

(appointed on 20 November 2015 and removed on 20 June 2017)

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to:-

  • announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR; and
  • issue the AR 2015 and AR 2016 on or before 30 April 2016 and 30 April 2017 respectively in accordance with Rule 9.23(1) of the ACE LR.

Public reprimand and total fines of RM30,200

 

4.

 

Suaran Singh a/l Himat Singh (Suaran Singh)

Independent Non-Executive Director

(appointed on 10 September 2015)

 

Audit Committee member

(appointed on 7 October 2015)

 

Resigned on 1 April 2016

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR.

Public reprimand and fines of RM11,400

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to issue the AR 2015 on or before 30 April 2016 in accordance with Rule 9.23(1) of the ACE LR.

Public reprimand

5.

 

Haflil Feiruz Bin Muhammad Feisol (Haflil Feiruz)

Independent Non-Executive Director

(appointed on 10 September 2015)

 

Audit Committee member

(appointed on 7 October 2015)

 

Resigned on 1 April 2016

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR.

Public reprimand and fines of RM5,700

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to issue the AR 2015 on or before 30 April 2016 in accordance with Rule 9.23(1) of the ACE LR.

Public reprimand

6.

 

Dato’ Muzaffirah Yurhaningseh Mazputri Binti Tun Dato Sri Ahmad Fairuz (Dato’ Muzaffirah)

Independent Non-Executive Director

(appointed on 10 September 2015)

 

Audit Committee member

(appointed on 25 February 2016)

 

Resigned on 1 April 2016

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR.

 

Public reprimand and fines of RM11,400

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to issue the AR 2015 on or before 30 April 2016 in accordance with Rule 9.23(1) of the ACE LR.

Public reprimand

 

 

 

 

 

 

 

 

7.

Chaang Kok Fai

Independent Non-Executive Director

(appointed on 10 September 2015)

 

Audit Committee Chairman

(appointed on 7 October 2015)

 

Resigned on 8 December 2015

 

Rules 16.13(a) and (b) of the ACE LR for causing and permitting WINTONI’s failure to announce the QR3 2015 on or before 30 November 2015 in accordance with Rule 9.22(1) of the ACE LR.

Public reprimand and fines of RM1,000

  


(C)  The Liquidator, Datuk Mohd Afrizan bin Dato’ Husain was publicly reprimanded for breach of Rules 2.22(3)(a) and (b) of the ACE LR where he had caused and permitted WINTONI’s failure to announce/issue the AR 2016, QR3 2017, QR4 2017, AR 2017, QR1 2018 and QR2 2018 which have yet to be announced/issued as at to-date.   In addition, the Liquidator was directed to make the necessary arrangement including working with and/or delegating the function to the directors of WINTONI to ensure announcement/issuance of the AR 2016, QR3 2017, QR4 2017, AR 2017, QR1 2018 and QR2 2018 and any other outstanding financial statements within 3 months.

The finding of breach and imposition of the above penalties on WINTONI, its directors and the Liquidator were made pursuant to Rule 16.19 of the ACE LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality/impact of the breaches to WINTONI and shareholders/investors and the roles, responsibilities, knowledge and conduct of the directors and the Liquidator.

Bursa Malaysia Securities views the contraventions seriously as the timely and accurate submission of financial statements and the corporate governance requirements on composition of the BOD, AC and internal audit function are fundamental obligations of listed companies and of paramount importance in ensuring a fair and orderly market for securities traded on Bursa Malaysia Securities and necessary to aid informed investment decisions. 

BACKGROUND

A.      Enforcement Actions against WINTONI and its Directors

(1)       Delay in Announcement of the QR3 2015

The delay was essentially caused by the failure of the Company and directors to undertake proper and reasonable assessment to ascertain the impairment of an asset.  There was no reasonable justification for the failure to provide for a full impairment of the asset particularly as:–

Further, having decided to engage an independent review to substantiate the impairment on 25 November 2015, the Company and directors had failed to take reasonable efforts to ensure the independent review was finalized expeditiously for the timely announcement of the QR3 2015. 

