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STATEMENT OF CORPORATE GOVERNANCE

 

The Board of Directors (“Board”) is committed to uphold the high standards of corporate governance within the Group, as it is a fundamental part of discharging its responsibility to protect and enhance shareholders value and the performance of the Group.

 

This corporate governance statement (“Statement”) sets out how the Company has applied the 8 Principles of the Malaysian Code an Corporate Governance 2102 (“MCCG2012”) and observed the 26 Recommendations supporting the Principles following the release of the MCCG 2012 by the Securities Commission in late March 2012. Where a specific Recommendation of the MCCG 2012 has not been observed during the financial period under review, the non-observation, including the reasons thereof and where appropriate, the alternative practice, if any, is mentioned in this statement.

 

Principle 1 – Establish clear Roles and Responsibilities of the Board and Management

 

The Board recognizes the key role it plays in charting the strategic direction of the Company and has assumed the following principle responsibilities in discharging its fiduciary and leadership functions:

 

·        reviewing and adopting a strategic plan for the Company’s, which also addresses the sustainability of the Group’s business;

 

·        overseeing the conduct of the Company’s and subsidiaries (“Group”) business and evaluating whether or not its business are being properly managed;

 

·        identifying principal business risks faced by the Group and ensuring the implementation of appropriate internal controls and mitigating measures to address such risks;

 

·        ensuring that all candidates appointed to senior management positions are of sufficient caliber, including having in place a process to provide for the orderly succession of senior management personnel and members of the Board;

 

·        overseeing the development and implementation of a shareholder communications policy; and

 

·        reviewing the adequacy and integrity of the Group’s internal control and management information systems.

 

·        ensuring that the Group adheres to high standards of ethnics and corporate behavior

 

·        delegates certain responsibilities to the various Board Committees with clearly defined terms of reference to assist the Board in discharging its responsibilities

 

·        establish and formalize strategies on promoting sustainability. Attention shall be given to environment, social and governance aspects of business which underpin sustainability

 

·        succession planning, including ensuring all candidates, appointed to senior management positions are of sufficient caliber and programmes are in place to provide for orderly succession of senior management.

 

 

To assist in the discharge of its stewardship role, the Board has established Board Committee, namely the Audit Committee, Nomination Committee and Remuneration Committee, to examine specific issues within their respective terms of reference as approved by the Board and report to the Board with their recommendations. The ultimate responsibility for decision making, however, lies with the Board.

 

 

(i)      Board Composition and Balance

 

The Board consists of qualified individuals with diverse professional backgrounds, age, gender and specialisations with vast range of experience in the field of information and technology, finance and management to enable them to discharge their duties and responsibilities effectively. The composition and the size of the Board is such that it facilitates the decision making of the Company. Pursuant to the Articles of Association of the Company, the Board shall not be less than two (2) Directors and more than nine (9) Directors.

 

In accordance with the Listing Requirements of Bursa Securities, the Company must ensure that at least two (2) Directors or one-third (1/3) of the Board, whichever is the higher, are Independent Directors. If the number of Directors of the Company is not three (3) or a multiple of three (3), then the number nearest one-third(1/3) must be used. The Board currently has seven (7) members comprising the following:-

 

·One (1) Independent Non Executive Chairman

·One (1) Senior Independent Non-Executive Director

·One (1) Independent Non-Executive Director

·One (1) Managing Director; and

·Three (3) Executive Directors.

 

 

The basis for the presence of an independent voice on the Board is to ensure that objectivity in decision-making of the Board is achieved and that no single party can dominate such decision-making in the Company.

 

On boardroom diversity, the Board will review the appropriate skills, experience and knowledge required of the Board members, in the context of the needs of the Group. The Board will review its composition and size from time to time to ensure its appropriateness.

 

 

(ii)    Board Charter

 

The Board has establish clear functions reserved for the Board and those delegated to Management to enhance accountability. There is a formal schedule of matters reserved to the Board for its deliberation and decision to ensure the direction and control of the Company are in its hands. Key matters reserved for the Board include. Inter–alia, quarterly and annual financial statements for announcement, investment and divestment, as well as monitoring of the Group’s financial statements and operating performance. Such delineation of roles is clearly set out in the Board Charter (“Charter”), which serves as a reference point for the Board activities. The Charter provides guidance for directors and Management regarding the responsibilities of the Board, its Committees and management, the requirements of Directors in carrying out their stewardship role and in discharging their duties towards the Company as well as boardroom activities. The salient features of the Charter are disclosed in the Company’s website at www.boilermech.com in line with recommendation 1.7 of the MCCG 2012.

