Bangkok, 19 September 2019 – The SEC encouraged the shareholders of Global Service Center Public Company Limited (GSC) to exercise their rights, at the Extraordinary General Meeting of Shareholders on 25 September 2019, to consider and confirm the granting of financial assistance to Asia Capital Group Public Company Limited (ACAP) but the independent financial advisor (IFA) is of the view that the transaction is unreasonable, inappropriate, and that the shareholders should not approve this transaction.
GSC had applied the proceeds from the offer of sale of ordinary shares to the public (IPO) and its revolving capital in a loan to ACAP, its major shareholder (64%) for a short term at the interest rate of 2% per annum as follows: 1. A loan by the disbursement of advance payments in the amount of THB 80 million, whereby GSC has received the principal repayment and will collect payment of interest, and 2. investing in five short-term promissory notes (P/N) of ACAP, for a term of 60 days, or on demand, and without any collateral, two promissory notes are pending the repayment of principal, totaling THB 130 million and interest.
In addition, this loan is considered a connected transaction as GSC and ACAP have the same directors. However, GSC did not seek approval from the shareholders in compliance with the Notification on Connected Transactions. The Board of Directors resolved to propose the matter at the Extraordinary General Meeting of Shareholders in order to seek confirmation from the shareholders on the transaction on 25 September 2019.
The independent financial advisor (IFA) was of the opinion that the shareholders should not approve the confirmation of the connected transaction because the transaction was unreasonable and inappropriate. For example, the interest rate of 2% per annum is relatively low compared with an investment with lower risks, and the interest rate is also lower than other loans that ACAP secured from other persons which were at the rates of 4.40% – 8.00% per annum. Furthermore, the lending period was not clear; there is a risk of default on the debt repayment; the use of proceeds was not in accordance with the objective of the capital increase of the IPO; and the transaction was not in compliance with the liquidity management policy.
If the meeting resolves to not confirm the transaction, GSC is required to cancel the transaction and to follow up ACAP in making repayment of the remaining principal and payment of interest immediately.
However, the Board of Directors and the Audit Committee of GSC were of the opinion that the interest rate of 2% per annum was a better return than that of the liquidity management of the company in the past. In addition, the reason for not properly entering into the transaction in accordance with the Notification on Connected Transactions was because it was mistaken believed that the lending was merely liquidity management. However, the Board of Directors had resolved that ACAP shall make payment of the outstanding P/N of THB 130 million by 23 September 2019.
Accordingly, the transaction was considered a connected transaction. Therefore, the transaction must be approved at a meeting of shareholders by a vote of not less than three-quarters of the total votes of the shareholders attending the meeting and having the right to vote, without counting the votes of the shareholders who have an interest in the matter.
The shareholders are strongly advised to review the information and exercise their right to protect their interest, as well as to enquire for information from the executives of GSC in order to have complete information for their decision-making.
_________________________