Bursa Malaysia Securities Berhad [Registration No.: 200301033577 (635998-W)] (Bursa Malaysia Securities) has publicly reprimanded Computer Forms (Malaysia) Berhad (CFM) and 8 of its directors for breaches of the Bursa Malaysia Securities MAIN Market Listing Requirements (MAIN LR). In addition, the 8 directors were imposed total fines of RM2 million.

CFM was publicly reprimanded for breaches of the following provisions of the MAIN LR: -

(1)     JVA Announcement Breach

Paragraphs 9.35A(1)(a), (b) and (d)(i) of the MAIN LR in respect of CFM's announcement dated 5 January 2023 (5 Jan Announcement) on the joint venture agreement (JVA) entered with EA Mobility Holding Co. Ltd. (EA Mobility) which was not factual, did not contain sufficient information to enable securities holders and investors to make informed investment decisions, misleading and omitted material facts as the 5 Jan Announcement did not disclose the following: -

(a)  the company had also entered into a shareholders agreement with EA Mobility on 5 January 2023 (SA) to govern their respective rights, duties and obligations with respect of the joint venture company (JVCO) where pursuant to Clause 7.2.3 of the SA, EA Mobility shall be entitled to exercise a put option to sell all of its shares in the JVCO to CFM and CFM irrevocably promised to purchase all of EA Mobility's shares (in the JVCO) (Put Option) if, within 6 months from the establishment of the JVCO i.e. by 30 June 2023 (30 June Deadline), CFM was unable to procure for the JVCO -

i.  Affirmed Orders of electric vehicle (EV) products of at least 200 vehicles; and

ii.  cash payment of the deposit or purchase price irrevocably paid by the relevant purchaser for such Affirmed Orders in aggregate of at least RM12.5 million (or its equivalent in other currency) (RM12.5m Cash Payment),

(hereinafter referred to as the E-Bus Order Shortfall); and

(b)  pursuant to Clause 8.2 of the JVA, the JVA shall automatically be terminated (without any notice or action) if CFM or EA Mobility ceases to own any shares in the JVCO.

(2)     3 July Press Release Breach

Paragraphs 9.35A(1)(b) and (d)(i) of the MAIN LR in respect of the press release titled "CFM Positive on the Joint Venture with Thai EV Giant, EA Mobility Holding Co. Ltd" attached in the company's announcement dated 3 July 2023 (3 July Press Release) which was misleading and omitted material facts.

In this regard, it was noted that: - 

(a)  CFM had represented, amongst others, the following in the 3 July Press Release -

"In response to enquiries from shareholders regarding the status of the joint venture, the Management of CFM has confirmed that both CFM and EAPCL (Energy Absolute Public Company Limited) remains positive on the outcome of the joint venture and that the parties are currently in the final stages of negotiation to solidify the launch and operation of Malaysia's pioneer EV project. The Management further believes that EA Malaysia (the JVCO) will be able to develop and maintain a fully electric transportation system in line with Malaysia's policy of reducing consumption of fossil fuels by 37% before year 2040 and towards the goal of becoming a zero-carbon emission society."

(b)  The 3 July Press Release did not disclose the E-Bus Order Shortfall by CFM i.e. CFM had failed to procure the Affirmed Orders and RM12.5m Cash Payment for the JVCO by the 30 June Deadline and that the JVA was subject to the risk of termination pursuant to Clause 8.2 of the JVA read together with Clause 7.2.3 of the SA upon the exercise of the Put Option by EA Mobility for the E-Bus Order Shortfall.

(3)     10 July Put Option Notice Breach

Paragraph 9.03(1) of the MAIN LR for failing to make an immediate announcement of EA Mobility's notification to exercise the Put Option for the E-Bus Order Shortfall by CFM dated 10 July 2023 (10 July Put Option Notice). 

CFM had only announced the 10 July Put Option Notice on 20 July 2023 (20 July Announcement), after a delay of 8 market days.   

