Definition of "independent director"
Mr A is appointed a director of X Bhd, a listed issuer on 5 August 2009. Mr A is also a major shareholder of Y Sdn Bhd. 5% of Y Sdn Bhd's gross revenue for the financial years ending 31 December 2007 and 31 December 2008 amounted to RM800,000. Y Sdn Bhd supplied X Bhd with raw materials in March 2009 and April 2009 the value of which amounted to RM900,000. Is Mr A disqualified from being an independent director of X Bhd?
The relevant threshold to be considered pursuant to paragraph 5.1 of Practice Note 13 is RM1 million or 5% of Y Sdn Bhd's gross revenue for the last 2 financial years whichever is the higher. As 5% of the gross revenue of Y Sdn Bhd for the last 2 financial years amounted to only RM800,000, the relevant threshold is RM1 million. Pursuant to paragraph 5.1 of Practice Note 13, Mr A will not be disqualified from being an independent director of X Bhd because the value of the transactions entered into with Y Sdn Bhd of which Mr A is a major shareholder does not exceed RM1 million.