Not for publication, distribution or release directly or indirectly, in whole or in part, in or into the United States, the Republic of South Africa, Australia, Canada or Japan in or into any other jurisdiction where offers or sales would be prohibited by applicable law. This announcement is for information purposes only and is not an offer to sell or a solicitation to buy securities in Green & Smart Holdings plc or any other entity in any jurisdiction, including the United States, the Republic of South Africa, Australia, Canada or Japan.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the EU Market Abuse Regulation (596/2014). Upon the publication of the announcement via a regulatory information service, this information is considered to be in the public domain.

3 January 2020

Green & Smart Holdings plc

("Green & Smart", the "Company" or the "Group")

Proposed waiver of obligations under Rule 9, Directorate Change and Notice of Extraordinary General Meeting

Green & Smart Holdings plc (AIM: GSH), a renewable energy company generating power from biogas captured through the treatment of palm oil mill effluent ("POME") in Malaysia, announces that it has today posted to its Shareholders a circular (the "Circular") convening an Extraordinary General Meeting ("EGM") of the Company to be held on 24 January 2020 at 2.00pm GMT at the offices of Charles Russell Speechlys LLP, 5 Fleet Place, London EC4M 7RD to seek independent Shareholder approval of a waiver of obligations under Rule 9 of the City Code on Takeovers and Mergers in connection with a debt-for-equity swap (the "Whitewash Resolution").

A copy of the Circular is available on the Company's website: http://www.greennsmart.com.my/   

It has been proposed that, following the passing of the Whitewash Resolution at the Company's EGM, Mohd Abdul Karim Bin Abdullah, Managing Director and CEO of Serba Dinamik Holdings, be appointed as Non-executive Chairman of the Company to replace Datuk Haji Radzali Hassan and that Habizan Rahman Bin Habeeb Rahman be appointed as a Non-executive Director of the Company. These appointments are subject to standard regulatory checks and approvals. In addition, it is intended that Messrs Saravanan Rasaratnam and Navindran Balakrishnan step down as Executive Directors with effect from the forthcoming Annual General Meeting (which is expected to be held in February 2020, notice of which will be given to Shareholders in due course), but will remain with the Company as consultants to assist with the Company's operations. Further announcements will be made to the market in due course.

Further information on the Whitewash Resolution and the proposed directorate change can be found in the extracts from the Circular below.

Capitalised and defined terms used in this announcement have the meanings given to them in the Circular.

Enquiries

Extracts from the circular

Approval of a waiver under Rule 9 of the City Code on Takeovers and Mergers and Notice of General Meeting

1             Introduction

1.1       On 19 July 2018, the Company announced that it had raised approximately £3.2 million via the subscription for 51,806,000 new Ordinary Shares by Serba Dinamik International, at a price of approximately 6.19 pence per Ordinary Share.

On 25 September 2018, the Company announced the appointment of Mr Syed Nazim bin Syed Faisal as Finance Director and an Executive Director of the Company with immediate effect, pursuant to the Company's subscription agreement with Serba Dinamik International.

On 4 December 2018, the Company announced that it has been notified that Serba Dinamik Group had purchased from K2M Ventures, a company wholly-owned by Mr Saravanan Rasaratnam (CEO and a director of the Company) and Mr Navindran Balakrishnan (COO and a director of the Company), 34,537,581 Ordinary Shares, representing 10.0 per cent. of the issued share capital of the Company at a price of 6.97 pence per Ordinary Share.

On 24 May 2019, the Company announced that it had entered into an agreement with Mr Syed Nazim bin Syed Faisal, Finance Director of the Company, for a 12-month interest-free loan of £1.6 million (the Loan) to be used by the Company for working capital purposes.

The Company has now agreed with Mr Syed Nazim bin Syed Faisal to convert the Loan into 86,343,953 new Ordinary Shares representing 20 per cent. of the Enlarged Share Capital, which is at an effective share price of approximately 1.85 pence and therefore at a 51.9 per cent. discount, compared to the closing mid-market price on AIM of the Company's Ordinary Shares on 2 January 2020 (being the latest practical date before publication of this Circular) of 3.85 pence.

