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The Board of Directors strongly believes that good corporate governance forms an integral part of the Group’s corporate culture and business decision making process for long term sustainable business growth and the creation and protection of shareholders’ value.
The Company is well-placed to harmonise the corporate governance fundamentals with the principles and recommendations expressed in the Malaysian Code on Corporate Governance 2012 (“MCC G 2012”), except where stated otherwise, and this statement is to provide an insight into the Corporate Governance (“CG”) practices of the Group under the leadership of the Board.
All Board members are expected to show good stewardship and act in a professional manner, as well as uphold the core values of the Group. The Board has the overall responsibility for corporate governance, strategic direction, formulation of policies and overseeing the investment and business of the Group. The Board Charter (“Charter”) is established to reflect the current best practices and the applicable rules and regulations. The Board is guided by the Charter which provides reference for the directors in relation to their role, powers, duties and functions. The Charter outlines the processes and procedures for the Board and Board Committees to be effective and efficient. The Board will annually review the Charter to ensure its relevance in assisting the Board in discharging its duties and to remain consistent with the Board’s objectives and responsibilities.
The Board is responsible for the oversight and overall management of the Company. The Board takes full responsibility in leading, governing, guiding and monitoring the entire performance of the Group and enforces standards of accountability including the process for financial reporting, risk management and compliance.
The Board assumes, amongst others, the following duties and responsibilities:
The following are matters specifically reserved for the Board:-
The Board currently has seven (7) members, comprising three (3) executive and four (4) non-executive directors. The non-executive directors include the Chairman of the Board who is non-independent. The remaining three (3) non-executive directors are independent as defined in the Main Market Listing Requirements (“Listing Requirements”)
All directors of the Company have a wealth of experience as well as skills and knowledge of business and finance. The directors are professional in the field of engineering, finance and accounting. Together, they bring a wide range of competencies, capabilities, technical skills and relevant business experience to ensure that the Group continues to be a competitive player especially in construction industry with a strong reputation for professional competence and good paymaster. With their intimate knowledge of the Group’s businesses, the three executive directors take on the primary responsibility for the conduct of the Group’s businesses and operations. The executive directors, led by the Managing Director, have many years of experience in the Group’s core businesses and they practise “hands-on” style of management.
The Board recognises the importance of diversity in designing its composition and total manpower. The Board, through the Nomination and Remuneration Committee, will continuously review the composition of the Board and source for suitable independent directors to conform to the MCCG 2012. The Board, through Nomination and Remuneration Committee will also consider candidates from a number of aspects, including but not limited to gender, ethnic and age with the appropriate skills, experience and characteristics, cultural and educational background, regional and industry experience and exposure and professional experience as part of its selection exercise. The ultimate decision will be based on merit and contribution that the selected candidates will bring to the Board.
The Board considers that gender diversity contribute positively to the performance of the Board which is vital to the sustainability of the Group’s businesses. Currently, the Board has one (1) female director out of a total of seven (7) directors, representing approximately 14% of women participation in the boardroom. The Board will actively work towards having more female directors on the Board. The Board recognises that the evolution of the diversity is a long process and weighs the various factors relevant to board balance and diversity when vacancies arise.
The Nomination and Remuneration Committee is responsible in ensuring that diversity principles are adopted in board appointments, board performance evaluation and succession planning processes.
Overall, the Board is satisfied with the existing number and composition of the members and is of the view that the Board comprises a good mix of members with diverse experiences background to provide for a collective range of skills, expertise and experience which are relevant to support the growth and cope with the complexities of our businesses.
The Board noted that the MCCG 2012 recommends that the tenure of an independent director should not exceed a cumulative term of nine (9) years. The Company does not have term limits for independent directors as the Board believes that continued contribution provides benefit for the Board and the Company as a whole. The calibre, qualification, experience and personal qualities, particularly of the independent directors’ integrity and objectivity in discharging his/her responsibilities in the best interest of the Company predominantly determines the ability to serve effectively as independent directors.
