KUALA LUMPUR (Dec 15): Tethystronics Technologies Company Ltd (TTCL), an indirect shareholder of SilTerra Malaysia Sdn Bhd, has filed an arbitration notice against the company and its sister company DNeX Semiconductor Sdn Bhd (DDSB) over a dispute concerning the appointment of directors to the board of SilTerra.

In a filing with Bursa Malaysia, Dagang Nexchange Bhd — the parent company of SilTerra and DSSB — said the dispute arises from a clause in a shareholders agreement that concerns SilTerra’s board of directors.

The clause stipulates that SilTerra’s board will comprise a maximum of five directors unless unanimously agreed upon by TTCL and DSSB; that the composition of the board will be mutually agreed upon by both companies; that the board will at all times comprise two persons appointed by DSSB and three persons appointed by TTCL; and that both companies have the right to remove the person they have respectively appointed as director.

“However, we have been advised that the [agreement] is not binding in the respondents for legal reasons that shall be made clear in the formal reply to be filed under the [Asian International Arbitration Centre Arbitration Rules, 2021],” it said.

“Further, the respondents have been advised they have legal authority and basis to appoint additional directors. [DSSB] has passed the necessary member’s written resolutions (MWR) to appoint additional directors in accordance to the prevailing terms of the constitution,” it added.

TTCL is seeking, among others, declarations that the MWR and any of the disputed board appointments are illegal, null, void, and/or unenforceable.

It is also seeking a declaration that the directors’ written resolution on Nov 21 to rescind a resolution of SilTerra’s board passed on Nov 17 and any such resolution passed with the votes of the impugned directors are illegal, null, void, and/or unenforceable.

TTCL is also seeking an order that DSSB and SilTerra take the necessary steps to comply with their obligations under the shareholders’ agreement.

TTCL is the owner of Mimastronics Technologies Company Ltd (MIMAS), which owns a 40% stake in SilTerra. The remaining 60% is owned by DNeX.

Meanwhile, TTCL’s ultimate owner is Beijing Integrated Circuit Advance Manufacturing and High-End Equipment Equity Investment Fund Centre (Limited Partnership), better known as CGP.

TTCL has also filed an originating summons and a notice of an ex-parte application against SilTerra and DDSB seeking injunctive relief and remedies, among others, against the defendants.

In a separate statement, DNeX executive chairman Tan Sri Syed Zainal Abidin Syed Mohamed Tahir said: “As a majority shareholder, we have exercised our rights to strengthen our position and to ensure that SilTerra’s business continues to do well. Part of the action taken was to strengthen the SilTerra board by bringing in experienced subject matter experts into the board. This move by DNeX is governed by SilTerra’s constitution. We have the right to nominate directors as a majority shareholder pursuant to SilTerra’s Constitution. These actions are now being contested by TTCL.

“TTCL’s Originating Summons was filed solely to obtain an injunction to restrain the new board members from acting as Directors and exercising their rights as Directors of SilTerra. However, TTCL is not seeking any orders or relief to remove the new board members in the said originating summons."

In November, DSSB had issued and served a notice of arbitration to commence arbitration proceedings against MIMAS. The dispute centres around whether prior approval is needed from the Ministry of International Trade and Industry for a proposed investment of at least RM200 million by DNeX and CGP into SilTerra, by way of subscribing for new shares to be issued the company.

Based on DNeX’s 60% stake, the capital injection by DNeX will amount to about RM120 million.

Both parties sought to opt for the issuance of irredeemable convertible preference shares (ICPS) in DNeX Semi, amounting to RM100 million, to be issued to and subscribed by MIMAS. This would result in MIMAS holding a 33% stake in DNeX Semi.