SUBSTANTIAL shareholding does put a particular shareholder whether an individual or a business entity higher in the hierarchy of shareholders.
But that’s about it unless the particular substantial shareholder can bring value to the company either by means of “putting his money where his mouth is” or by having a vision on how he can leverage his wealth of business experience to further elevate future prospects of the company.
Section 136 of the Companies Act 2016 defines a substantial shareholder as “a person who has an interest in one or more voting shares in a company, and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company”.
This obviously puts the person or entity closer to the controlling stakeholder or even major shareholder who owns and controls more than 51% of a company’s outstanding shares.
This holds true even if substantial shareholders sit on the board of directors not to bring value but rather to preserve their investment by ensuring that no value destroying decisions are taken, according to Minority Shareholders Watch Group (MSWG) CEO Devanesan Evanson.
“Frankly, many would sit on the board to safeguard their investments rather than trying to add value,” he told FocusM. “In fact, many GLICs (government-linked investments companies) end up as substantial shareholders and have their nominees on board for the same reason.”
In this regard, property developer EcoFirst Consolidated Bhd can somehow be assured of ‘a compatible’ substantial shareholder in Datuk Michael Chooi Yoey Sun, the co-founder of kitchen cabinet manufacturer Signature International Bhd who has emerged as a substantial shareholder of the company with a 5.15% stake.
Known as a sales and marketing specialist with almost 30 years of experience, Chooi grew Signature Kitchen alongside his partner Tan Kee Choong where their kitchen cabinets soon made their mark in upmarket property projects. Signature also made inroads abroad via some 15 different markets.
Chooi who had amassed 20 million shares in the open market over the past 14 days further acquired another 40 million shares via an off-market transaction through Wawasan Fokus Sdn Bhd.
“We are extremely pleased to welcome Chooi as a strategic shareholder in EcoFirst. With his expertise and proven track record in growing Signature International, we look forward to exciting prospects and innovations ahead for EcoFirst,” commented EcoFirst’s alternative director Datuk Kenneth Teoh Seng Kian.
However, there are few red flags that minority shareholders must be wary of with regard to substantial shareholders.
“If it is a loss making PLC (public listed company) and the substantial shareholder does not have relevant skills and experience which to help turnaround the company, minority shareholders will be left wondering why the shareholder has taken a substantial stake,” Devenesan pointed out.
“In some instances, the PLC will make an announcement on how the substantial shareholder will be able to help elevate the performance of the PLC … this is helpful for minority shareholders. Otherwise, it may just be plain wondering and guessing.
“If it is a profitable company, minority shareholders will probably see it as a investment in a profitable company… nothing more, nothing less.”
After climbing 4.5 sen or 8.74% to 56 sen yesterday (Jan 25) with 12.21 million shares traded, EcoFirst is currently trading at 54.5 sen (down 1.5 sen or 1.79%) which gave the company a market capitalisation of RM641 mil. – Jan 25, 2022
