UNHAPPY shareholders of SCAN Associates Bhd may be given a choice to decide on the future direction of the company in the light of a brewing management tussle. Parties aligned with SCAN’s former CEO Datuk Norbik Bashah Idris have emerged and are requesting the removal of the ICT solutions provider’s current board of directors.

According to filings with Bursa Malaysia on July 1 and 3, Patrick Yeoh Eng Kong and Hussin Othman have become substantial shareholders of SCAN (fundamental: 0.15; valuation: 0) with stakes of 5.29% and 5.09% respectively. Yeoh had previously surfaced as a strategic investor in other publicly listed companies while Hussin is a co-founder of SCAN with Norbik.

A July 24 filing with Bursa shows that Hussin and Norbik have requisitioned an extraordinary general meeting to be convened to vote on the removal of four company directors, including Mak Siew Wei, who is also a substantial shareholder of SCAN. Mak held a direct 6.19% stake comprising 12.38 million shares as at March 27.

Additionally, the two founders are seeking to appoint Norbik and three other long-time SCAN employees to the board.

Norbik tells digitaledge Weekly that he is keen to return to SCAN Associates to turn things around. However, the current board would have to step down as part of the founder’s plan.

“The information security business is sensitive, particularly if you are providing services to critical public sector agencies. And usually, the big projects are in the public sector. One of the main issues over the past few years has been the company’s inability to restore the bumiputera ownership threshold. Despite numerous reminders, the board has failed to address the problem,” Norbik says.

According to him, the bumiputera ownership threshold is crucial to the company because it deals with sensitive information as an ICT security solutions provider. The threshold, which classifies a company as having substantial local equity ownership, is a criterion for firms to qualify for certain projects by government agencies and government-linked corporations.

“The company has lost as much as RM100 million in contracts over the past two to three years because of this issue. Nevertheless, our technical expertise is among the best in the sector, although the company needs to start moving in the right direction,” Norbik says.

He had resigned on June 30 mainly because he was dissatisfied with the board of directors.

A proposed private placement lapsed on June 18 as the company was obligated to come up with an all-new regularisation plan following Bursa’s Guidance Note 3 ruling on May 11. According to the regulator, SCAN had recorded aggregate full-year losses that exceeded its shareholders’ funds, triggering the classification.

Apart from SCAN’s existing troubles, it is also said to be considering suing Bursa for damages for classifying it a GN3 company without justification. The suit is spearheaded by Mak, who has assumed a more active role in the company following the classification.

While Mak would not comment on the tussle when contacted, he clarifies that he has not shed his shareholding in SCAN. Sources tell digitaledge Weekly that he is considering the requisition of an EGM.

However, what SCAN needs to do urgently is to regularise its financial condition and recapitalise. It is running out of cash, as shown by its cash and bank balance of just RM157,000 as at March 31.

“[The lawsuit] would be quite meaningless now. Sadly, the perception of clients and investors is that, like it or not, you are already a GN3 company. Even if it wins the case, business has already suffered. So, shareholders should ask, ‘Why the need to go through this ‘roller-coaster’ exercise with Bursa?’” Norbik says.

He and Hussin may have the backing of SCAN’s long-term minority shareholders but the EGM could go either way. The two founders collectively hold a 10.59% stake, comprising 21 million shares, in SCAN but nearly half of the company’s shares are publicly traded on the open market.

Norbik admits that he does not know if Yeoh is aligned with the party asking for the removal of SCAN’s board, although the latter emerged as a substantial shareholder at around the same time as Hussin.

But given the recent developments and upheaval at SCAN, its minority shareholders may finally have a say in how the company should be run. “We are hoping SCAN’s shareholders will support our offer to correct all these wrongs. We founded the company, established it and know what its strengths and weaknesses are,” Norbik says.

This article first appeared in digitaledge Weekly, on August 10 - 16, 2015.