RELATED PARTY TRANSACTIONS POLICY AND PROCEDURES

MESB BERHAD

199501008356 (337554-D)
(Incorporated in Malaysia)

1.0      OBJECTIVES

(a) To outline the procedures for purpose of identifying, monitoring, evaluating, reporting and approving related party transactions and recurrent related party transactions.

(b) To comply with the Part E, Paragraphs 10.08 and 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and other applicable laws.

2.0      DEFINITIONS

(a)  “Audit and Risk Management Committee” shall mean the Audit and Risk Management Committee of MESB.

(b)  “Board” shall mean the Board of Directors of MESB.

(c)   “Bursa Securities” shall mean Bursa Malaysia Securities Berhad.

(d)   “Director” has the meaning given in section 2(1) of the Capital Markets and Services Act 2007 and includes any person who is or was within the preceding 6 months of the date on which the terms of the transaction were agreed upon: –

(i)  a director of the listed issuer, its subsidiary or holding company; or

(ii) a chief executive of the listed issuer, its subsidiary or holding company.

(e)    “MESB” or “Company” shall mean MESB Berhad

(f)     “MESB Group” or “the Group” shall mean MESB and its subsidiaries.

(g)    “Family” in relation to a person means such person who falls within any one of the following categories:

(i)   spouse;

(ii)  parent;

(iii) child including an adopted child and step-child;

(iv)  brother or sister; and

(v)    spouse of the person referred in point g (iii) and (iv) above.

(h)    “Listing Requirements” shall mean Main Market Listing Requirements of Bursa Securities.

(i)     “Major Shareholder” includes any person who is or was within the preceding 6 months of the date on which the terms of the transaction were agreed upon – a major shareholder of the listed issuer as defined under paragraph 1.01 of Listing Requirement or any other corporation which is its subsidiary or holding company.

(j)     “Person connected” in relation to a Director or Major Shareholder, means such   person who falls under any one of the following categories: –

  • a family member of the Director or Major Shareholder;
  • a trustee of a trust (other than a trustee for a share scheme for employees or pension scheme) under which the Director or Major Shareholder, is the sole beneficiary;
  • a partner of the Director or Major Shareholder, or a partner of a person connected with that Director or Major Shareholder;
  • a person who is accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the Director or Major Shareholder;
  • a person in accordance with whose directions, instructions or wishes the Director or Major Shareholder is accustomed or is under an obligation, whether formal or informal, to act;
  • a body corporate or its Directors which/who is/are accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the Director or Major Shareholder;
  • a body corporate or its Directors whose directions, instructions or wishes the Director or Major Shareholder is accustomed or under an obligation, whether formal or informal, to act;
  • a body corporate in which the Director or Major Shareholder, or person connected with him/her are entitled to exercise, or control the exercise of, not less than 20% of the votes attached to voting shares in the body corporate; or
  • a body corporate which is a related corporation.

(k) “Recurrent Related Party Transaction” or “RRPT” shall mean a related party transaction which is recurrent, of revenue or trading nature, which is necessary for day-to-day operations of the Company or its subsidiaries and which has been made or will be made by the Company and/or its subsidiaries at least once in 3 years in the course of its business.

(l) “Related Party” shall mean director, major shareholder or person connected with such director or major shareholder of the Company, its subsidiary or holding company.

(m) “Related Party Transaction” or “RPT” shall mean a transaction entered into by the Company or its subsidiaries which involves the interest, direct or indirect, of a related party.

(n) “Transaction” shall mean the acquisition, disposal or leasing of assets, the establishment of joint ventures, the provision of financial assistance, the provision or receipt of services or any business transaction or arrangement entered into, by the Company or its subsidiaries but excludes transactions entered into between the Company (or any of its wholly-owned subsidiaries) and its wholly-owned subsidiary.

3.      IDENTIFICATION OF RELATED PARTIES

(a)   The list of Related Parties (which is not exhaustive) will be compiled and kept by the Finance Department and circulated within the Group (i.e. Finance Department and its head of subsidiaries) annually.

