WE, a group of minority shareholders of Apex Equity Holding Bhd, wish to express our shock and dismay over the Kuala Lumpur High Court’s decision to validate a share buy-back exercise of company shares.

On September 26, we were informed that the High Court of Malaya granted Apex Equity Holding Bhd’s application to validate past share buy-back exercises that were conducted between 2005 and 2017.

We are troubled by this decision of the Court since the company’s memorandum and articles of association (M&A) do not provide the company with the requisite authority to such an exercise.

In a filing with Bursa Malaysia, Apex Equity was informed that the court granted the orders applied for in the company’s application pursuant to Section 582(3) of the Companies Act 2016 and Section 355(3) of the Companies Act 1965 to the High Court of Malaya in Kuala Lumpur on Aug 29, 2018.

We view this decision by the court as a dangerous precedent that does not protect the best interests of shareholders, as it will allow public listed companies to cast aside the wishes and interests of thousands, if not millions of shareholders in favour of individual ambitions and board room manoeuvrings by those tasked with protecting shareholder rights.

With this decision, the court is giving company directors and top executives carte blanche to breach their fiduciary duties. In this case, they will be able to disregard a company’s M&A – the basic charter that governs the relationship between a company and its shareholders.

A company’s constitution can only be reversed through an extraordinary general meeting and a ballot by shareholders if doing so is in the best interest of the company, for example, if the original sale of shares was undervalued.

In the case of Apex Equity, the High Court decision is seen as overturning the decision of shareholders at the company’s annual general meeting (AGM) on May 28, which voted against the shares buy-back where there were over 93 million ballots against the buy-back as opposed to 36 million in support of it.

The shareholders proceeded with their decision to uphold the M&A despite the risk of losing out on dividends.

At the AGM, chairman Ahmad Fuzi Abdul Razak had informed shareholders that as the company’s constitution may not provide Apex Equity with the authority to proceed with a shares buy-back, the payment of dividends on those shares may also be prohibited.

We are disappointed with the inaction of the Securities Commission as well as the silence of the Minority Shareholders Watchdog Group (MSWG) over the breach of company’s constitution.

This is not the first time that Apex Equity has defied shareholders’ wishes.

On June 21, 2012, Chang Seng Guan, along with Lew Lup Seong were ousted from the board at the company’s annual general meeting. There were 82.15 million votes against the re-election of Chan, and 79.7 million against Lew.

However, two days later, the company’s only other two directors – Azizan Abdul Rahman and Leow Yan Seong – reappointed Chan as executive director. The reason given was that there was no one to run the company’s operations.

Due to this inaction and perceived endorsement, we beg the question: is the SC looking the other way when the company sought to validate the share buy-back due to the fact that a senior Apex Equity executive is related to a former senior SC official?

We do not wish to cast negative aspersions but when there is silence and non-action, the perception will not be kind.

Ace shares have seen a steady decline since the beginning of the year from RM1.46 to the current 94 sen.

Now the recent news of a merger with Mercury Securities has also caught us by surprise.

According to media reports Apex is issuing its new equity to Mercury at 92 sen per Apex share – a 36% discount to Apex Equity’s net tangible asset (NTA) value of RM1.45 per share.

Shareholders are tired of being taken by surprise by the events as Apex Equity. While individually we may not be a significant stakeholder, but collectively our voices should be heard. Otherwise, one can do away with AGMs and ballotings which, after this validation, will be reduced to a cosmetic exercise.

In the meantime, we are considering legal avenues to reverse this decision in the interest of shareholders everywhere. – October 15, 2018.

* This statement represents 23 minority shareholders of Apex Equity Holding Bhd.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.