In addition, it has been proposed by the Concert Party that Mohd Abdul Karim Bin Abdullah, Managing Director and CEO of Serba Dinamik Holdings (short biography set out at paragraph 3.9 of this Part 1 below) is appointed a Non-executive Chairman of the Company following the passing of the Whitewash Resolution at the Company's EGM to replace Datuk Haji Radzali Hassan. Furthermore, the Company proposes at the same time to appoint Habizan Rahman Bin Habeeb Rahman, Director of K2MV, as a Non-executive Director of the Company. These appointments are subject to standard regulatory checks and approvals and a further announcement will be made in due course. In addition, it is intended with effect from the forthcoming AGM that Messrs Saravanan Rasaratnam and Navindran Balakrishnan step down as Executive Directors but will remain with the Group as consultants to assist with the Group's operations. The Company is reviewing the need for the appointment of further Executive Directors and may also make future Non-executive Director appointments to support the Group's ongoing business strategy.

The primary focus of the Company's business is to Build, Own and Operate (BOO) Biogas Power Plants on behalf of Palm Oil Mill owners. This benefits the Mill owners as they are not required to outlay capital to build a palm oil mill effluent (POME) treatment facility and at the same time become compliant with Malaysian and international environmental standards. Consequently, the Company has sought to create a sustainable long-term capital structure from which to further develop its business. The Independent Directors consider the loan restructuring would allow the Company to progress various alternative financing options and hence consider the Debt for Equity Swap as necessary to remove the overhang of the debt, which is hindering progress in these matters.

In their consideration of the Debt for Equity Swap and the Whitewash Resolution, the Independent Directors have taken note of the facts that the members of the Concert Party will be locked in (as described below) in respect of their entire holdings of Ordinary Shares, including those held before the Debt for Equity Swap, and also that the members of the Concert Party have entered into the Relationship Agreement to ensure that the Group can act independently of the members of the Concert Party.

1.2      Serba Dinamik International and Serba Dinamik Group are both wholly-owned subsidiaries of Serba Dinamik Holdings Berhad and Mr Syed Nazim bin Syed Faisal has been, since August 2015, Chief Financial Officer of Serba Dinamik Holdings. Accordingly, these parties are considered a Concert Party under the City Code. 

1.3      The Concert Party is currently interested in, in aggregate, 86,343,581 Existing Ordinary Shares, representing approximately 25 per cent. of the Existing Ordinary Shares. 

1.4       Accordingly, on completion of the Debt for Equity Swap, the Concert Party's interest in the Company would increase to, in aggregate, 172,687,534 Ordinary Shares representing approximately 40 per cent. of the Enlarged Share Capital.

1.5       Therefore, the Board is seeking the approval of the Independent Shareholders on a poll of the Rule 9 Waiver which the Panel has agreed with the Company to grant, subject to the passing of the Whitewash Resolution by the Independent Shareholders at the EGM, of any obligation on the part of the Concert Party, to make a general offer to Shareholders under Rule 9 of the City Code which would arise upon the Debt for Equity Swap as more fully set out in paragraph 1.1 of this Part 1.  Further details of the Rule 9 Waiver are set out in paragraph 4 of this Part 1.

1.6        The Rule 9 Waiver is conditional upon, inter alia, Independent Shareholder approval of the Whitewash Resolution on a poll, which will be sought at the forthcoming EGM to be held at the offices of Charles Russell Speechlys LLP, 5 Fleet Place, London EC4M 7RD at 2:00 p.m. on 24 January 2020.  You will find a Notice of EGM at the end of this Circular.  A Form of Proxy is also enclosed with this Circular.

1.7          The purpose of this Circular is to: (i) provide you with details of and background to the Rule 9 Waiver and the reasons why the Directors believe that the Transaction is in the best interests of the Company and its Shareholders as a whole and, also, why the Independent Directors recommend that the Independent Shareholders vote in favour of the Whitewash Resolution at the EGM; and (ii) seek your approval for the Whitewash Resolution to be proposed at the EGM.