(b)   MESB and all its subsidiaries are advised to understand and familiarise themselves with the list of Related Parties when entering into any transaction

(c)   In the event that the proposed transaction is to be entered into with any of the Related Parties as identified in the list of Related Parties, such proposed transaction shall be reported to the Finance Department to ascertain the compliance requirements under the Listing Requirements.

4.      REPORTING PROCESS AND APPROVING AUTHORITY FOR RPT AND RRPT

(a)         RPT

(i) Before entering into a Transaction, the originator/buyer must notify and furnish the details of contract/agreement/transaction to the Finance Department for verification of whether it is a RPT.

(ii) The Finance Department will compute the percentage ratio in accordance with formulas that are provided in the Listing Requirement as set out in Appendix I and ensure the compliance requirements as set out in Appendix II.

(iii)  RPT which is below RM500,000 in value for each transaction is subject to the approval of any of the Executive Directors of the Company

(iv) RPT which is RM500,000 and above in value shall be reviewed and approved by the Audit and Risk Management Committee and the Board before the Transaction is entered into.

(v) The Audit and Risk Management Committee and the Board shall satisfy that the Transaction is: –

(a)  in the best interest of the Company;

(b)  fair, reasonable and on normal commercial terms; and

(c)   not detrimental to the interest of the minority shareholders.

(vi)  Submit the announcement for the RPT to the Board for deliberation and approval based on Audit and Risk Management Committee’s recommendation (the Board’s approval is not required for RPTs with contract value less than 0.25% and no announcement will be made to Bursa Securities).

(vii) If a member of the Audit and Risk Management Committee or the Board or the Board of MESB’s subsidiaries has any interest (direct or indirect), in the RPT, he/she shall:

(a)  declare his/her interest in the RPT and abstain from any deliberation and decision making by the Audit and Risk Management Committee or the Board or MESB’s subsidiaries in respect of such RPT and continue to abstain from voting on the resolution approving the RPT; and

(b)  undertake that he/she will ensure that persons connected with him/her abstain from voting on the resolution deliberating or approving the proposal at the general meeting.

(viii) The Finance Department will maintain and update a Register of RPTs and to ensure that all relevant announcements are released to Bursa Securities accordingly.

(ix)    The Internal and External Auditors to review the Register of RPTs on an annual basis.

(x)    The Finance Department shall report the RPTs to the Audit and Risk Management Committee the Board on a quarterly basis and to disclose any material RPTs in the quarterly report to Bursa Securities.

(b)        RRPT

(i)  Before entering into a Transaction, the originator/buyer must notify and furnish the details of contract/agreement/transaction to the Finance Department for verification of whether it is a RRPT.

(ii) The Finance Department will:

– maintain and update the Register of RRPTs;

– monitor the threshold of the RRPT and ensure that an immediate announcement is made if: –

* the consideration, value of the assets, capital outlay or costs of RRPT is RM1 million or more: or

* the percentage ratio of the RRPT is 1% or more;

whichever is the higher;

* monitor the threshold of the RRPT and ensure that an immediate announcement is made when the actual value of RRPT exceeds the estimated value of the RRPT disclosed in the circular (shareholders’ mandate for RRPT, if any) by 10% or more; and

(iii) Internal and External Auditors to review the Register of RRPTs on an annual basis.

(iv) A list of Related Parties shall be circulated to management of all subsidiaries from time to time with the instruction that, all RRPTs with such Related Parties are required to be transacted on an arm’s length basis, on normal commercial terms consistent with the Group’s normal business practices and policies and will not be detrimental to the minority shareholders.

(v) RRPTs will be monitored quarterly through management reports made to the Board as well as to the Audit and Risk Management Committee.

(vi) the Board as well as the Audit and Risk Management Committee will review the management reports quarterly to ascertain that the guidelines and procedures established to monitor the RRPTs have been complied with.