Nevertheless, the Board is of the view that there are significant advantages to be gained from the long-serving independent directors who provide invaluable insight and possesses knowledge of the affairs of the Company.
Currently, there are three (3) independent directors who are able to exercise independents judgement on issues of strategy, performance and resources of the Group. None of the independent director’s tenure has exceeded a cumulative term of nine (9) years for the financial year 2015.
There is clear division of responsibility between the non-executive non-independent Chairman and Managing Director to ensure a proper balance of power and authority. The Managing Director has overall responsibilities over the operating units, organisational effectiveness and implementation of Board’s policies and decisions. The Chairman’s responsibility is to ensure effectiveness and proper conduct of the Board.
The MCCG 2012 recommends that the Board must comprise a majority of independent directors where the Chairman of the Board is not an independent director. The Board is chaired by Dato’ Ding Pei Chai, a founder member and a non-independent director. Notwithstanding the Chairman is not an independent director, the Board has not found it necessary to identify an independent director as Chairman for the time being. Due to Dato’ Ding Pei Chai’s intensive wealth of expertise and goodwill generated over the years that has benefited the Group, the roles of the Chairman remain vested in him for business efficiency and effectiveness. Although the Chairman is not an independent Director, all decisions of the Board are based on the decision of the majority of the Board members and matters are deliberated with active participation of the three (3) independent directors.
The Board has carefully assessed and reviewed the performance carried out by the existing independent directors of the Company and concluded that they are able to discharge their duties and responsibilities effectively to ensure that there is a balance of power and authority on the Board.
The presence of the independent directors fulfils a pivotal role in corporate accountability. Although all the directors are jointly responsible for the Group’s strategic business direction, the role of these independent directors is particularly important as they provide unbiased and independent views, advice and judgment taking into account the long term interests of our stakeholders, namely the Company’s shareholders, employees, customers, business associates and the community as a whole. Therefore, no individual director can dominates the decision making process.
The Managing Director is responsible for the day-to-day business operations of the Company, its subsidiaries and their respective operations supported by the senior management team to achieve the corporate objectives. The delegation of authority includes responsibility for:-
The Board delegates the management resources to the senior management team and has unrestricted access to any information pertaining to the Group. As such, the senior management key personnels are invited to attend all the Board meetings and Audit Committee meetings to furnish with explanations and comments on the agenda items tabled at the Board meetings and Audit Committee meetings or to provide clarification on issues that may be raised by the directors and Audit Committee members.
Currently, none of the members of the Board hold any directorship in any other public listed companies. In any event, each director is required to notify the Chairman of the Board prior to accepting directorships in other public listed companies incorporated in Malaysia as well as directorships in corporations with similar businesses operating in the same jurisdiction.
The Board is satisfied with the level of time commitment given by the directors toward fulfilling their roles and responsibilities as directors of the Company as noted in the full attendances in the Board meetings held during the financial year. Besides attending Board, Board Committees and general meetings, the directors also present at the Group’s corporate events such as projects launching, annual dinner and corporate social gatherings.
In order to facilitate the directors’ planning, an annual meetings calendar is prepared and circulated in advance of each new year. The calendar provides the directors with the scheduled dates for meetings of the Board and Board Committees and Annual General Meeting (“AGM”) of the Company.
The Board meets at least four (4) times a year and additional meetings are convened as necessary.
All directors have complied with the minimum 50% attendance requirement in respect of Board meetings as stipulated by the Listing Requirements. During the financial year, four (4) meetings were held. The following are the details of the attendance of each director in respect of the meetings held: The
The proceedings of Board meetings are conducted in accordance with a structured agenda together with board papers which were furnished to the directors in advance of each Board meeting so as to accord sufficient time for the directors to review the meeting materials before attending the meetings.
At the Board meetings, the Managing Director provides updates and progress of materials on-going projects and business development including overseas operations. All deliberations at Board meetings are duly minuted as records of proceedings. Decision made, policies approved and follow-up at Board meetings will be communicated to the management accordingly. In the intervals between Board meetings, for any matters requiring Board’s decisions, the Board’s approval is obtained through circular resolutions which are then noted at the next Board meeting.