1.8          The actions that you should take to vote on the Whitewash Resolution, and the recommendation of the Independent Directors, are set out in paragraphs 9 and 12 of this Part 1, respectively.

1.9       Should the Whitewash Resolution be approved at the EGM, the Ordinary Shares to be issued in connection with the Debt for Equity Swap are expected to be issued on or around 27 January 2020.  The Company and the members of the Concert Party have entered into a relationship agreement (effective subject to the passing of the Whitewash Resolution and the issue of Ordinary Shares pursuant to the Debt for Equity Swap) to regulate the relationship between them and to ensure that the rights of Independent Shareholders are fully upheld and which is summarised at paragraph 3.11 of this Part 1 and paragraph 7.1.1 of Part 3. In addition, the members of the Concert Party have entered into lock-in agreements in respect of the Ordinary Shares in the Company already held by them and the new Ordinary Shares to be issued in connection with the Debt for Equity Swap, which are summarised at paragraph 3.12 of this Part 1 and paragraphs 7.1.2 and 7.1.3 of Part 3.

2             Current activities, trading and prospects

2.1       Green & Smart, which was listed on AIM, a market operated by the London Stock Exchange, on 12 May 2016, operates in the renewable energy sector in Malaysia, focusing on the generation of power from biogas captured through the treatment of POME. Its principal wholly-owned operating subsidiary, Green and Smart Sdn. Bhd. ("GNS"), incorporated on 11 March 1980 as Mardec Engineering Sdn Bhd, was primarily involved in wastewater treatment for the rubber industry before venturing into waste treatment for the Palm Oil Sector as this became an increasingly important market in Malaysia and Indonesia.

GNS has undertaken and completed numerous wastewater treatment projects in Asia including a World Bank project and four biogas capture facilities owned by Felda Palm Industries Sdn Bhd, a subsidiary of Felda Global Ventures, which is the world's largest crude Palm Oil producer.

In 2018, Serba Dinamik Holdings, a publicly listed company on Bursa Malaysia with a market capitalisation of RM6.241 billion (Source: Bloomberg https://www.bloomberg.com/quote/SDH:MK, dated 7 November 2019), via its subsidiaries, Serba Dinamik International and Serba Dinamik Group, acquired a 25 per cent. stake in the Company. The Chief Financial Officer of Serba Dinamik Holdings, Mr Syed Nazim bin Syed Faisal, was then appointed Executive Director of the Company.

Since Serba Dinamik Holdings invested in the Company, Green & Smart has changed its business focus from being an EPCC contractor building Biogas Power Plant (BPP) for other Palm Oil Mill owners into building their own BPP.

To date, Green & Smart has successfully commissioned its first fully-owned BPP of 2MWh installed capacity at Kluang, Felda Kahang and its second fully-owned BPP of 2MWh in Malpom, Penang. Preliminary ground works, including technical drawings and specifications, vendor selection and necessary approvals are all in place for the third BPP. Construction has already commenced and as at today's date has reached about 50 per cent., with completion expected in mid-2020.

The Company has therefore positioned itself as an IPP through the construction, operation and ownership of BPPs providing electricity to the Malaysian National Grid through the Feed-in-Tariff mechanism.

The change in business direction is largely to take advantage of government incentives and as well as capitalising on the Company's own intellectual properties. This will guarantee captive income for the Company in the next sixteen years and beyond. The Company expects to secure and own more Biogas Plants in years to come given the significant market potential in Malaysia and Indonesia.

The Company will continue, as a secondary line of business income, to offer its expertise as an EPCC contractor for third party power plants as well as providing Operations & Maintenance Management of these power plants upon successful commissioning, for the entire duration of the plants' existence.

The Company has developed a strong pipeline of opportunities, both in the building and ownership of BPP to produce electricity through the process of treating POME, as well as in contracting to develop BPP for third parties, and has built relationships with some of Malaysia's largest Palm Oil businesses.

