Pity the Protasco minorities, 2 EGMs in 3 days


HARDLY anybody sends out greeting cards these days, but there should be one to express sympathy for the minority shareholders of PROTASCO BHD.

And the message inside should be something like this:

Roses are red,

Violets are blue,

You have two EGMs ahead,

And oh, how I feel for you.

Okay, so not everybody is destined for a glittering career at Hallmark Cards, but this should be good enough to reflect the confusion and indecision that people must be experiencing now over the intense feud between Protasco’s two largest shareholders, executive vice-chairman and group MD Datuk Seri Chong Ket Pen and non-executive director Tey Por Yee.

Next week is set to present two turning points. The first is the EGM on Wednesday to vote on resolutions to remove Tey and his associate and fellow board member Ooi Kock Aun. The shareholders behind this move are Chong (via a private company) and Tan Heng Kui, another Protasco director.

Two days later, there’ll be another EGM, jointly requisitioned by Tey and a company he controls, to oust Chong from the board.

It’s a numbers game. Based on the latest filings with Bursa Malaysia, Chong’s direct and indirect interest in Protasco is 22.4%, while Tey’s stake stands at 17.1%.

Based on these figures alone, Chong has a sizeable advantage. But who knows what the other shareholders will do? How many of the rest will attend the EGMs and how will they vote?

Therefore, neither Chong nor Tey is acting as if the outcomes of the EGMs are certain. The fight to win hearts and minds is raging and therein lies the problem.

This column has commented before on several corporate tussles involving shareholders demanding that EGMs be held to consider the removal of directors and often, the appointment of replacements. Among the companies that have gone through this are ASIAEP Resources Bhd, Metronic Global Bhd, Tiger Synergy Bhd and KOMARKCORP BHD.

The conditions and procedures for this are laid out in the Companies Act, which however doesn’t require the requisitionists to explain why they’re pushing for these boardroom changes.

More often than not, the requisitionists choose to keep mum. The Act provides that the directors facing removal can submit written representations for distribution to shareholders or to be read out at the EGMs, but how do you defend yourself when confronted with a wall of silence?

Thus, we have appalling situations in which shareholders are asked to support boardroom revamps without knowing why.

It may well be that the requisitionists already have sufficient votes and aren’t relying on the minority shareholders. If that’s the case, it makes things worse because it suggests that control of the companies may have changed hands without anybody making general offers for the rest of the shares.

Transparency

This column has argued against the requisitionists’ opacity, and has pointed out that transparency and willingness to engage with minority shareholders will earn goodwill.

The recent developments at Protasco, which calls itself an infrastructure development provider, take us to the other extreme, and it’s equally troubling and frustrating. Here, the problem is not that the principal players are not saying anything. On the contrary, a lot of information is flowing out from both sides, directly and openly or otherwise, but there are so many allegations and counter-allegations of wrongdoings that the minority shareholders can’t be expected to make confident conclusions as to whom they should back.

Lawsuits have been initiated and the saga will probably drag on for many months at least. The EGMs are by no means the final battles, but they’re important because a board seat is a valuable vantage point.

The EGMs are lawful as long as they’re convened and conducted according to the Companies Act’s provisions and the company rules. However, there’s more happening now than those meetings. The brawl has spilled over into the media and the blogosphere, and one wonders how much of this fits the requirement for “full, accurate and timely disclosure”.

Also, there’s little indication that the regulators are at hand to prevent things from going too far. Bursa Malaysia and the Securities Commission may prefer the quiet and subtle way of delivering warnings and gathering facts, but they should also recognise that the unusual events at Protasco offer them a unique opportunity to draw the line between disclosure and negative campaigning. When there’s plenty of mudslinging going on, nobody walks away spotless.

> Executive editor Errol Oh is only sure that Chong and Tey can’t both be right.


   

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