All directors are invited to deliberate and discuss on any issues as they deem fit. Where a potential of conflict arises in the Group’s transactions involving any director’s interest, such director is required to declare his/her interest and abstain from the decision making process.
All directors have attended and completed the Mandatory Accreditation Programme prescribed by Bursa Securities. The directors are regularly updated by the Company Secretary on the new statutory as well as regulatory requirements relating to their duties and responsibilities. The directors will continue to attend other relevant training programmes to keep abreast with regulatory, business and financial developments on a continuous basis in compliance with paragraph 15.08 of the Listing Requirements.
During the financial year, the directors have attended regular briefings and updates conducted internally on the new statutory as well as regulatory requirements relating to their duties and responsibilities and also GST workshop conducted in-house. In addition, the following directors have also attended external training programmes to further broaden their perspective and knowledge and to keep abreast with the relevant changes in law, regulations and the business environment:
The Board shall, on a continuous basis, evaluate and determine the training needs of its members to assist them in the discharge of their duties as directors.
The Board is committed to creating a corporate culture within the Group to operate the businesses and affairs in an ethical and professional manner and to uphold the highest standards of integrity and exemplary corporate conduct.
The Board has formalised a Code of Conduct (“Code”) to assist the directors and all personnel of the Group in defining the ethical standards and conduct at work and beyond normal working hours which they should possess in discharging their duties and responsibilities at the highest standards of personal integrity and professionalism.
The Code covers the following core areas of conduct:
The Board will review the Code when deemed necessary to ensure it remains relevant and appropriate.
In line with the commitment to maintaining the highest possible standards of ethical and legal conduct within the Group, and in order to enhance good governance and transparency, the Board has developed a whistle blowing policy and procedure with the aim to provide and facilitate a mechanism for any persons to report concerns related to any suspected and/or known misconduct, wrongdoing, corruption, fraud, waste and/or abuse of which they become aware, and to ensure that the reporting person can report allegation of such malpractice or misconduct in an appropriate manner and without fear of retaliation.
Confidentiality and anonymity are offered to the reporting persons who report their concerns in good faith and in doing so, have to follow the appropriate channel of reporting accordingly. This will ensure that issues could be addressed to the appropriate person and proper course of actions could be taken.
The policy and procedures also include the contact details of the Audit Committee Chairman, being an independent director, should the reporting person be in doubt of the Management’s independence and objectivity on the concerns raised.
All reports will be investigated promptly and dealt with fairly and equitably. Actions will be taken based on the nature of the allegation and may be resolved by agreed action. The Audit Committee Chairman may initiate the formation of an investigation team, if deemed necessary.
The Board recognises the importance of sustainability that improve the continuous improvement process for an organisation in the modern economy which includes the sound management of people and environment, and business sustainability eventually.
The Company is committed to promote sustainability practices within the Group with an equitable good balance of environmental, social and governance aspects of business.
The directors have full and unrestricted access to all information pertaining to the Group’s businesses and affairs to enable them to discharge their duties. The agenda and a full set of papers for consideration are distributed at least one week in advance before each meeting of the Board to ensure that directors have sufficient time to study them and be properly prepared for discussion and decision-making.
All directors have full and unrestricted access to the advice and services of the senior management team, Company Secretary, internal auditors and external auditors. The directors may also interact directly with, or request further explanation, information or updates on any aspect of the Company’s operations or business concerns from the management. The directors may obtain independent professional advice at the Company’s expenses in discharging its various duties.
The Board is supported by an experienced and competent Company Secretary who is qualified to act as company secretary under Section 139A of the Companies Act 1965. The Company Secretary reports directly to the Board and plays an advisory role to the Board and Board Committees, particularly with regard to their policies and procedures and the Company’s compliance with regulatory requirements, rules, guidelines and legislation, as well as the best practices of corporate governance.