GNS operates in a fast-growing market underpinned by Government legislation to reduce greenhouse gases and increase contribution of renewable energy (RE) in Malaysia. The 2014 Directive issued by the Malaysian Palm Oil Board for all Palm Oil Mills to have in place Biogas Facilities / Methane Avoidance Facility by 2020. In addition, all applications for new Mills and Mills seeking approval for expansion in capacity must provide details of having in place Biogas Facilities / Methane Avoidance Facilities prior to approval. As at end 2016, there were 453 mills in operations in Malaysia with an estimated 30 to 40 plants under planning and construction, all expected to have biogas facilities by the year 2020.

3             City Code on Takeovers and Mergers

Application of the City Code to the Company

3.1        As a company incorporated in Jersey with shares admitted to trading on AIM, the Company is subject to the City Code and the requirements of Rule 9 of the City Code, which requires that any person who acquires, whether by a single transaction or a series of transactions over a period of time, an Interest (as defined in the City Code) in shares which, taken together with shares in which persons acting in concert with him are already interested, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, will normally be required by the Panel to make a general offer to all the remaining shareholders of that company to acquire their shares.

3.2       Rule 9 of the City Code further provides that where any person, together with any persons acting in concert with him, is interested in shares which, in aggregate, carry not less than 30 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, and such person, or any such persons acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person or persons acting in concert with him will normally be required to make a general offer to all remaining shareholders to acquire their shares.

3.3          An offer under Rule 9 of the City Code must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer.

3.4          Under the City Code, a concert party arises where persons acting together pursuant to an agreement or understanding (whether formal or informal) co-operate to obtain or consolidate control of, or to frustrate the successful outcome of an offer for a company, subject to the City Code.  Control means an interest, or interests, in shares carrying, in aggregate, 30 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.  The members of the Concert Party are deemed to be acting in concert for the purposes of the City Code.

Position of the Concert Party

3.5        Serba Dinamik Holdings is currently interested in, in aggregate, 86,343,581 Ordinary Shares, via its wholly-owned subsidiaries Serba Dinamik International, which holds 51,806,000 Ordinary Shares and Serba Dinamik Group which holds 34,537,581 Ordinary Shares. This aggregate interest represents 25 per cent. of the Existing Ordinary Shares.

3.6      Mr Syed Nazim bin Syed Faisal, Serba Dinamik Holdings and its two subsidiaries Serba Dinamik International and Serba Dinamik Group are considered to be acting in concert for the purposes of the City Code.  Mr Syed Nazim bin Syed Faisal is an executive director of the Company and was appointed on 25 September 2018.  His appointment was made pursuant to the Company's subscription agreement with Serba Dinamik International announced on 19 July 2018, pursuant to which Serba Dinamik International was entitled to appoint one executive director to the Company's Board of Directors for as long as Serba Dinamik International holds at least 15 per cent. of the Company's issued share capital.

3.7         The aggregate interests of all the members of the Concert Party currently comprises 86,343,581 Ordinary Shares representing approximately 25 per cent. of the Existing Ordinary Shares.

3.8      The table below sets out the proposed participation in the Debt for Equity Swap, along with current shareholdings.  Further information on each member of the Concert Party is provided in paragraph 3.9 of this Part 1 below.

3.9          Information on each member of the Concert Party

Serba Dinamik Holdings, Serba Dinamik International and Serba Dinamik Group

Serba Dinamik International and Serba Dinamik Group are both wholly-owned subsidiaries of Serba Dinamik Holdings, which is listed on the Main Market of Bursa Malaysia Securities Berhad. Serba Dinamik Holdings has been listed since 8 February 2017 and its stock name is SERBADK and Stock Code 5279.

Serba Dinamik Holdings was incorporated as a private limited company in Malaysia, under the name of Serba Dinamik Holdings Sdn Bhd on 2 December 2015, and was subsequently converted into a public limited company on 13 May 2016. Established in 1993, Serba Dinamik Holdings, through its subsidiaries, is an international energy services group providing integrated engineering solutions to the Oil & Gas, petrochemical, power generation industries, water & wastewater and utilities.

