Securities: Malaysia's Securities Commission blocks disposal of proceeds of share sale

Ishak's sale of a block of some 58.7 million shares raised approx MYR10.2 million - about GBP1.9 million. The Securities Commission has launched an investigation into suspected breaches of Malaysia's securities laws, says the SC.

The High Court granted the temporary injunction for four days when the case must come back before the Court. It also ordered Ishak to "furnish full and complete details of his assets whether in Malaysia or elsewhere" before that hearing.

The SC is also "actively" looking into alleged breaches of securities laws by the now ousted board along with some of the company's management and shareholders, it said in a statement today.

The company issued a statement saying that it has not been made aware of the identity of the purchaser of Ishak's shareholding.

The company operates in five primary areas of operation: the production of flat panel TVs, flat-pack furniture, consumer electronics especially audio, a wide range of consumer items from garden implements to stationery and the development of an industrial and residential township in Vietnam.

It has operations in Taiwan, Australia, UK and several in China as well as in Malaysia where it is listed.

Earlier this month, Bursa Malaysia (the KL Stock Exchange) told the company to appoint a special auditor after it was suspended from trading on 1 June. Its share price had fallen 68% in a single day. Local media said that its MD James Hwang, who is Taiwanese, and "several board directors went missing" the previous week. The company is in default with its periodic filings.

But things have been going from bad to worse: EON Bank appointed a receiver to secure the assets covered by a floating charge applicable to the paper division, Kenmark Paper Sdn Bhd, under a debenture executed in 1991. One of its plants, at Klang, was sealed according to local reports.

Chen Wen-Ling (who had held a 18.7% stake in Kenmark) and Chang Chin-Chuan, executive director, plant operations in Malaysia and Vietnam have also disappeared. They have, reportedly, been contacted via telephone and e-mail but have not, to date, made any physical appearance.

When the company at last filed its Q1 figures, it revealed a substantial and unexpected loss.

But it is word of the state of the plants that has caused consternation: the Klang works required what Malaysians politely call "cleaning." And inspectors were sent to Vietnam expecting to find the unit in disarray after reports of looting. They have reported that it is "largely intact."

The new directors held a press conference late last week. The new MD, Datuk Abd Gani Yusof, said "We met key members of management and we asked them what is required to restart the production. We will take it from there. Management is supposed to do an assessment of various departments, the equipment, and the personnel required. Some new recruitment may be needed." He admitted that the state of the company remained unclear. "We are meeting management on Monday to see where we stand and decide whether there is a need to purchase more raw materials or get more workers.As we saw yesterday, we have enough machinery and raw material stock. There are also some debts that can be collected. Any additions will have to be reviewed as we go along."

But one unequivocal statement gives some hope: asked if the company had defaulted on its debt, Adbullah said "We have not." But things are not rosy. He added "We only have one order to deliver by month-end, that is why as soon as we get the company working again, the business can recommence and the delivery for month-end will be met."

Another new director, Ho Soo Woon, said of Hwang "he seems very depressed. He has asked us to help him rectify the situation. I think the issue is he did not leave everything. Sometimes when you collapse, there is no such thing as “I am going to collapse, I need to get this and that done”. I was told that he collapsed due to exhaustion and lack of sleep. At one point, he was without sleep for nearly 20 days which I don’t think is humanly possible."

But the case demonstrates a worrying factor: Hwang ran the company autocratically, it appears. Ho said "Even from the board position, the executive directors are all Taiwanese, and they all report to him. There is no local executive director to liaise with the market to say what is happening."

But the company holds strong to the fact that most of its key management have been in place for "between 19-26 years." Only one of them resigned and Ho said that she had been asked to return and, in the light of the new board, she had agreed.