 

(iii)  Code of Ethics

 

At the date of this statement, the Board has formalized a Director’s Code of Ethics, setting out the standards of conduct expected from Directors. To inculcate good ethical conduct, the Group has established a Code of Conduct for employees.

 

The Board has also formalized a Whistle-blowing Policy, with the aim of providing an avenue for raising concerns relating to possible breaches of business conduct, noncompliance of laws and regulatory requirements as well as other malpracitces. The board recognizes the importance of adhering to the Code of Ethics and has taken measures to put in place a process to ensure its compliance.

 

(iv)   Sustainability of Business

 

The Board is mindful of the importance of business sustainability and, in conducting the Group’s business, the impact on the environmental, social and governance aspects is taken into consideration. The Group also embraces sustainability in its operations. The Group’s activities on corporate social responsibilities for the financial period under review are disclosed Report in the Corporate Social Responsibility Report section of this Annual Report.

 

(v)     Access to Information and Advice

 

Directors are provided with relevant information and reports on financial, operational, corporate, regulatory, business development and audit matters for decisions to be made on an informed basis and effective discharge of the Board’s responsibilities.

 

Procedures have been established for timely dissemination of Board and Board Committee papers to all Directors prior to the Board and Board Committee meetings, to facilitate decision making by the Board and to deal with matters arising from such meetings. Senior management of the Group and external advisers are invited to attend Board meetings to provide additional insights and professional views, advice and explanations on specific items on the meeting agenda. Besides direct access to Management, Directors may obtain independent professional advice at the Company’s expense, if considered necessary, in accordance with stablished procedures set out in the Board Charter in furtherance of their duties.

 

Directors have unrestricted access to the advice and services of the Company Secretaries to enable them to discharge their duties effectively. The Board is regularly updated and advised by the Company Secretaries who are qualified, experience and competent on statutory and regulatory requirements and the resultant implications of any changes therein to the Company and Directors in relation to their duties and responsibilities.

 

 

(vi)   Separation of Positions of the Chairman and Managing Director

 

There is clear division of the roles and responsibilities between the Company’s Chairman and Managing Director to ensure a balance of control, power and authority. The Board is led by Tan Sri Datuk Mohd Zaman Khan @ Hassan B Rahim Khan as Independent Non Executive Chairman and the executive management is led by Mejar (K) Datuk Wira Lee Wah Chong, the Managing Director.

 

The Chairman is responsible for ensuring Board effectiveness and conduct of the Board. The Managing Director assumes the overall responsibility for the Group’s operational activities and effectiveness and implements the Board’s policies. strategies and decisions. The Managing Director is responsible to the Board for day-day management of the Company and the Group. The role of the Chairman and the Managing Director are clearly defined in the Board Charter.

 

(vii)  Qualified and Competent Company Secretary

 

The Board is supported by Company Secretaries in discharging its duties and functions. The Directors have unrestricted access to the advise and services of the Company Secretaries to enable the Directors to discharge their duties effectively.

 

The Company Secretaries ensure that the Board is regularly updated on relevant regulatory requirements, codes or new statutes issued from time to time. Also ensuring that, all obligations required by the regulatory and under the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Berhad (“Bursa”) are fulfilled in a timely manner.

 

 

Principle 2 – Strengthen Composition of the Board

 

During the financial period under review, the Board consisted of seven (7) member, comprising four (4) Executive directors and Three (3) independent Non-Executive Directors. This composition fulfills the requirements as se out in the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa”), which stipulate that at least two (2) Directors or one-third of the Board, whichever is higher, must be independent. The profile of each Director is set out in the Directors’ Profile section of this Annual Report. The Directors, with their diverse backgrounds and specializations, collectively bring with them a wide range of experience and expertise in areas such as engineering, entrepreneurship, finance, taxation, accounting and audit; legal and economics.

 

(i)      Nomination Committee – Selection and Assessment of Directors

 

The Nomination Committee conducted an assessment of the performance of the Board, as a whole, the Audit, Nomination and Remuneration Committees and individual Directors, based on a self and peer assessment approach. From the results of the assessment, including the mix of skills and experience possessed by Directors, the Board considered and approved the recommendations on the reelection and re-appointment of Directors at the Company’s forthcoming annual General Meeting.