The main business of the Serba group is in operations and maintenance (O&M), and engineering, procurement, construction and commissioning (EPCC), IT Solutions and Education & Training. It has operational offices in Malaysia, Indonesia, UAE, Bahrain, Qatar, Singapore, India and UK. Serba Dinamik Holdings itself is an investment holding company and is principally involved in the provision of management services.

Set out below are details of the names of the directors, registered office and activities of each of the corporate Concert Party members.

Information on Controlling Shareholders in Serba Dinamik Holdings

Dato' Dr. Ir. Mohd Abdul Karim Bin Abdullah (Malaysian, age 54)

Dato' Karim has been SDHB's Group Managing Director/Group CEO and Non-Independent Executive Director since May 2016. He has a 23.7% interest in Serba Dinamik Holdings. Dato' Karim holds a Bachelor in Mechanical Engineering from Universiti Teknologi Malaysia.  He started his engineering career 31 years ago with Asean Bintulu Fertilizer Sdn Bhd (1988) as a Mechanical Engineer. In 1993, he formed Serba Dinamik and assumed the position as the Group Chief Executive Officer.

Dato' Awang Daud Bin Awang Putera (Malaysian, age 59)

Dato' Awang Daud is the Non-Executive Director and 9.5% shareholder in Serba Dinamik Holdings. In 2018, Dato' Awang Daud was conferred the highest professional qualification of CHARTERED FELLOW which carries the post nominal FCILT from The Chartered Institute of Logistics and Transport Malaysia (CILTM) which is locally and internationally recognized. He joined Serba Dinamik in 1994 as a director and was involved in field supervision, coordination and managing various projects, construction and fabrication tasks, planning and tendering, attending negotiation and handling managerial portfolios.

Abdul Kadier Sahib (Malaysian, age 70)

Abdul Kadier is the Non-Independent Non-Executive Director and 18.9% shareholder in Serba Dinamik Holdings. He obtained his Bachelor Degree in Economics in 1973 from the University of Malaya, Malaysia. He began his career as a marketing executive with Diethlem Sdn Bhd in 1973 for one year and later joined Sarawak Economic Development Corporation, where he served as a marketing officer until 1976. In 1976, he started his own business in diversified areas of food industry, road transportation, agriculture and forestry. In July 1994, he was appointed as a director in Serba Dinamik and subsequently became a shareholder of Serba Dinamik in October 1994.

In the 2018 Annual Report of Serba Dinamik Holdings, the MD/CEO reported "Financially, we have achieved a significant growth of 20.60% in revenue at RM3.28 billion for the Financial Year Ended 2018 ("FYE2018"), as compared to RM2.72 billion for the preceding financial year ended 31 December 2017 ("FYE2017"). The improvement in revenue was mainly driven by our operations & maintenance ("O&M") segment. Hence, the Company's Profit Before Tax ("PBT") and Profit After Tax ("PAT") for FYE2018 stood at RM437.63 million and RM392.84 million, with an increment of 26.46% and 28.89% respectively as compared to RM346.0 million and RM304.79 million in FYE2017."

Certain financial information of Serba Dinamik Holdings is incorporated by reference into this document as set out at Part 2 Section B.

Syed Nazim bin Syed Faisal (Malaysian, age 39)

Syed Nazim is an Executive Director of the Company and has over 15 years' experience in the accounting and banking sectors. Since August 2015, Mr Nazim has been the Chief Financial Officer of Serba Dinamik Holdings Berhad, the Malaysia-based investment holding company that manages the Serba Dinamik group of international energy services companies. Prior to joining Serba Dinamik, he held positions at Ibdar Bank, RHB Islamic Bank and KPMG. Mr Nazim is also a director or partner of the following companies or partnerships: CSE Global Limited, Fahrenheit Café Sdn Bhd, NAK Ventures Sdn Bhd, BIRR Capital Limited and PT Amorsk Indonesia. 

