FBC had on 3 December 1998 entered into two separate Sale And Purchase Agreements to purchase 51% equity interest in Sanbumi Sawmill Sdn Bhd (Sanbumi) for a cash consideration of RM34,394,237 and a 51% equity interest in Akalaju Sdn Bhd (Akalaju) for a cash consideration of RM3,585,565. Both the companies are involved in the manufacturing and marketing of sawn and moulded timber and related activities such as finger-joint and laminated woods, trading of logs, sawntimber and timber related products. FBC, on the other hand, is a construction-based company.

While the SC takes cognizance of the operational independence of a listed entity and the commercial reality for a company to take on new businesses, the acquisition of Sanbumi and Akalaju by FBC, however, represents a departure from their core business. This is not in line with Section 7.08 of the SC Guidelines which clearly stipulates that a company which has been approved for listing should not be used as a vehicle for venturing into other activities not related to its original core business for at least three years following listing. In that period, the directors of newly listed companies should give priority to managing and expanding its existing core business. In the case of FBC, it has been listed on KLSE for only less than three years before it acquired controlling interest in Sanbumi and Akalaju. In this respect, the SC's approval letter dated 9 September 1997 in relation to FBC's listing application had expressly stated that FBC should fully comply with the relevant requirements as provided for under Chapter 7 the SC Guidelines.

The SC also wishes to emphasise that the merit of the acquisitions itself was not an issue. FBC should have submitted an application to the SC for approval for the acquisitions or for a waiver from complying with the requirements under section 7.08 of the SC Guidelines with appropriate justifications.

The SC takes a serious view of FBC's failure to observe its post-listing obligation and such failure is a serious breach of the principle of good corporate governance which reflects poorly on the conduct of the directors of the company. In this regard, FBC was given due opportunity to explain its case to the SC. The explanations as provided by FBC were found to be unsatisfactory. Being guardians of a listed entity, the Directors of FBC should have discharged their duties and responsibilities in a more diligent and responsible manner.

Public-listed companies, including their principal shareholders and directors as well as advisers, are reminded and expected to comply with all the SC Guidelines and conditions of approval applicable to them. They must at all times discharge their duties in a responsible and professional manner, with due care and diligence. This is important to uphold market integrity and ensure that the interests of investors at large and minority shareholders are well served.