 

The Nomination Committee recognizes the importance of the roles the Committee plays not only in the selection and assessment of Directors but also in other aspects of corporate governance which the Committee can assist the Board to discharge its fiduciary and leadership functions. The Nomination Committee comprises the following members:

 

  • Tan Sri Datuk Mohd Zaman Khan @ Hassan B Rahim Khan (Independent Non-Executive Chairman);
  • Dato’ Haji Ishak Bin Haji Mohamed (Independent Non-Executive Director); and
  • See Tai Soon -resigned on 26 May 2016 (Independent Non-Executive Director)
  • Thee Kok Chuan -appointed on 26 May 2016 ( Independent Non-Executive Director)

 

The Board has stipulated specific terms of reference for the Nomination Committee, which cover, inter-alia, assessing and recommending to the Board the candidacy of Directors, appointment of Directors to Board Committees and training programmers for the Board. The terms of reference require the Nomination Committee to review annually the required mix of skills and experience of Directors; succession plans and board diversity, including gender diversity; training courses for Directors and other qualities of the Board, including core-competencies which the independent Non-Executive Directors should bring to the Board, The Committee is also entrusted to assess annually the effectiveness of the Board, as a whole, Board Committees and contribution of each individual Director. Insofar as board diversity is concerned, the Board does not have a specific policy on setting targets for women candidates. The evaluation of candidates’ suitability is solely based on their competency, character, time commitment, integrity and experience in meeting the needs of the Company, including, where appropriate, the ability of the candidates to act as Independent Non-Executive Directors, as the case may be.

 

(ii)    Directors’ Remuneration

 

The Remuneration Committee, established by the Board, is responsible for setting the policy framework and recommending to the Board the remuneration of Directors so as to ensure that the Company is able to attract and retain its Directors needed to run the Group successfully. The components of Directors’ remuneration are structured so as to link rewards to corporate and individual performance in the case of Executive Directors. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the individual Non-Executive Director concerned. Directors do not participate in discussion of their individual remuneration.

 

 

Principle 3 – Reinforce Independence of the Board

 

The positions of Chairman and Chief Executive officer of the Company are held by the Non-Independent Non-Executive Chairman and Managing Director respectively. The Independent Non-Executive Directors are not employees and they do not participate in the day-to-day management as well the daily business of the Company. The Nomination Committee and the Board have upon their annual assessment, concluded that each of the three (3) Independent Non-Executive Directors continues to be independent minded, demonstrates conduct and behavior that are essential indicators of independence, and that each of them continues to fulfill the definition of independence as set out in MMLR.

 

The Chairman is responsible for ensuring the adequacy and effectiveness of the Board’s governance process and acts as a facilitator at board meetings to ensure that contributions from Directors and forthcoming on matters being deliberated and that no Board member dominates discussion. As the Managing Director, supported by fellow Executive Directors and an Executive Management team, he implements the Group’s strategies, policies and decision adopted by the Board and oversees the operations and business development of the Group.

 

The Independent Non-Executive Directors bring the bear objective and independent views, advice and judgment on interest, not only of the Group, but also of shareholders, employees, customers, suppliers and the communities in which the Group conducts its business. Independent Non-Executive directors are essential for protecting the interests of shareholders and can make significant contributions to the Company’s decision making by bringing in the quality of detached impartiality.

 

During the financial period under review, the Board assessed the independence of its independent Non-Executive directors based on criteria set out in the Listing Requirements of Bursa. The Board Charter provides a limit of a cumulative term of nine (9) years on the tenure of an Independent Director. However, an Independent director may continue to serve on the Board upon reaching the 9-year limit subject to the Independent Director’s re-designation as a Non-Independent Non-Executive Director. In the event the Board intends to retain the Director as Independent after the latter has served a cumulative term of nine (9) years, the Board must justify the decision and seek shareholders’ approval at general meeting. In justifying the decision, the Board is required to assess the candidate’s suitability to continue as an Independent Director based on the criteria on independence as adopted by the Board.

 

At the date of this Statement, none of the Independent directors has exceeded the 9-year independence tenure.

 

Principle 4 – Foster Commitment of Directors

 

The Board ordinarily meets at least ($) times a year, scheduled well in advance before the end of the proceeding financial period to facilitate the Directors in planning their meeting schedule for the year. Additional meeting are convened when urgent and important decisions need to be made between schedule meetings. Board and Board Committees papers, which are prepared by Management, provide the relevant facts and analysis for the convenience of directors. The meeting agenda, the relevant reports and Board papers are furnished to Directors and Board Committees members before the meeting to allow the Directors sufficient time to peruse for effective discussion and decision making during meetings. At the quarterly board Meetings, the Board reviews the business performance of the Group and discusses major operational and financial issues. All pertinent issues discussed at board meetings in arriving at the decisions and conclusions are properly recorded by the Company Secretaries by way of minutes of meetings.