When the Company subsequently announced the QR3 2015 on 26 February 2016, it had fully written off the asset amounting to RM32 million without any change of circumstances and without completion of the independent review which was terminated on 27 January 2016.  Upon announcement of the QR3 2015 on 26 February 2016, the Company had triggered the prescribed criteria in paragraph 3.1(a) of Guidance Note 3 where the shareholders’ equity on a consolidated basis was 25% or less of the Company’s issued and paid-up capital. 

(2)       Delay in Issuance of the AR 2015 and AR 2016

The delays were essentially due to the purported lack of funds towards payment of the outstanding audit fees to enable commencement of the audit for FYE 31 December 2015 and/or appointment of new external auditors for FYE 31 December 2016.

In this regard, the directors were not absolved from their duty to ensure the Company’s compliance with the ACE LR particularly as they had failed to take any action including to enquire, follow up, monitor and supervise the management with regard to the preparation of the AR 2015 and AR 2016 and address/resolve the issues (including the purported lack of funds) expeditiously to enable timely issuance of the AR 2015 and AR 2016 as follows:-   

(a)       In respect of the AR 2015:–

(b)       In respect of the AR 2016, DS Mohd Shariff, Ahmad Amryn and Raja Kamarudin had merely noted/accepted that the Company did not have sufficient funds. They failed to take any reasonable/expeditious effort including to address/resolve the purported lack of funds and source/appoint new external auditors despite being informed of the resignation of the external auditors since November 2016 (i.e. more than 5 months before the due date of issuance of the AR 2016 on 30 April 2017) and reminded by the Company’s Sponsor of the obligation to issue the AR 2016 during the BOD meeting on 22 March 2017.    

(3)       Delay in Announcement/Issuance of the QR1 2016, QR4 2016, QR3 2017, QR4 2017, AR 2017, QR1 2018 and QR2 2018

All listed companies are required to maintain the resources necessary including sufficient and available finance/accounting staff to facilitate the preparation of their financial statements and to put in place all the necessary controls, governance and procedures to procure their subsidiaries’ accounts to enable the timely preparation of the financial statements and discharge of the obligations under the listing requirements.  Hence, the delay in the announcement of the QR1 2016 due to the resignation of the finance manager at the end of March 2016 and the delay in the announcement of the QR4 2016 due to the subsidiary’s failure to provide its financial statements to the Group did not absolve the Company’s culpability. 

Further, all listed companies have the obligation to comply with the ACE LR so long as the company remains listed pursuant to Rule 2.05(2)(a) of the ACE LR.  Hence, the winding-up order against WINTONI on 17 August 2017 (Winding-Up Order) did not absolve the Company’s obligation to ensure timely announcement/issuance of the QR3 2017, QR4 2017, AR 2017, QR1 2018 and QR2 2018 which remained outstanding as at to-date.

B.      Enforcement Action against the Liquidator of WINTONI

Pursuant to the Winding-Up Order against WINTONI and the letter of undertaking dated 20 September 2017 provided by the Liquidator to comply with the ACE LR (LOU), the Liquidator (being the person who took possession or control over the assets of WINTONI) would act for and on behalf of WINTONI including to ensure compliance with the ACE LR.  In this regard, the Liquidator has the power to make the necessary arrangements operationally, including working with WINTONI’s directors or delegating the function/task to the directors/other person to ensure compliance with the ACE LR in particular, the disclosure obligations in areas such as making announcements and releasing financial statements.  However, the Liquidator had failed to do so and it was not acceptable for the Liquidator to do nothing/disregard compliance of the ACE LR. The Liquidator’s contention that he cannot/had not assumed the responsibility to ensure timely submission of the financial statements in accordance to the ACE LR was untenable.