KUALA LUMPUR: Scomi Energy Bhd has formed a committee to investigate certain related party transactions (RPT) and advances made without prior authorisation from the board.
“As the investigation is still ongoing, the board is unable to provide a statement as to whether the provision of the advances were fair and reasonable or to the detriment of the company or its shareholders,” Scomi Energy said in a filing with Bursa Malaysia yesterday.
Scomi Energy said it had determined that the company had omitted to announce certain RPT in accordance with the Main Market Listing Requirements.
These RPTs relate to sums that have been advanced to its holding company, Scomi Group Bhd and its subsidiaries over a period of two years, from June 2016 to June 2018, or the affected period.
Given the nature of shareholding between the company and Scomi Group and the common directors between these two listed entities, these advances were deemed to be related party transactions.
“The total sum advanced is RM64.33mil of which RM19.39mil related to a shared service agreement between the company and Scomi Group and is not regarded as a related party transaction pursuant to paragraph 10.08(11)(k) of the MMLR.
“The balance of RM44.94mil (the advances) constitutes related party transactions, of which the Scomi Group of Companies has, over the affected period, repaid RM9.7mil,” Scomi Energy said.
During the affected period, the Scomi Energy’s board believed that the amount due from Scomi Group related to the shared service agreement between the company and the Scomi Group.
“On being informed that the advances had been made without prior authorisation from the board, the board immediately commenced an investigation into the matter to obtain further information relating to the advances,” Scomi Energy said.
Scomi Energy’s board has engaged a firm of solicitors to conduct a review of the transactions in accordance with a preliminary report issued.
As a result of the preliminary report from the solicitors in November 2018, the board initiated an investigative review of the transactions which involved the advances, the Bursa filing said.
A third party firm of independent auditors would be tasked to undertake an inquiry in order to identify issues and risks that arose.
The board will take steps to implement additional protocols to strengthen corporate governance and enhance management accountability and transparency.
“In addition, the scope of the investigative review is to determine the culpability of person or persons responsible for the making of the advances,” the filing said.
At the same time, the Scomi Energy board has undertaken some improvement and remedial actions.
These actions include reviewing the management structure and terminating shared services agreement between the company and Scomi Group.
It is also reviewing the reporting and escalation structure from the management to the board, and ensuring that the chief financial officer is directly accountable to the board to report on all material matters, including any proposed related party transactions.