Tuesday 29 January 2013

Shareholder activism in HK scores a victory

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The good news is that Aeon Credit has indeed withdrawn their proposal, the objections apparently didn't fall on deaf ears: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).

6 comments:

  1. Huh? Do I have an eye problem? How come Boleh land climb to the 4th spot as there are tonnes of investors being robbed by the major shareholder!
    Or IMF simply base on whatever report Boleh Land publish and they never conduct a proper research! As an investor myself I strongly doubt that Malaysia protect and value its minority shareholder! In fact I feel that they treat as ATM (include the sovereign funds as most of the time they will support the major shareholder).

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  2. I am afraid it is in IMF's report. Also, you can go to any bank and lend money, Malaysia no. 1 in the world in getting credit.

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  3. We have a similar case in Malaysia involving Panasonic Manufacturing Malaysia Berhad which placed RM444,364 of its funds with related company as at 30 Sep 2012. Looks as if minority shareholders here cannot do anything about this matter. Just wondering whether MSWG can do something regarding this issue.

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  5. Correction to yesterday's posting where the amount involved was wrongly stated. It should read as follows:-

    "We have a similar case in Malaysia involving Panasonic Manufacturing Malaysia Berhad which placed RM444.364 MILLION of its funds with related company as at 30 Sep 2012. Looks as if minority shareholders here cannot do anything about this matter. Just wondering whether MSWG can do something regarding this issue."

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  6. Thanks, I am aware of it, posted on it in my previous entry. Yes, the situation is going on for a long time, best way is to try to get publicity for this case, and indeed, MSWG can help with that.

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