(vii) where any director or persons connected to him has an interest (direct or indirect) in any related party transactions, such director (or his alternate) shall abstain from voting on the matter. Where any member of the Audit and Risk Management Committee is interested in any transaction, that member shall abstain from voting on any matter relating to any decisions to be taken by the Audit and Risk Management Committee with respect to such transactions.

(viii) The prices, terms and conditions of the RRPTs are based on the Group’s usual business practices, market rates, the availability of the amount/resources to be transacted or negotiated on a willing buyer willing seller basis.

(ix) The Group shall determine at least two (2) other contemporaneous transactions with unrelated third parties for similar products/services and/or quantities will be used as comparison, wherever possible, to determine whether the price and terms offered to/by the related parties are fair and reasonable and comparable to those offered to/by other unrelated third parties for the same or substantially similar type of produces/services and/or quantities.

(x) In the event that quotation or comparative pricing from unrelated third parties cannot be obtained, the transactions price will be based on prevailing market rates/prices that are agreed based on MESB Group’s usual business practices and policies and on terms which are generally in line with industry norms in order to ensure that the RRPT is not detrimental to the Company or the Group.

(xi) The Audit and Risk Management Committee’s review procedures will be conducted on a quarterly basis together with the review of quarterly results, or such frequency as the Audit and Risk Management Committee considers appropriate having regard to the value and the frequency of the RRPTs.

(xii) The RRPT which is below RM1.0 million in value for each transaction is subject to the approval of any one of the Executive Directors of the Company or any one of the non-interested Director of MESB Group

(xiii) The RRPT which is RM1.0 million and above or 1% of any percentage ratios shall be reviewed and approved by the Audit and Risk Management Committee and the Board before the transaction is entered into.

(xiv) all RRPTs entered into pursuant to the general mandate shall be subjected to an annual review of the approval procedures to be undertaken by the Audit and Risk Management Committee and the Board. Approval of the shareholders would be sought at the AGM for renewal of RRPT mandate.

(xv) The Audit and Risk Management Committee shall review the findings of internal audit reports relating to the RRPT (if any).

(xvi) Any member of the Audit and Risk Management Committee may, as he/she deems fit, request for additional information pertaining to the transaction from independent sources or advisers, including obtaining of valuation from professional valuers or advisers.

(xvii) If a member of the Audit and Risk Management Committee or the Board or the Board of MESB’s subsidiaries has any interest (direct or indirect), in the RRPT, he/she shall: –

– declare his/her interest in the RRPT and abstain from any deliberation and decision making by the Audit and Risk Management Committee or the Board or the Board of MESB’s subsidiaries in respect of such RRPT and continue to abstain from voting on the resolution approving the transactions; and

– Undertake that he/she will ensure that persons connected with him/her abstain from voting on the resolution deliberating or approving the proposal at the general meeting;

(xviii) The Finance Department shall report to the Audit and Risk Management Committee and the Board on the RRPT on a quarterly basis and disclose RRPT in the quarterly report to Bursa Securities.

(xix) MESB may seek a mandate from its shareholders for the RRPTs subject to the following: –
– the transactions are entered into in the ordinary course of business and are on terms not more favorable to the Related Party than those generally available to the public;
– the shareholders’ mandate is subject to annual renewal and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the shareholders’ mandate during the financial year where the aggregate value is equal to or more than prescribed threshold;
– the Company’s circular to shareholders for the shareholders’ mandate includes such information as may be prescribed by Bursa Securities. The draft circular must be submitted to Bursa Securities together with a compliance checklist;
– at the general meeting to obtain the shareholders’ mandate, the interested related party must abstain from voting on the resolution approving the RRPT. An interested related party must ensure that the persons connected with him abstain from voting on the resolution in respect of RRPT;
– MESB must immediately announce to Bursa Securities when the actual value of a RRPT, exceeds the estimated value of the RRPT as disclosed in the circular by 10% or more and must include such information as may be prescribed by Bursa Securities in its announcement; and
– Where MESB has procured the shareholders’ mandate, the provisions of Paragraph 10.08 of the Listing Requirements on the RPT shall not apply.

