AGAINST the backdrop of the Employee Provident Fund (EPF) having already disposed 955,200 shares between June 2 and 3 to slash its shareholding to 9.92%, investors – big and small – are now more eager than ever to wonder what ultimate solutions the independent non-executive directors (INEDs) of Serba Dinamik Holdings Bhd are bringing to the table.
After all, two weeks have lapsed since external auditor KPMG flagged some outstanding matters pertaining to the global integrated oil & gas (O&G) service provider’s statutory audit for its FY2020 financials on May 25.
Having questioned the “proactiveness” of the company’s INEDs recently, the Institutional Investors Council Malaysia (IIC) is demanding prompt action given that the selection process for an international independent firm to review KPMG’s audit “seems to have stalled”.
“The INEDs must keep to their promise that they will ensure the due process takes place without compromising the governance aspect,” IIC adviser Lya Rahman told FocusM, referring to the statement dated June 3 by the INEDs to ensure that the company’s corporate governance is at the highest level.
“The appointment of the international independent firm to look at the various audit issues raised by KPMG is crucial and should not be delayed to regain the shareholders and stakeholders confidence,” asserted Lya.
“In ensuring the independence of the appointment process, this obviously should come under the purview of the audit committee or INEDs without the management’s interference.”
Echoing IIC’s view, the Minority Shareholders Watch Group (MSWG) agreed that the appointment of the independent firm should be made as soon as possible.
“As a matter of better governance process, the audit committee (two INEDs are members of the committee) should evaluate these firms and make a recommendation to the board. Where there is a will, there is a way,” MSWG’s CEO Devanesan Evanson told FocusM.
“The sooner these issues are resolved, the better the visibility for minority shareholders and the greater the certainty as to the company’s financial position.”
Similarly, the IIC is also appalled with the undue delay in appointing members of the independent committee.
“If there is a further delay, perhaps the reasons should be made known,” opined IIC’s Lya.
“Bursa Malaysia as the front line regulator should monitor the situation and probably exert some pressures on the board to ensure that all urgent efforts be made to ensure that the establishment of the committee be expedited alongside a clear set of terms of reference.”
MSWG’s Devanesan said one alternative is for Serba Dinamik to look to its INEDs to resolve the issues instead of an independent firm.
“They can form an ad-hoc committee whose terms of reference will be to resolve the KPMG issues. This committee can invite other professionals on a need basis to assist them,” proposed Devanesan.
“There will be no learning curve with these independent directors as opposed to a new incoming independent firm. Furthermore, some of the independent directors – who are also AC members – have dealt with KPMG for many years in the past.”
Serba Dinamik’s independent directors include KPMG Malaysia’s former partner Hasman Yusri Yusoff, Nationwide Express Holdings Bhd’s former managing director Rozilawati Basir as well as accountant Sharifah Irina Syed Ahmad Razi and lawyer Tengku Datuk Seri Hasmuddin Tengku Othman.
“Thus, there are competent resources among the independent directors to resolve the issues. An ad-hoc committee comprising independent directors will be the fastest way to resolve the issues,” reckoned Devanesan.
At the end of the day, IIC’s Lya said the main issue has nothing to do with the INEDs having adequate experience in dealing with a high-magnitude crisis management.
“It is more about their willingness to discharge their fiduciary duties independently for the best interest of the company without fear of losing their positions and beholden to management or certain major/substantial shareholders,” she pointed out.
MSWG’s Devanesan said it is the prerogative of the nomination committee (NC) to assess whether the company needs new directors on board to deal with the current issues and the crisis.
“The NC should evaluate whether there is such a need and make their recommendations to the board,” he suggested.
“The NC is in the best position to assess this need (for new directors) as it is within their terms of reference to assess the skills-matrix of the board and facilitate directors’ evaluations.”
As investors are awaiting positive development on the pending issue – and with many speculations and rumours flying out there – Serba Dinamik must remember that its silence can only be deafening. – June 10, 2021