Probe reveals Xin Hwa funds taken for personal use

TheEdge Wed, Jun 12, 2019 08:53am - 4 years View Original


KUALA LUMPUR: The external auditor investigating financial irregularities at Xin Hwa Holdings Bhd revealed yesterday that the company’s funds had been used to take care of personal expenses over the past two years.

KPMG, appointed by the logistics firm’s board to carry out the investigation, found that three out of the eight allegations had some bases or were substantiated.

Findings of the review revealed that dividend payment of a subsidiary of Xin Hwa was paid to a third party instead of the registered shareholder.

“But the arrangement was meant to settle a personal debt, and with instructions from the registered shareholder,” said KPMG.

Additionally, the company’s funds had been used to pay executive directors’ personal expenses, said KPMG. These payments were partially made out of directors’ fees and the remaining payments were recognised as debts owed by the directors to the company that have since been repaid.

There were also payments made on behalf of a substantial shareholder, which have since been fully repaid by the substantial shareholder, it added.

KPMG said the review was carried out mainly for the period between January 2017 and December 2018. The report was submitted to the audit and risk management committee and the board.

In the course of its review, KPMG also noted that there were provisions of financial assistance by a subsidiary of Xin Hwa to several companies — in the form of interest-free advances and payments mainly relating to those companies’ operating expenses — although some of these advances and payments have since been repaid.

The auditor also pointed out that the revision of the executive directors’ remuneration was not tabled before the Remuneration Committee (RC) and the board as required under the company’s directors’ Remuneration Policy and Procedure. The matter has since been addressed by the RC and the board.

“There was variance between the bonus approved and paid in a year to a director of a subsidiary,” said KPMG.

Xin Hwa’s board said it is in the process of appointing solicitors to review the report of KPMG and to advise the board on any non-compliance with any laws and listing requirements.

According to Xin Hwa’s 2018 report, the company has three substantial shareholders, Eng Peng Lam @ Ng Peng Lam, Ng Aik Chuan and Ng Yam Pin, who are 71.87% deemed interested by virtue of shareholding in NF Capital Management Sdn Bhd as at June 2018.

Aik Chuan, managing director of Xin Hwa, is the elder brother of executive director Yam Pin. The duo, co-founded Xin Hwa and were appointed to the board in 2013, are sons of Eng Peng Lam @ Ng Peng Lam.

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