3.10       Related Party Transaction

3.10.1        The Debt for Equity Swap, will be a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies (Rule 13), as (i) Syed Nazim bin Syed Faisal is a Director of the Company; and (ii) the issue of 86,343,953 new Ordinary Shares pursuant to the Debt for Equity Swap will exceed 5 per cent. in certain of the class tests (as that term is defined in the AIM Rules for Companies).

3.10.2      Saravanan Rasaratnam and Navindran Balakrishnan are guarantors to the Loan and are therefore considered to be interested in the Debt for Equity Swap for the purposes of Rule 13.

3.10.3        Accordingly, the Directors (excluding Mr Syed Nazim bin Syed Faisal, Saravanan Rasaratnam and Navindran Balakrishnan) confirm that, having consulted with the Company's nominated adviser, Beaumont Cornish, they consider the terms of Debt for Equity Swap to be fair and reasonable insofar as Shareholders are concerned, and in the best interests of Shareholders and of the Company as a whole.

3.11       The Relationship Agreement 

Pursuant to an agreement dated 2 January 2020 made between (1) the Company, (2) Mr Syed Nazim bin Syed Faisal, (3) Serba Dinamik Holdings, (4) Serba Dinamik International, (5) Serba Dinamik Group and (6) Beaumont Cornish Limited (the Relationship Agreement) the parties, subject to the passing of the Whitewash Resolution and the issue of the Ordinary Shares pursuant to the Debt for Equity Swap, agreed to manage the relationship between them to ensure, inter alia, that: 

·    the Company will at all times be capable of carrying on its business independently of the members of the Concert Party; and

·    all transactions and arrangements between the Company and the members of the Concert Party will be at arm's length and on normal commercial terms.

The provisions of the Relationship Agreement will remain in force for so long as:

·    the Ordinary Shares are admitted to trading on AIM; and

·    the aggregate interest of the Concert Party in the Ordinary Shares represents 20 per cent. or more of the issued Ordinary Shares.

3.12       Lock-in Deeds 

3.12.1          Pursuant to an agreement dated 2 January 2020 made between (1) the Company, (2) Mr Syed Nazim bin Syed Faisal, (3) K2MV, (4) Saravanan Rasaratnam, (5) Navindran Balakrishnan, (6) Serba Dinamik Group, (7) Simon Peter and (8) Beaumont Cornish Limited (the SEDA Lock-in Deed), each of the parties agreed, subject to the passing of the Whitewash Resolution and the issue of the Ordinary Shares pursuant to the Debt for Equity Swap, not to effect any disposal of the Ordinary Shares held by them unless and until the proposed transferor obtains a legal opinion from its Malaysian lawyers in terms satisfactory to the Company and Beaumont Cornish that no member of the Group is subject to any restriction on foreign ownership under the Malaysian Renewable Energy Rules, including without limitation a requirement that no foreign person or persons should hold, directly or indirectly, more than 49 per cent. of the voting power or issued share capital (excluding preference shares) of a Malaysian incorporated company which qualifies as an "eligible producer" under the relevant Malaysian Renewable Energy Rules. For those parties to the agreement who are members of the Concert Party, the agreement imposes a lock-in period of 12 months from the date of issue of the Ordinary Shares pursuant to the Debt for Equity Swap, irrespective of whether a legal opinion is obtained or not.

Further, any acquirer of such Ordinary Shares is required to enter into a lock-in agreement on equivalent terms to the SEDA Lock-in Deed and the Company may also impose further arrangements or requirements on a proposed disposal to prevent any breach of the Malaysian Renewable Energy Rules. This agreement, subject to the condition to its coming into force being met, will supersede the agreement between the parties (other than Mr Syed Nazim bin Syed Faisal) dated 4 December 2018, which contains identical restrictions on disposals of Ordinary Shares.

