One week ago I wrote: "Lending money to a related company is a no-no" about Aeon Credit Service (listed in Hong Kong) planning to lend money to its parent company.
David Webb strongly advised minority shareholders to vote against this proposal.
Claire Barnes from Apollo Investment Management wrote:
"A helpful investor has noted that unless Aeon Credit Service Asia (ACSA)
could rely on unanimous shareholder approval (which it clearly cannot, as we
object strongly), its proposal appears to be in breach of section 168A of the
Companies Ordinance in Hong Kong, as the loan would be financing a
competitor. We have written further to the company, urging it to withdraw the
proposal, and to rethink its plans in China to avoid conflicts of interest and
ensure fair treatment of minority shareholders."
The good news is that Aeon Credit has indeed withdrawn their proposal, the objections apparently didn't fall on deaf ears:
"The Board decided to terminate the Loan Agreement in order to allow time for better communication with the Shareholders and the market on its business strategy and direction."
A great success for shareholder activism in Hong Kong, it also shows how a few funds being pro-active can quickly persuade listed companies to withdraw proposals that are not beneficial for minority investors.
Malaysia (and its large Government Linked Funds) can learn a thing or two from this episode. I can hardly recall a similar victory for minority investors, despite the IMF (again!) calling Malaysia the 4th best country in the world regarding "minority shareholders protection". A rather preposterous claim, I am sorry to say, which has no baring to the reality. It is all based on laws, not on actual (court) cases or enforcement.
Next to that, Malaysian minority investors are severely hampered by the fact that there is no possibility for class action suits. MSWG would be in a prime position to initiate class action suits against companies and directors who have disadvantaged minority investors. The VEB in The Netherlands (comparable to the MSWG in Malaysia) has initiated and won many class action suits, some of them against Fortune 500 companies. Which also explains its popularity and its membership of 48,000 (on a population of below 20 million).