THE KUALA Lumpur High Court has ruled that the investment by Main Market-listed apparel maker Prolexus Bhd (now Techbase Industries Bhd) in property developer South Malaysia Industries Bhd (SMI) “was made in good faith and based on sound business judgment”.
This came about after the court dismissed a derivative action filed by three minority shareholders seeking to challenge Prolexus’s investment in SMI.
According to the court paper sighted by FocusM, the judge found no evidence of improper conduct by Prolexus’s directors, underscoring the legitimacy of their decision-making process.
The three minority shareholders are Irene Wong Sook Lin, Kwan Kum Loy and Lee Ceh Chan while the respondents are Datuk Au Yee Boon, Tan Eik Huang, Au Yee Soon and Prolexus Bhd.
Wong had acquired 26,000 Prolexus shares on May 3, 2023 while Kwan and Lee bought 10,000 shares each on May 2, 2023.
In its findings, the court further noted that the applicants failed to dispel the respondents’ contention that they were “agents provocateurs” planted to create trouble for the company.
Below are some salient points of the court ruling:
- The court emphasised that Prolexus’s investment in SMI shares was a result of a legitimate and thorough process with the decision supported by financial analysis and recommendations from the company’s investment committee.
- The applicants who collectively hold only very insignificant shares, acquired these shares shortly before filing the derivative action. The court noted that their actions appeared to serve a collateral purpose, hence raising doubts about their intent and good faith.
- Notably, two of the minority shareholders previously worked at Messrs Gideon Tan Razali Zaini, the law firm representing SMI in its on-going litigation against Prolexus.
- The court also highlighted that the Securities Commission Malaysia (SC) had previously rejected similar complaints, thus further discrediting the applicants’ claims.
In delivering the judgment, the court stated:
“No evidence has been presented to show that the decision to invest in SMI was not made honestly or that the directors acted improperly. Business and commercial decisions, when made prudently, should not be second-guessed by the courts.”
At the close of today’s (Nov 27) trading, Techbase was unchanged at 12.5 sen with 11,300 shares traded which valued the company at RM38 mil) while SMI was down 0.5 sen or 1.19% to 41.5 sen with a traded volume of 26,800 shares and a market capitalisation of RM87 mil. – Nov 27, 2024