3.12.2          Pursuant to an agreement dated 2 January 2020 made between (1) the Company, (2) Serba Dinamik International and (3) Beaumont Cornish, Serba Dinamik International agreed to not dispose of any Ordinary Shares held by it for a period of 12 months from the date of issue of the Ordinary Shares pursuant to the Debt for Equity Swap. Serba Dinamik International entered into a separate lock-in agreement as, for the purposes of the Malaysian Renewable Energy Rules, it is a foreign entity as it is established in Labuan, an offshore free trade zone, and therefore is not a Malaysian person.

3.12.3          The restrictions on the disposal of Ordinary Shares contained in the Lock-In Deeds do not apply to certain circumstances. Further details of the Lock-In Deeds can be found in paragraphs 7.1.2 and 7.1.3 of Part 3.

4             Rule 9 Waiver and Whitewash Resolution

4.1          Following consultation by the Company, the Panel has confirmed that Mr Syed Nazim bin Syed Faisal, Serba Dinamik Holdings, Serba Dinamik International and Serba Dinamik Group, constitute a 'concert party' under the City Code.  Details of the individual Shareholders who qualify as the Concert Party and further information on the members of the Concert Party are set out in paragraphs 1.2 and 3.9 of this Part 1.

4.2          The Debt for Equity Swap will result in Mr Syed Nazim bin Syed Faisal having a 20 per cent. holding of the Company's issued share capital and will also result in an increase in the Concert Party's aggregate percentage interest to over 30 per cent. of the Company's issued share capital and as such prompt a mandatory offer under Rule 9 of the City Code.

4.3          Under Note 1 of the Notes on the Dispensations from Rule 9 of the City Code, the Panel may waive the requirement for a general offer to be made in accordance with Rule 9 of the City Code if, inter alia, the shareholders of the company who are independent of the person who would otherwise be required to make an offer, and any person acting in concert with him, pass an ordinary resolution on a poll at a general meeting or by way of a written resolution approving such a waiver.

4.4          Accordingly, the Company proposes that the Independent Shareholders waive the obligation on the Concert Party to make a mandatory offer under Rule 9 of the City Code, which would otherwise arise as a result of the Debt for Equity Swap.

4.5     The Panel has agreed, subject to the passing of the Whitewash Resolution by the Independent Shareholders on a poll at the EGM, to waive the requirement under Rule 9 of the City Code for the Concert Party, collectively and/or individually, to make a mandatory offer for the Ordinary Shares not already owned by it or persons connected with it as would otherwise arise on the Debt for Equity Swap.

4.6         The Panel has agreed to the Rule 9 Waiver on the basis that the Independent Directors, who have been so advised by Beaumont Cornish, consider the terms of the Rule 9 Waiver to be fair and reasonable and in the best interest of the Independent Shareholders and the Company as a whole.

5             Potential voting rights of the Concert Party

If the Whitewash Resolution is passed at the EGM, on the assumption that no options or convertibles are awarded or exercised and no other shares are issued, the Concert Party's holding in the Company's issued share capital would increase to 172,687,534 Ordinary Shares, representing 40 per cent. of the voting rights in the Company.

As a result of the Debt for Equity Swap, the Concert Party will, in aggregate, be interested in shares carrying more than 30 per cent. of the Company's voting share capital but will not hold shares carrying more than 50 per cent. of such voting rights and (for so long as they continue to be treated as acting in concert) any further increase in that aggregate interest in voting shares in the Company (other than the issue of the Ordinary Shares pursuant to the Debt for Equity Swap) will be subject to the provisions of Rule 9.

6             Independent advice

6.1          Beaumont Cornish has provided advice to the Independent Directors in relation to the Rule 9 Waiver in accordance with the requirements of paragraph 4(a) of Appendix 1 to the City Code.

6.2          This advice was provided by Beaumont Cornish to only the Independent Directors and, in providing such advice, Beaumont Cornish has taken into account the Independent Directors' commercial assessments.

6.3          The Independent Directors, who have been so advised by Beaumont Cornish, consider that the approval of the waiver by the Panel of any requirement for the members of the Concert Party to make a general offer to shareholders under Rule 9 of the City Code, is fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole.