 

All other directors have complied with the minimum 50% attendance requirements in respect of board meetings as stipulated by the MMLR.

 

As stipulated in the Board Charter, the Directors shall devote sufficient time and efforts to carry out their responsibilities. The board shall obtain this commitment from Directors at the time of their appointment. Each Director is expected to commit time as and when required to discharge the relevant duties and responsibilities, besides attending meetings of the Board and Board Committees.

 

Directors Training – Continuing Education Programmes

 

The Board is mindful of the importance for its members to undergo continuous training to be apprised on changes to regulatory requirements and the impact such regulatory requirements have on the group.

 

All directors have attended the Mandatory Accreditation Programme (“MAP”) as required by the MMLR on all directors of listed companies and the Board will continue to evaluate and determine the training needs of its Directors on the on-going basis. During the year, the Directors have attended various seminars or briefings which they have collectively or individually considered as useful in discharging their stewardship responsibilities.

 

The Company Secretaries circulates the relevant guidelines on statutory and regulatory requirements from time to time for the Board’s reference and brief the Board on these updates, where applicable. The Accountant and External Auditors also brief the Board members on any changes to the Malaysian Financial Reporting Standards that affect the Group’s financial statement during the financial period under review. The Directors continue to undergo relevant training programmes to further enhance their skills and knowledge in the discharge of their stewardship role.

 

Principle 5 – Uphold integrity in financial reporting by the Company

 

(a)          Financial Reporting

 

It is the Boards commitment to present a balanced and meaningful assessment of the Group’s financial performance and prospects at the end of each reporting period and financial period, primarily through the quarterly announcement of Group’s results to Bursa, the annual financial statements of the Group and Company as well as the Chairman’s statement and review of the Group’s operations in the Annual Report, where relevant.

 

(b)          Audit Committee

 

The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and the Company as at the end of the reporting period and of their results and cash flows for the period then ended. To assist in its discharge of its duties on financial reporting, the Board has established an Audit Committee, comprising exclusively Independent Non-Executive Directors, with Tan Sri Datuk Mohd Zaman Khan @ Hassan B Rahim Khan as the Committee Chairman. The composition of the Audit Committee, including its roles and responsibilities, are set out in the Audit Committee Report section of this Annual Report. One of the key responsibilities of the Audit Committee in its specific terms of reference is to ensure that the financial statements of the Group and Company comply with applicable financial reporting standards in Malaysia and provisions of the Companies Act, 1965. Such financial statements comprise the quarterly financial report announced to Bursa and the annual statutory financial statements.

 

The Board understands its role in upholding the integrity of financial reporting by the Company. Accordingly, the Audit Committee, which assists the Board in overseeing the financial reporting process of the Company, has adopted a policy for the types of non-audit services permitted to be provided by the external auditors, including the need for the Audit Committee’s approval in writing before such services can be provided by the external auditors. To address the “self review” threat faced by the external audit firm, the procedures included in the policy require the engagement team conducting the non-audit services to be different from the external audit team.

 

The Audit and Risk Management Committee meets with the external auditors at least twice a year without the presence of the management to review the scope and adequacy of the audit process, the annual financial statements and their audit findings. The Audit and Risk Management Committee also meets additionally with the external auditors whenever it deems necessary. The service provided by the external auditors includes statutory audits and non-audit services. The term engagement and fees for external and internal auditors are reviewed by the Audit and Risk Management Committee and subsequently recommended to the Board for approval.

 

(c)          Assessment of External Auditors

 

In assessing the independence of external auditors, the Audit Committee requires written assurance by the external auditors, confirming that they are, and have been, independent throughout the conduct of the audit engagement with the Company in accordance with the independence criteria set out by the International Federation of Accountants and the Malaysian Institute of Accountants.

 

Principle 6 – Recognise and manage risks of the Group

 

The Board regards risk management and internal controls as an integral part of the overall management processes. The following represents the key elements of the risk management and internal control structure:

 

a)      The establishment of a Risk Management Unit (“RMU”) which is entrusted to ensure the implementation of an effective risk management system and to review the adequacy and integrity of the Group’s internal control and management information system.

