Oct 4 2007, 11:26 PM, updated 19y ago
AN ACRIMONIOUS shareholder dispute at one of Malaysia's main luxury car importers is set to offer a peek into the workings of the country's coddled auto industry, and could undermine foreign investor sentiment.
Singapore businessman Alfred Tan Chor How and his son Edward Tan told The Straits Times they plan to sue their Malaysian partner, Tan Sri Nasimuddin Amin, and the Malaysian government for their actions that allegedly led to them losing their lucrative franchise to distribute Ferrari cars in Malaysia.
The Tans and Tan Sri Nasimuddin are partners of Next Car, a private concern that until recently owned the franchise to import Ferrari cars into Malaysia since 1996.
But the partnership broke down in June after the Tans initiated moves to remove Tan Sri Nasimuddin as chairman of Next Car on grounds that he allegedly undermined the company's business reputation.
Since then, the Tans say that they and their other partners in Malaysia have been victims of a campaign that eventually destroyed their business.
Two of their Malaysian partners were arrested by the Anti-Corruption Agency, which has also demanded the two Singapore businessmen return to Malaysia for questioning.
The Tans have refused to return to Malaysia and have filed a police report in Singapore citing concerns over their safety.
'We just want what is fair,' says the younger Mr. Tan, whose family company Hong Seh has been the sole distributor of Ferrari in Singapore since 1984.
A legal battle to resolve the shareholder dispute will be watched closely by local and foreign investors because it will offer a glimpse into the opaque workings of Malaysia's auto import industry, a business that is worth close to one billion ringgit (S$438 million) annually.
Under the system that began in the mid-1970s, the Ministry of International Trade and Industry issues approved permits or APs, which every car manufactured or assembled outside Malaysia must secure before it can be imported or sold locally.
The licensees are usually companies that are majority controlled by ethnic Malay investors, who receive the APs without any open tender and at no cost to the recipient. These APs are then sold to auto distributors for prices ranging between RM10,000 and RM50,000, depending on the make and model.
Over the past three decades, this controversial import licensing scheme has enriched a small group of well-connected ethnic Malay businessmen. One of the wealthiest license-holders is Tan Sri Nasimuddin, who heads the privately held Naza Group. He did not respond to requests for comment on this article.
Because of Malaysia's ownership laws in the auto sector, the Tans invested in Next Car by providing the initial seed money for the Ferrari franchise business to two ethnic Malay business partners, who controlled 60 per cent of the company. Tan Sri Nasimuddin, who has been Next Car's chairman since the company was incorporated in 1996, held the remaining 40 per cent.
Troubles began to surface at Next Car in mid-2005 after the Tans and Tan Sri Nasimuddin started to disagree over the direction of the auto importing business.
In June this year, the Tans sought to take a joint 30 per cent interest in the car distribution concern and remove Tan Sri Nasimuddin as chairman.
Under their plan, Mr Mohd Zain and Ms Radhiah would each sell half of their holdings in the company to the elder and younger Tan at a price that would be determined by independent financial consultants.
At a board of directors meeting on June 8, Tan Sri Nasimuddin objected to the planned sale of shares to the Tans, but was outvoted by both Mr Mohd Zain and Ms Radhiah.
According to minutes of the directors' meeting seen by The Straits Times, Mr Nasimuddin warned that Next Car risked losing its APs for the import of its luxury autos.
Shortly after that, on June 12, Next Car received a notice from Ministry of International Trade and Industry secretary-general Abdul Rahman Mamat, stating that all its AP allocations had been suspended with immediate effect.
The company's plan to re-organise its shareholding was said to be in breach of ownership rules set by the government for auto importers.
Why the Ministry of International Trade and Industry reacted without calling for an inquiry into the proposed shareholding change is not clear. Datuk Abdul Rahman did not respond to requests for comment.
Two days later, officers from Malaysia's Anti-Corruption Agency visited Next Car's office. Ms Radhiah was detained for more than four hours by agency officers and was made to sign documents to state that she was a corporate nominee for the Tans, lawyers close to the Singaporean businessman say.
On June 19, Mr Mohd Zin went to the agency's headquarters voluntarily where he was detained for questioning for one week. Immediately after his release, the agency seized the shares of Next Car held by Mr Mohd Zin and Ms Radhiah.
A senior agency official involved in the investigation into Next Car said the agency had received a corruption complaint against the company, but declined to identify the complainant.
From Singapore, the Tans sought to clarify matters with the Malaysian authorities through their lawyers. But they never got far.
As the problems with the Malaysian government deepened, Ferrari told the Tans on August 8 that it was terminating the franchise agreement in Malaysia with Next Car.
http://www.straitstimes.com/Free/Story/STIStory_162949.html
S'pore duo 'edged out' of Malaysian car deal
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