(4)     JVA Termination Breaches

Paragraphs 9.35A(1)(b) and (d)(i) of the MAIN LR in respect of the announcements dated 20 July 2023, 24 July 2023, 10 August 2023 and 1 September 2023 (collectively, the Announcements) which were misleading and omitted material facts. 

In this regard, it was noted that: -

(a)  CFM had in the 20 July Announcement on receipt of the 10 July Put Option Notice only stated the following -

i.  the company was actively evaluating the implications of the 10 July Put Option Notice and would be seeking legal advice to ensure a comprehensive understanding of its rights and obligations in this matter; and

ii.  the day-to-day operations and business activities of the JVCO would continue without disruption.

(b)  CFM had in the announcement dated 24 July 2023, in response to Bursa Securities' specific enquiry on the status of the JVA arising from the exercise of the Put Option by EA Mobility and whether the said agreement was deemed terminated, stated that the JVA remained in effect, and the day-to-day operations, as well as the business activities of the JVCO had continued without any disruptions.   

(c)  CFM had, on the option closing date of 10 August 2023, in the announcement dated 10 August 2023 stated that - 

i.  the conversations between CFM and EA Mobility were still in progress, and a definitive decision had not been reached; and

ii.  during this period of careful deliberation, it was important to highlight that the operations of the JVCO remained unaffected.

(d)  CFM had in the announcement dated 1 September 2023 further stated the following -

i.  the company had initiated the procedures of acquiring 50 ordinary shares in the JVCO, representing 50% equity interest of JVCO from EA Mobility. This development heralds a dynamic transformation within the venture, reflecting a strategic progression aligned with the evolving goals of both EA Mobility and CFM. As the transfer of equity interest unfolds, the company anticipated a seamless transition that would fortify the venture's trajectory; and

ii.  even amid this transformative period, the company's commitment to growth remained steadfast. While navigating this acquisition, the company remained dedicated to exploring diverse avenues of business opportunity.  The company was actively poised to engage in alternative partnerships and collaborative ventures to propel the JVCO's business endeavours forward.

(e)  The Announcements did not disclose that the JVA would be terminated after completion of the transfer of all 50 shares held by EA Mobility in the JVCO to CFM (Transfer) pursuant to the 10 July Put Option Notice (Termination).

(f)  CFM had only announced the Termination on 5 September 2023, i.e. approximately 2 months after issuance of the 10 July Put Option Notice upon Bursa Securities' request vide letter dated 4 September 2023 for the company to confirm again the status of the JVA arising from the acquisition of 50 ordinary shares in the JVCO and whether the said joint venture was terminated.

(g)  The Transfer was completed on 8 September 2023.

(5)     SA Misrepresentation Breach

Paragraphs 2.18(1)(a) and (c) of the MAIN LR for failing to ensure that the company's response to Bursa Securities vide letter dated 28 July 2023 (28 July Letter) and email dated 31 July 2023 (31 July Email) were accurate and not false or misleading.

In this regard, it was noted that: -

(a)  After the 20 July Announcement on the 10 July Put Option Notice, Bursa Malaysia Securities had requested the company to provide a copy of the relevant agreement entered into between CFM and EA Mobility between 5 January 2023 until 28 July 2023, including such document stating the Put Option clause. 

(b)  However, CFM had merely enclosed a copy of the JVA in the 28 July Letter and misrepresented that there was no other agreement or supplemental agreement entered into by CFM and EA Mobility after the JVA in the 31 July Email. 

(c)  CFM had only provided the SA to Bursa Malaysia Securities on 25 September 2023 after Bursa Malaysia Securities repeated enquiry. 

Eight (8) directors of CFM at the material time had breached paragraph 16.13(b) of the MAIN LR for permitting CFM to commit the breaches for which the following penalties were imposed on them: -

The findings of breach and imposition of the above penalties on CFM and the directors were made pursuant to paragraph 16.19 of the MAIN LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the breaches, impact of the breaches to CFM and shareholders/investors and the roles, responsibilities, knowledge, involvement and conduct/action/inaction of the directors.

