44. SIGNIFICANT CONTINGENT LIABILITIES (CONTD.) The development of material litigation disclosed as contingent liabilities in the financial year ended 31 December 2021 are as follows: (contd.) (b) Magna Meditech Sdn. Bhd. (“MMSB”) vs Edgenta Mediserve Sdn. Bhd. (“EMS”) On 25 March 2021, MMSB commenced an action against EMS on the claim that EMS has breached the terms of contract, by prematurely and unlawfully terminating the contract. MMSB seeks reinstatement of the contract by way of a new term of 3 years with an extension of further 2 years damages amounting to RM22.0 million. As at 31 December 2021, no provision was recognised and MMSB’s claim was disclosed as contingent liability as EMS has been advised by its legal counsel that it has a good defence against the claim. On 29 December 2022, EMS entered into a settlement agreement with MMSB. Pursuant to the settlement agreement, EMS will pay a settlement sum of RM1.2 million and MMSB withdrew the claim against EMSB without liberty to file afresh. The settlement sum, which also inclusive of claim of assets and equipment purchased by MMSB had been recorded by EMS in the financial year ended 31 December 2022. (c) UEM Edgenta Berhad (“UEM Edgenta” or “the Company”) and DGIR On 30 April 2021, the DGIR served UEM Edgenta with additional tax assessment for the years of assessment 2015 to 2018 for additional income taxes and penalty of RM18.7 million. The additional income tax was imposed by DGIR mainly pursuant to the dispute on the status of the Company as a Management Service Company and shall be taxed as an Investment Holding Company under Section 60FA of the Income Tax Act, 1967. At 31 December 2021, no provision was recognised and the additional tax assessment was disclosed as contingent liability as the Company has been advised by its legal counsel that it has a valid legal claim to challenge the basis of assessment. On 8 December 2022, the Company reached an out of court settlement with DGIR, on the Company’s treatment of its taxable income, which resulted in the downward revision of additional tax assessments and penalty from RM18.7 million to RM6.9 million. The Company had recorded additional tax assessments and penalty totalling to RM6.9 million, disclosed in Note 7 and Note 10. (d) Edgenta PROPEL Berhad (“EPB”) and DGIR On 29 June 2021, DGIR served EPB with additional tax assessment for the years of assessment 2016 to 2018 for additional income taxes of RM9.4 million. The additional income taxes are consequent to the DGIR’s view that EPB ought to not have deducted the adjusted losses surrendered to it by UEM Edgenta Berhad, flowing from DGIR’s position that UEM Edgenta is not a management services company as described in Note 44(c). On 8 December 2022, EPB reached an out of court settlement with DGIR. As the losses surrendered by UEM Edgenta are now allowed for deduction by EPB, there is no additional tax charges imposed for the years of assessment 2016 to 2018. Consequently, DGIR discharged all the notices of additional assessments. 45. SIGNIFICANT EVENTS (a) On 10 March 2022, OIMB, a wholly-owned subsidiary of OGB which in turn is a wholly-owned subsidiary of UEM Edgenta Berhad entered into a Shareholders Agreement with PPES and OCS to jointly provide project management services and engineering design consultancy services, relating to the engineering and construction projects. On 22 April 2022, OCS issued 175,000 new ordinary shares, in which 47,500 and 127,500 were subscribed by OIMB and PPES, respectively. As a result, OIMB’s equity interest were diluted to 49% and OCS became a JV to OIMB as disclosed in Note 20. (b) On 29 September 2022, Edgenta Arabia Limited (“EAL”), a wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement and Shareholders Agreement with Mohammed Ibrahim Al-Subeaei and His Sons Investment Company for the proposed investment in MEEM for Facilities Management Company, through a 60% equity interest buy-in by EAL. The transaction is expected to be completed in the first quarter of financial year ending 31 December 2023. As at 31 December 2022, the transaction has no financial impact to the Group and the Company. (c) On 9 November 2022, Edgenta Facilities Sdn Bhd (“EFSB”), a wholly-owned subsidiary of UEM Edgenta entered into a Share Purchase Agreement for the disposal of its entire 47,113 equity shares in FSPL, representing 51% of the paid-up share capital of FSPL for a sale consideration of INR700 million (approximately RM39.1 million). The disposal has been completed on 17 November 2022. Further details are disclosed in Note 19. (d) Malaysia transitioned into an endemic phase of Covid-19 on 1 April 2022. Accordingly, the Group has also been able to resume its operations at full capacity while still maintaining necessary precautionary measures in our day-to-day operation. 46. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES Details of subsidiaries, joint ventures and associates are as follows: Issued and paid-up share capital RM Effective proportion of ownership interest Name of Companies Country of incorporation 2022 % 2021 % Principal activities Subsidiary of the Company: Edgenta FIRST Sdn. Bhd. Malaysia 100,000 100 100 Provision of management services Edgenta Arabia Limited (a) The Kingdom of Saudi Arabia SAR 500,000 100 – Investment holding, provision of integrated facilities management services and energy performance management services Faber Development Holdings Sdn. Bhd. Malaysia 56,520,010 100 100 Investment holding Edgenta Facilities Sdn. Bhd. Malaysia 200,000 100 100 Investment holding and provision of integrated facilities management services Edgenta Healthcare Management Sdn. Bhd. Malaysia 2 100 100 Provision of hospital support services p.374 p.375 UEM EDGENTA BERHAD INTEGRATED ANNUAL REPORT 2022 1 2 3 4 5 6 7 8 9 FINANCIAL STATEMENTS Notes to the financial statements For the year ended 31 December 2022 Notes to the financial statements For the year ended 31 December 2022
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