Lotte Chemical Titan Proposes Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions: Key Insights for Investors

Introduction

Lotte Chemical Titan Holding Berhad (“LCT” or “the Company”) has issued a circular to its shareholders detailing a proposed renewal of the existing shareholders’ mandate for recurrent related party transactions of a revenue or trading nature (“RRPTs”). This renewal will be tabled at the Annual General Meeting (AGM) scheduled for Monday, 25 May 2026 at 10.00 a.m. at Renaissance Johor Bahru Hotel.

The proposal is significant as it governs major transactions between LCT and its related parties, which include key shareholders and directors with substantial control or influence over the company. Such transactions, if not conducted at arm’s length or disclosed properly, can impact minority shareholders and overall corporate governance.

Key Points of the Proposed Mandate

• Scope of Proposed Mandate: Renewal of the mandate for the LCT Group to enter into RRPTs with related parties, specifically the Lotte Chemical Corporation (LCC) Group and persons connected to LCC and its major shareholders. These transactions are essential for the day-to-day operations of LCT, covering the sale and purchase of petrochemical products, provision of services, and licensing arrangements.
• Nature of Transactions: Includes sales and purchases of polyethylene, polypropylene, butadiene, tert-Butyl alcohol, catalyst, information technology services, logistics, and payment of royalties for trademark usage. The mandate also covers consignment trials and other business-enabling contracts.
• Estimated and Actual Transaction Values: The estimated value of the transactions for the mandate period (from the 2026 AGM to the next AGM in 2027) is substantial:
  • Sale of goods to LCC Group: USD247.8 million (RM980.9 million)
  • Purchase of goods from LCC Group: USD79.0 million (RM312.6 million)
  • Information technology services: USD8.5 million (RM33.6 million)
  • Logistics services (PT Lotte Global Logistics Indonesia): USD14.0 million (RM55.4 million)
  • Royalty payment for trademarks: USD22.6 million (RM89.4 million)
• Key Related Parties: The interested major shareholders include LCC, Lotte Corporation, Lotte Property & Development, Hotel Lotte, Lotte Holdings, and Kwangyoonsa. The interested directors are Jang Seon Pyo, Yu Seung Yong, and Park Jae Sun, who are representatives of LCC on LCT’s Board.
• Approval and Voting: Interested directors and major shareholders, as well as persons connected with them, are required to abstain from voting on the related resolution at the AGM to ensure fairness and protect minority shareholders.
• Review Procedures: LCT has established a Related Party Transaction Protocol to ensure all RRPTs are at arm’s length, on commercial terms not more favourable to related parties than those available to the public, and not detrimental to minority shareholders. The Audit Committee oversees the sufficiency and effectiveness of these procedures.
• Thresholds and Approvals:
  • For Malaysian subsidiaries, RRPTs with a 1% or higher percentage ratio require review by the Executive Committee and Audit Committee, and Board approval. Below 1% is approved by the Executive Committee.
  • For Indonesian subsidiaries, similar thresholds apply, with additional approvals by local directors, commissioners, and/or shareholders as per local law.
• Outstanding Balances: As of 31 December 2025, all amounts due from related parties that exceeded credit terms have been settled. The company reports no overdue sums outstanding beyond January or February 2026.
• Financial Impact: The company expects the mandate, if approved, to contribute positively to its earnings per share and net assets for the financial year ending 31 December 2026, provided external factors remain constant.
• Audit Committee Statement: The Audit Committee affirms that the procedures in place are adequate and that RRPTs are not more favourable to related parties than the public, safeguarding minority interests.

Price-Sensitive and Shareholder-Relevant Information

• Potential Share Price Impact: The sheer scale of RRPTs, exceeding RM1.47 billion in total estimated value for the next mandate period, highlights the significant dependency of LCT on intra-group and related party transactions. Any disruption, change of mandate, or adverse findings from regulators could have a material impact on LCT’s operations, earnings, and share price.
• Governance Risk: The requirement for interested parties to abstain from deliberations and voting is a key governance safeguard. Investors should watch for any regulatory or minority shareholder pushback regarding the fairness of these transactions.
• Currency Risks: The transactions are largely denominated in USD, and the estimated values are based on a USD/MYR exchange rate of 3.9580 as of 24 March 2026, exposing LCT to potential foreign exchange volatility.
• Industry and Market Conditions: The positive impact on earnings assumes industry and market conditions remain stable. Any downturn in the petrochemical sector or disruptions in related party supply chains could adversely affect LCT’s financial performance.
• Regulatory Compliance: The company reports no material litigation or contracts outside the ordinary course of business and confirms compliance with all disclosure and review requirements.
• Shareholder Action: Shareholders are encouraged to review the full details in the circular and participate in the AGM, either in person or by proxy, to vote on this critical mandate renewal.

Appendices and Further Information

The circular includes detailed appendices listing all relevant related parties, the group structure, and the principal activities of subsidiaries. It also provides assurance of the accuracy of the information, absence of material litigation, and availability of documents for inspection at LCT’s registered office.

Notably, the directors (except for the interested directors) recommend that shareholders vote in favour of the proposed mandate, emphasizing its importance for the company’s ongoing operations and strategic flexibility.

Conclusion

The proposed renewal of the RRPT mandate is a routine yet crucial matter for LCT shareholders. Given the high transaction values and the interconnectedness of LCT with its major Korean shareholders and affiliates, the outcome of the AGM could have a material impact on LCT’s business continuity, governance profile, and ultimately, its share price. Investors should consider both the operational necessity and governance implications when making their voting decisions.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review the full circular and consult their financial advisers before making any investment decisions based on the contents herein. The author and publisher assume no responsibility for actions taken based on this article.

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