HAVING filed an unprecedented legal suit in Corporate Malaysia against market regulator Bursa Malaysia Securities Bhd on Monday (Nov 8), Serba Dinamik Holdings Bhd has filed an Originating Summons at the High Court against Ernst & Young Consulting Sdn Bhd (EY).
In its quest “to defend its rights, protect the company’s reputation as well as its shareholders’ interests”, the global integrated oil & gas (O&G) service provider is bringing EY to court on grounds that the latter is the purported “special auditor” chosen by Bursa Securities only to be appointed by the company.
In its legal action against Bursa Securities, Serba Dinamik has alleged that the market regulator has acted grossly in excess of authority and there is an underlying theme that it had interfered in the company’s audit process.
It further revealed that in the months of June and July, Bursa Securities had issued a directive to the company to appoint EY as the company’s special auditor to conduct a special independent review (SIR) with regard to auditing issues raised by the company’s previous external auditor KPMG PLT.
“Subsequently, in October 2021 Serba Dinamik was issued another directive by Bursa, demanding the company to announce a ‘Factual Findings Update’ which is understood as material that had been prepared by EY,” the company pointed out in statement.
“Both instructions were allegedly made on the justification that Bursa has the authority to do so under Main Market Listing Requirements (MMLR).”
Pursuant to the second directive dated Oct 22, the market regulator had suspended the trading of Serba Dinamik’s securities pending an announcement of the said “Factual Findings Update”.
Legal action against EY
Transpiring from the above events, Serba Dinamik is now calling into question the entire basis for the need of the SIR.
In its suit filed on Nov 5 against EY, the company is seeking declarations that EY is not an “auditor” within the meaning of MMLR and that its appointment by Serba Dinamik pursuant to MMLR was based on misrepresentation.
Therefore, the appointment and letter of engagement executed between them was void ab initio (having no legal effect from inception).
“Serba Dinamik challenges EY’s status as an auditor as defined under the MMLR and Companies Act 2016, and the fact that they are not registered with the Audit Oversight Board,” noted the company.
“The consulting firm’s independence is also being questioned as their affiliate is the auditor of Bursa Securities. EY has yet to provide an answer to Serba Dinamik concerning the question of whether they are in fact an ‘auditor’”.
According to the summons by Serba Dinamik, EY has acted contrary to its undertakings in the letter of engagement when it provided a “Factual Finding Update” to the Securities Commission (SC) without the company’s consent nor notifying the company in the first place.
In this regard, Serba Dinamik is hoping to obtain a court order to restrain EY from releasing/publishing any form of opinions on the company.
Alongside the order for restitution and claim for damages, Serba Dinamik is also seeking for interim injunctive relief pending the full and final disposal of the Originating Summons. The interim injunctive relief seeks to restrain EY from publishing any findings, reviews or opinions about the company.
The court has set the hearing of the interim injunctive relief on Nov 11 (tomorrow) while the Originating Summons is fixed for case management on Nov 17.
“This recent development is a sensible course of action taken by Serba Dinamik following its bold and interesting move in challenging Bursa’s limit of authority in court,” highlighted the company.
“In what can be interpreted as a course of taking a stand on the matter of limit of authority and protecting its reputation, it is only justified that Serba Dinamik is also questioning the validity and interest in appointing the said special auditor.”
Serba Dinamik was last transacted at 35 sen at the close of the mid-day trading on Oct 22 prior to the trading suspension of its shares/warrants, hence giving the company a market capitalisation of RM1.31 bil. – Nov 10, 2021