 

b)      An organizational structure in the Company with formally defined lines of responsibility and delegation of authority.

 

c)      Review and approval of annual business plan and budget of all major business units by the Board. This plan sets out the key business objectives of the respective business units, the major risks and opportunities in the operations and ensuing action plans;

 

d)      Quarterly review of the Group’s business performance by the Board, which also covers the assessment of the impact of changes in business and competitive environment; and

 

e)      Active participation and involvement by the Managing Director, supported by his fellow Executive Directors in the day-to-day running of the major businesses and regular discussions with senior management personnel on operational issues.

 

f)       Monthly financial reporting by the subsidiaries to the holding company.

 

Recognising the importance of having risk management processes and practices, the Board has formalized a risk management framework to enable Management to identify, evaluate, control, monitor and report to the Board the principle business risks faced by the Group on an ongoing basis, including remedial measures to be taken to address the risks.

 

The Board has an overall responsibility for maintaining a system of internal controls that provides reasonable assurance of effective and efficient operations and compliance with the applicable laws and regulations, as well as with internal procedures and guidelines.

 

The size and complexity of the operations of the Company and the Group involve the management of a wide variety of risks. The nature of these risks means that events may occur which would give rise to unanticipated or unavoidable losses. The Company’s and the Group’s system of internal controls are designed to provide reasonable and not absolute assurance against the risk of material errors, frauds or losses occurring.

 

The effectiveness of the system of internal controls of the Company and the Group is reviewed by the Audit and Risk Management Committee during its periodic meetings. The review covers the financial, operational and compliance controls as well as the process for identification, evaluation and management of the significant risks faced by the Company and the Group.

 

In line with the MCCG 2012 and the Listing Requirements of Bursa, the Company outsourced its internal audit function to an independent professional firm to assess the adequacy and effectiveness of the Group’s governance, risk management and internal control systems. The internal audit function, which reports directly to the Audit Committee, is guided by professional standards promulgated by the institute of Internal Auditors Inc, a globally recognized professional body for internal auditors. The internal audit function is independent of the activities it audits and the scope of work covered by the internal audit during the financial period under review is provided in the Audit committee Report section of this Annual Report.

 

Principle 7 – Ensure timely and high quality disclosure

 

The Board is aware of the need to establish corporate disclosure policies and procedures to enable comprehensive, accurate and timely disclosures relating to the Company and its subsidiaries to be made to the regulators, shareholders and stakeholders. Accordingly, the Board has adopted and formalized pertinent corporate disclosure policies not only to comply with the disclosure requirements as stipulated in the Listing Requirements of Bursa , but also setting out the persons authorize and responsible to approve and disclose material information to regulators, shareholders and stakeholders. To augment the process of disclosure, the Board has earmarked a section on the Company’s website, where information on the Company’s announcement to the regulators, the salient features of the Board Charter and the Company’s Annual Report may be accessed.

 

Principle 8 – Strengthen relationship between the Company and its shareholders

 

i)        Shareholder participation at general meeting

 

The Annual General Meeting (“AGM”), which is the principal forum for shareholder dialogue, allows shareholders to review the Group’s performance via the Company’s Annual Report and pose questions to the Board for clarification. At the AGM, shareholders participate in deliberating resolutions being proposed or on the Group’s operations in general. At the last AGM, a question & answer session was held where the Chairman of the meeting invited shareholders to raise questions with responses from the Board and Senior Management. The Notice of AGM is circulated at least twenty-one (21) days before the date of the meeting to enable shareholders to go through the Annual Report and papers supporting the resolutions proposed. All the resolutions set out in the Notice of the last AGM were put to vote by show of hands and duly passed. The outcome of the AGM is announced to Bursa on the same meeting day.

 

ii)     Communication and engagement with shareholders and prospective investors

 

The Board recognizes the importance of being transparent and accountable to the Company’s shareholders and prospective investors. The carious channels of communication are through meetings with institutional shareholders and investment communities, quarterly announcements on financial results to Bursa, relevant announcements and circulars, when necessary, the Annual and Extraordinary General Meeting and access corporate information, annual reports, press releases, financial information, company announcements and share prices of the Company. To maintain a high level of transparency and to effectively address any issues or concerns, the Group has a dedicated electronic mail, i.e. digista@digistar.com.myto which shareholders can direct their queries or concerns.

 

 

 

 

 

COMPLIANCE WITH CODE

 

 

The company has complied with the Malaysian Code on Corporate Governance and observed its best practices throughout the year.


 
 
 
     

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