7             Intentions of the Concert Party 

7.1       The Concert Party has confirmed that, other than the proposed appointment of the Non-executive Chairman to the Board of the Company nominated by the Concert Party, further details of which are set out at paragraph 1.1 above, it and each individual member of the Concert Party (whether acting in its capacity as a Director or a Shareholder) has no intention to make, or seek to make, any change in respect of the Company's: (i) business or any research and development functions; (ii) maintenance of its admission to AIM; (iii) the continued employment of the employees and management or any conditions of employment or in the balance of skills and functions of the employees and management; (iv) strategic plans and their likely repercussions on employment and on the location of the Company's place of business or on the location of the Company's headquarters and headquarters functions; or (iv)  redeployment of its fixed assets and those of its subsidiaries following any increase in its shareholding as a result of the Debt for Equity Swap. In addition, the Concert Party has no intention to change employer contributions into the Company pension scheme, the accrual of benefits for existing members (if any) or the admission of new members.

7.2          In the event that the Debt for Equity Swaps and Rule 9 Waiver are approved at the EGM, no member of the Concert Party will be restricted from making an offer for the Company.

8             EXTRAORDINARY General Meeting

8.1          An Extraordinary General Meeting of the Company, notice of which is set out at the end of this Circular, is to be held at the offices of Charles Russell Speechlys LLP, 5 Fleet Place, London EC4M 7RD on 24 January 2020 at 2:00 p.m. at which the Whitewash Resolution will be proposed.  Please note that the summary and explanation set out below is not the full text of the Whitewash Resolution and Shareholders should review the full text of the Resolution before returning their Forms of Proxy.

8.2        In summary, the Whitewash Resolution, which will be proposed as an ordinary resolution, seeks the approval of the Independent Shareholders to waive the obligation on the Concert Party which would otherwise arise under Rule 9 of the City Code as a result of the Debt for Equity Swap.

8.3         Only the Independent Shareholders will be entitled to vote on the Whitewash Resolution which will be conducted on a poll at the EGM.

9             Action to be taken

You will find enclosed with this Circular, a Form of Proxy for use at the EGM.  Whether or not you intend to attend the EGM in person you are requested to complete the Form of Proxy in accordance with the instructions printed on it and to return it to the Company's registrars, Link Asset Services, The Registry, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF as soon as possible and in any event by no later than 2.00 p.m. on 22 January 2020. The completion and return of a Form of Proxy will not preclude Shareholders from attending the EGM and voting in person should they so wish.

10           Importance of vote

The Debt for Equity Swap is required in order to ensure the continued support of Serba Dinamik group to the Company.  Shareholders should note that in the event the Whitewash Resolution is not approved and the Debt for Equity Swap does not complete, the Company would not be able to rely upon Serba Dinamik Holdings or its subsidiaries for future debt and equity funding and so would be required to seek alternative sources of funding. The Directors are unable to provide any assurance that alternative financing or re-financing could immediately be secured or, that if it were secured, it would be on terms as favourable to the Company or would not result in a substantial dilution of Shareholders' interests.

11           JERSEY REGULATION

The Jersey Financial Services Commission has also given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey) Order 1958 to the issue of shares in the Company.

12           Recommendation

The Independent Directors, who have been so advised by the Company's financial adviser, Beaumont Cornish, consider the Debt for Equity Swap and the Whitewash Resolution to be fair and reasonable and in the best interests of the Independent Shareholders and of the Company as a whole. Accordingly, the Independent Directors recommend that the Independent Shareholders vote in favour of the Whitewash Resolution at the EGM as they intend to do in respect of their entire holdings which amount to interests in 23,686,668 Ordinary Shares, representing approximately 6.8 per cent. of the Existing Ordinary Shares. In providing advice to the Independent Directors, Beaumont Cornish has taken into account the Independent Directors' commercial assessment.

Voting on the Whitewash Resolution will be by means of a poll at the Extraordinary General Meeting of Independent Shareholders.

Members of the Concert Party, including Syed Nazim bin Syed Faisal, the Executive Director of the Company, are not able to vote on the Whitewash Resolution at the Extraordinary General Meeting.