5.      MAINTENANCE OF RECORDS

(a)  The Finance Department shall keep the list of Related Parties and Directors and Major Shareholders’ declaration forms.

(b)  The Finance Department shall keep the Registers of RPTs and RRPTs and ensure proper maintenance and retention of documentation. Such documentation should be readily accessible to regulators and other interested parties.

6.      MODIFICATION

The Audit and Risk Management Committee and the Board reserve the right to modify or amend this Policy at any time as it may deem necessary in order to align the policy with Listing Requirements, the Companies Act 2016, the latest Malaysian Code on Corporate Governance and any other applicable laws enforced at the time being.

This new Related Party Transaction Policy and Procedures (Version No. 2) was adopted by the Board of the Company on 23 May 2023.

Appendix I

PERCENTAGE RATIOS                                                                                   

Percentage ratios are figures, expressed as a percentage, used to determine the materiality of RPT resulting from each of the following calculations:

  • The Value of the Assets which are subject matter of the transaction

Net Assets of the listed issuer

  • Net Profits of the assets which are subject matter of the transaction

Net Profits attributable to the owners of the listed issuer

(before other comprehensive income of loss)

  • The Aggregate Value of the consideration given or received in relation to the transaction

Net Assets of the listed issuer

  • The number of shares issued by the listed issuer as consideration for an acquisition

Total Number of Shares Previously in Issue (excluding treasury shares)

  • The Aggregate Value of the Consideration given or received in relation to the transaction

    Market Value of all the Ordinary Shares of the listed issuer (excluding treasury shares)

  • The Total Assets which are the subject matter of the transaction

Total Assets of the listed issuer

  • (i) In respect of joint ventures, business transactions or arrangements:

The Total Project Cost Attributable to the listed issuer

Total Assets of the listed issuer

  (ii)  In respect of the Joint Venture Corporation is incorporated as result of the joint venture:

      The Total Equity Participation of the Listed Issuer in the joint venture corporation

(based on the eventual issued capital of the joint venture corporation)

                  Net Assets of the listed issuer

  • The Aggregate Original Cost of Investment of the subject matter of transaction

            Net Assets of the listed issuer

 (in the case of a disposal and where the acquisition of the subject matter took place within 5 years)

 

Appendix II

 REQUIREMENTS FOR RPT

Percentage ratios in respect of the Transaction Requirements
Less than 0.25%

i.              Consideration is in cash or unquoted shares.

ii.             Consideration is wholly or partly in securities of Public Listed Corporation

 

  

Ø No announcement is required.

Ø  Immediate announcement (Appendix 10A & 10C of Listing Requirements).

 
Equal to or exceeds 0.25% but less than 5%

 

 Ø  Immediate announcement (Appendix 10A & 10C of Listing Requirements).

Ø  In a separate letter setting out percentage ratios applicable to the such transaction.

 
Equal to 5% but less than 25%

 

 Ø  Immediate announcement (Appendix 10A & 10C of Listing Requirements).

Ø  In a separate letter setting out percentage ratios applicable to the such transaction.

Ø  Appoint Independent Adviser before the terms of the transaction are agreed upon.

Ø  Submit a Circular to Bursa Securities together with a compliance checklist (Appendix 10B & 10D of Listing Requirements).

Ø  Issue Circular and seek shareholders’ approval.

* (An interested director/major shareholder and their persons connected must abstain from voting)

 
25% or more

 

 

 Ø  Immediate announcement (Appendix 10A & 10C of Listing Requirements).

Ø  In a separate letter setting out percentage ratios applicable to the such transaction.

Ø  Appoint Independent Adviser and Main Adviser before the terms of the transaction are agreed upon.

Ø  Submit a Circular to Bursa Securities together with a compliance checklist (Appendix 10B & 10D of Listing Requirements).

Ø  Issue Circular and seek shareholders’ approval.

* (An interested director/major shareholder and their persons connected must abstain from voting)