Bursa Malaysia Securities views the contraventions seriously as timely, full and accurate disclosure of material information to enable investors to make informed decision is of paramount importance in ensuring an orderly and fair market for securities traded on Bursa Malaysia Securities and maintaining market integrity and investor confidence.

BACKGROUND

On 5 January 2023, CFM entered into the JVA and SA where -

• pursuant to Clause 7.2.3 of the SA, CFM was required to procure for the JVCO the Affirmed Orders and RM12.5m Cash Payment by the 30 June Deadline, failing which, EA Mobility was entitled to exercise the Put Option to sell all of its shares in the JVCO to CFM; and
• the JVA shall be terminated after EA Mobility ceases to own any shares in the JVCO pursuant to Clause 8.2 of the JVA.

However, in announcing the JVA in the 5 Jan Announcement, CFM did not disclose the obligations and material risks under Clause 7.2.3 of the SA which were clearly fundamental to the joint venture arrangement to enable investors to make informed investment decision in relation to the joint venture/JVA.  In this regard, there was an overall increase of RM1.81/163% in CFM's share price from 1 September 2022 until 12 January 2023, i.e. the material time of CFM's announcement on the heads of agreement with EA Mobility on the proposed joint venture to conduct EV business in Malaysia on 26 September 2022 and the 5 Jan Announcement. CFM had further concealed the SA from Bursa Malaysia Securities until 25 September 2023 despite enquiries from Bursa Malaysia Securities on the agreement(s) other than the JVA that CFM had entered into which contained the Put Option clause. 

CFM had failed to procure for the JVCO the Affirmed Orders and RM12.5m Cash Payment by the 30 June Deadline which gave rise to the risk of termination of the JVA. However, CFM had issued the 3 July Press Release alluding to the positive progress and continuity of the joint venture which was misleading. The representations that parties were in negotiations to fulfil the Affirmed Orders did not justify the failure to disclose the E-Bus Order Shortfall and the imminent risk of termination of the JVA in the 3 July Press Release, particularly as the 3 July Press Release was issued -

• after a material decrease in CFM's share price by RM2.745/94% from a high of RM2.92 on 12 January 2023 to RM0.175 on 30 June 2023, during which period, Bursa Malaysia Securities had issued an unusual market activity queries issued to CFM on 8 March 2023; and
• in response to shareholders' enquiries on the status of the joint venture with EA Mobility.

EA Mobility had, following the E-Bus Order Shortfall, issued the 10 July Put Option Notice which would lead to the termination of the JVA after completion of the Transfer of EA Mobility's shares in the JVCO to CFM.  However, CFM had only disclosed the 10 July Put Option Notice on 20 July 2023.

Further, CFM did not disclose the Termination in the Announcements despite Bursa Malaysia Securities' enquiry on the status of the JVA arising from the 10 July Put Option Notice.  The representations that negotiations were ongoing between CFM and EA Mobility and the JVA was still in effect until completion of the Transfer on 8 September 2023 did not justify the failure to disclose the Termination in the Announcements as the omission to disclose the Termination created an incomplete and misleading picture of the status of the JVA/joint venture.  The disclosure of the Termination only on 5 September 2023, i.e. 3 market days prior to the completion of the Transfer, had essentially deprived the market of the opportunity to make informed investment decision in relation to the joint venture/JVA.

The directors had failed to undertake any/reasonable deliberation and assessment/enquiries on the joint venture/JVA, including the material developments arising therefrom to ensure timely, accurate and proper disclosure in the 5 Jan Announcement, 3 July Press Release and Announcements.  A higher fine was imposed on Datuk Wira Justin Lim Hwa Tat and Datuk Hoo Swee Guan in respect of the JVA Announcement Breach as they were involved in the JVA and SA.