An arbitral award has been made in favour of Q&M Dental Group QC7 ’s wholly-owned subsidiary, Q&M Dental Group (Malaysia) Sdn Bhd.
Q&M’s Malaysia unit had commenced arbitration proceedings with the Singapore International Arbitration Centre against Tye Chee Wah, Chong Vooi Seong and Chan Sing Cheong, the remaining 30% shareholders of AR Dental Supplies, and Pride Access Sdn Bhd.
The arbitration proceedings were launched in connection with the sale and purchase agreement (SPA) that was entered into between Q&M’s Malaysia unit, and Tye, Chong and Chan for the acquisition of a 70% stake in AR Dental. It is also related to the shareholders agreement dated July 5, 2013, and the memorandum of deposit dated Dec 24, 2014 for the property owned by Pride Access.
In March 2013, Q&M’s Malaysia unit acquired 70% in AR Dental Supplies for RM8.4 million or $3.36 million at the time.
The SPA stipulated several conditions including the three shareholders to ensure that AR Dental retains minimum net tangible assets (NTA) of RM3 million as at the date of completion of the agreement. The three shareholders would have had to execute 10 years’ worth of service contracts with AR Dental as well as execute a four year profit guarantee to be set out in the shareholders’ agreement.
With the arbitral award, Tye, Chong and Chan will have to pay Q&M Dental’s Malaysia unit a total of RM5.35 million ($1.5 million) as dividends payable, RM8.4 million per the buyback exercised by Q&M Dental Group (Malaysia) as well as the interest of 10% per annum.
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In addition, the trio will also have to cause Pride Access to “execute and deliver” the resolution of the board of directors and shareholders of Pride Access for the sale of the property. They will have to get AR Dental to repay Q&M Dental Group (Malaysia) RM2.5 million under shareholders’ loans.
Furthermore, the trio and Pride Access will have to pay Q&M Dental Group (Malaysia) RM545,000 for legal costs and the costs of arbitration.
The award is not expected to have a material impact on Q&M’s operations and financial performance for the FY2024 ending Dec 31.
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According to Q&M, when the arbitration was commenced in FY2021, the contribution of AR Dental to the group’s total equity was only 3.83%. As at July 16, the group has impaired its investment of RM6.3 million in AR Dental.
As at 9.53am, shares in Q&M Dental are trading 0.5 cents lower or 1.7% down at 29 cents.