All directors have access to the advice and services of the Company Secretary and are updated on the changes in the regulatory framework and corporate governance practices. The Company Secretary provides support to the Board in ensuring that the applicable rules and regulations are complied with as well as that the governance structure of the Group remains relevance and effective.
The Company Secretary attends all meetings of the Board and Board Committees and ensures that meeting procedures are followed and deliberations and proceedings at the meetings are accurately recorded and documented.
The Board is satisfied with the performance and support rendered by the Company Secretary to the Board in discharging his duties. The appointment and removal of the Company Secretary are subject to the approval of the Board.
The Board has delegated certain responsibilities to the Board Committees which operate within defined terms of reference. The Board Committees include the Audit Committee, the Investment Committee and the Nomination and Remuneration Committee. The respective Committees report to the Board on the matters considered and their recommendations thereon. The ultimate responsibility for the final decision on all matters, however, lies with the Board.
The Audit Committee is established with the primary objective of assisting the Board in fulfilling its responsibilities relating to accounting and reporting practices of the Company and its subsidiaries and to ensure an objective and professional relationship is maintained with the external auditors. The Committee has full access to the auditors both internally and externally who, in turn, have full access at all times to the Chairman of the Committee.
The Committee meets at least four (4) times a year. Representatives of the Company’s external auditors and internal auditors of the Group are normally invited to attend the meetings, as and when required.
The Nomination and Remuneration Committee is established with the primary objective of assisting the Board in overseeing the selection and assessment of directors. In addition, the Committee is responsible for developing policies on the remuneration packages of the executive directors. In case of non-executive directors, the level of remuneration shall be the responsibility of the Board as a whole.
The Committee comprises three (3) non-executive directors, a majority of whom are independent, as follows:-
The Chairman of the Committee is the senior independent director of the Board. The Committee meets as and when required. The Committee has met two (2) times during the financial year.
The activities of the Nomination and Remuneration Committee during the financial year ended 31 December 2015 include recommendation to the Board on the following:
The Committee is responsible for proposing new nominees for appointment to the Board, and recommends to the Board for approval on the appointment, re-appointment, re-election and annual assessment of directors.
The Committee shall consider and recommend to the Board the qualified candidates who demonstrate integrity, reliability and knowledge of corporate affairs; and the candidate’s professional experience and personal accomplishments. The Committee shall also consider the ability of the candidate to attend Board and committee meetings regularly and devote sufficient time and effort to carry out their duties and responsibilities effectively, and be committed to serve on the Board for an extended period of time. In the case of candidates for the position of independent directors, the Committee also evaluates the individual candidates’ ability to discharge such duties and responsibilities as expected from independent directors.
The directors who are appointed by the Board are subjected to re-election by the shareholders at the next AGM held following their appointment.
In accordance with the Company’s Articles of Association, all directors shall retire from the office at least once in three (3) years but shall be eligible for re-election at the AGM.
The Committee also conducts annual assessment of each individual director to ensure the effectiveness of the Board as a whole and recommends for the re-appointment and re-election of directors who are seeking for the re-appointment and re-election at the AGM. In determining the independence of individual directors, the Committee conducts assessment on the independent directors annually.
In terms of Board composition, the Committee will consider the diversity in business background, area of expertise, skills, educational background, gender, and ethnicity as well as other factors that may provide the Board with a boarder range of viewpoints and perspectives. In determining whether to recommend a director for re-election or re-appointment, the Committee shall consider the director’s past attendance at meetings and participation in and contributions to the activities of the Board.
Based on the recent annual review, the Committee was satisfied that the Board composed of directors with appropriate mix of skill and experience to meet the Company’s requirements and the independent directors have fulfilled the criteria as defined in the Listing Requirements.
The Committee considers the principles recommended by the MCCG 2012 in determining the directors’ remuneration whereby the executive directors’ remuneration is designed to link rewards to the corporate performance whilst the remuneration of the non-executive directors is determined in accordance with their experience and level of responsibilities assumed.
The Committee reviews and assesses annually the framework of executive remuneration and its cost and to determine on behalf of the Board specific remuneration packages and conditions of employment for executive directors to ensure that the Company attracts and retains those executives needed to run the Company successfully.
The ultimate decisions of the determination of the level of remuneration shall be the responsibility of the Board as a whole after considering the recommendations of the Committee. Directors, whether executive or non-executive, shall not participate in decisions on their own remuneration packages.
The Investment Committee is established with the primary objective of assisting the Board in evaluating all new and potential investments or projects of the Group, which arise out of the ordinary course of business, and assessing its viability before recommending to the Board for approval.
The Committee comprises two (2) executive and three (3) non-executive directors (of which two (2) are independent) as follows:
The Committee meets as and when required.
In its financial reporting to the shareholders and other interested parties by means of the annual financial statements and quarterly results announcements, the Board aims to present a balanced and understandable assessment of the Group’s financial position and prospects. The Board, assisted by the Audit Committee, oversees the financial reporting processes and the quality of the financial reporting by the Group. The Audit Committee assists the Board by reviewing the information to be disclosed, to ensure completeness, accuracy and adequacy prior to release to Bursa Securities.
The Audit Committee, amongst others, has been delegated with the responsibility to review the quarterly reports and year end financial statements of the Group, focusing particularly on:
Through the Audit Committee, the Board has a direct relationship with the external auditors. The external auditors regularly bring up relevant matters that need to be addressed during the Audit Committee meetings and Board meetings.
The Audit Committee was accorded the power to communicate directly with both the external and internal auditors in providing independent assessment on the adequacy, efficiency and effectiveness of the Group’s internal control system.
In determining the independence of the external auditors, Messrs Ernst & Young (“EY”), the Audit Committee considered several factors which include size of audit firm, level of competitive in audit services market, tenure of audit firm serving and size of audit fees received by EY in relation to total percentage to annual audit revenue. Based on the review, the Audit Committee is of the opinion that EY is, and is perceived to be, independent for the purpose of the Group’s statutory financial audit. EY has declared its independence to the Group and its compliance pursuant to Paragraph 290.173 of the By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants.
In order to provide support for an assessment on independence, the Audit Committee has obtained written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
In reviewing the nomination of EY for re-appointment as external auditors for the financial year 2016, the Audit Committee, satisfied with EY’s performance, technical competency and audit independence as well as fulfilment of the criteria set by the Audit Committee, recommended to the Board the re-appointment of the EY as external auditors for the financial year ending 31 December 2016 with the rotation of audit engagement partner. The Board had approved the Audit Committee’s recommendation for the shareholders’ approval to be sought at the 20th AGM on the appointment of EY as external auditors of the Company for the financial year 2016 .
The Board is aware of the importance of establishing and maintaining a sound system of risk management framework and internal control in the Company and the Group to safeguard shareholders’ interest and Group’s assets. The Board continuously reviews and examines the effectiveness and efficiency of the risk management framework and internal control system on areas such as financial, operational and compliance, and seek alternative ways for improvement should any weakness be detected and identified.
Since 2005, the Company has outsourced the Internal Audit Function to a professional services firm, Messrs KPMG Business Advisory Sdn Bhd.
The Board is committed to provide shareholders and other stakeholders with comprehensive, accurate and quality material information on a timely and regular basis. Given the size of the Group and its business complexity, the Board is of the view that internal corporate disclosure procedures are adequate to facilitate the handling and disclosure of material information in a timely and accurate manner that ensures the Company’s compliance with its Investor Relations Policy and Corporate Disclosure Guide 2011 introduced by Bursa Securities whilst adhering with the corporate disclosure requirements as set out in the Listing Requirements, to enable informed and orderly market decisions by the investors.
The Company acknowledges the importance of timely and equal dissemination of material information to the shareholders, investors and public at large. As such, the Company accords a high priority in ensuring that information which includes quarterly financial results, as well as changes in the composition of the Group and any other relevant information are made available and disseminated as early as possible. The Board is mindful that information which is expected to be material must be announced immediately.
The following means of communications were utilised as channels for sharing of substantial information with its shareholders, investors and members of the public:-
The Company’s AGM which is held each year (not later than 30 June) remains the principal forum for dialogue and interaction with the shareholders. The Board regards the AGM as an important channel of communication, as it serves as a forum for direct two-way interaction between the shareholders, Board and Management on the Company’s strategy, operations, performance and major developments. Shareholders who are unable to attend are allowed to appoint proxies to attend and vote on their behalf.
The Notice of AGM together with Form of Proxy are given to shareholders at least twenty-one (21) days together with a copy of the Annual Report in CD-ROM before the AGM, which gives shareholders sufficient time to prepare themselves to attend the AGM or to appoint a proxy to attend and vote on their behalf. Each item of special business included in the Notice of AGM is accompanied by an explanatory statement for the proposed resolution to facilitate the full understanding and evaluation of issues involved. At the 19th AGM held on 25 May 2015, all directors were present in person to engage directly with shareholders, and be accountable for their stewardship of the Company.
The Annual Report of the Company remains a key channel of communication with the Group’s shareholders and other stakeholders. The contents of the Annual Report comprise of details of the business, financial performance, direction and other activities of the Company which have enhanced the transparency level of the Group generally and meet the Listing Requirements and other governing regulatory requirements. Effective communication through timely announcements and release of financial results on a quarterly basis also provides the shareholders and the investing public with an overview of the Group’s performance and operations. An online version of the Annual Report is also available at the Bursa Securities’s website.
The Company’s corporate website www.dkls.com.my also provides an avenue for accessing to the latest corporate information and development of the Company easily and immediately. It houses information of the Group which includes corporate profile, properties development for both residential and commercial (including current and future launches), financial results, press releases and corporate news and events. Alternatively, Bursa Securities’s website www.bursamalaysia.com would be another source of information to the shareholders, investors and public community on the various announcements made by the Company from time to time in additions to the Annual Report, Circular to Shareholders and Annual Audited Accounts submitted to Bursa Securities.
By recognising broader communication, the Company has embarked on its social media journey by registering itself with online social networking platform such as Facebook fan page of DKLS Premierhome Sdn Bhd for its property development activities.
The Board has designated Mr Chin Kok Tong, as the senior independent director of the Company to whom the shareholders may address their concerns relating to the Group. At all times, shareholders may contact the Company through the Company Secretary for information.
The Company fully recognises the rights of the shareholders and encourages them to exercise their rights at the Company’s general meetings. The AGM remains the principal forum for dialogue with shareholders where they may seek clarifications on the Group’s businesses.
Shareholders are given the opportunity to participate in the question and answer session during the AGM on the proposed resolutions and the Group’s operations. Members of the Board as well as the auditors of the Company are present to answer questions raised at the meeting. The Chairman will provide sufficient time to shareholders’ questions on matters pertaining to the Company’s performance and would respond to the shareholders with regards to their concern and question raised.
All members present at each meeting shall have the right to demand for a poll in accordance with the provisions of the Articles of Association of the Company on the voting for any resolutions. The voting process at each meeting shall be by way of show of hands unless a poll is demanded or specifically required. The Chairman of the meeting may demand for a poll for any resolutions put forward for voting at the shareholders’ meetings, if so required.
During the financial year, the Company has not issued any options, warrants or convertibles securities.
The material contracts entered into by the Company and its subsidiaries involving directors and major shareholders either subsisting at the end of the financial year or entered into since the end of the previous financial year are disclosed in Note 40 to the financial statements under “Related Party Disclosures” on pages 147 to 150 of the Annual Report.
During the financial year, the Company did not seek mandate from the shareholders for the Company and its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature as there are no recurrent related party transactions which exceeded the materiality threshold stated in paragraph 10.09(1) of the Listing Requirements.
This Statement was approved by the Board on 25 February 2016.