Serba: Some progress made while awaiting other significant developments

By Devanesan Evanson

 

1. The Special Independent Review (SIR)

SERBA Dinamik Holdings Bhd has recently appointed Ernst & Young Consulting Sdn Bhd (EY) to conduct a special independent review (SIR) to assess the accuracy and veracity of the matters raised by the resigning external auditor KPMG PLT. This is a step closer to resolving the issues highlighted by KPMG.

The minority shareholders are expecting two announcements: one on the indicative date for the finalisation of the SIR Report and the other, of the findings in the report.

Serba Dinamik must liaise with EY to arrive at the indicative date when the Report is expected to be finalised. This date should be announced as soon as possible.

It should not take too long for the company to announce an indicative date as it is presumed that EY has the cooperation of the outgoing auditor, and this cooperation would provide EY with some visibility on the indicative date.

The findings in the SIR Report must also be announced promptly to shareholders.

2. The appointment of new auditors

With the resignation of KPMG as the statutory auditor for Serba Dinamik, the company is in the process of identifying a new auditor. As announced on July 6, Serba Dinamik had already submitted request of proposal for provision of external audit to international audit firms.

Devanesan Evanson

The company has also requested a meeting with the Companies Commission of Malaysia (SSM) for a consultation in relation to the appointment of external auditors pursuant to Section 272 of the Companies Act 2016.

Section 272 states that if a public company fails to appoint an auditor, the registrar may appoint an auditor upon the application in writing by any member of the company.

Serba Dinamik has announced that it targets to appoint the new auditor by end-July 2021 and will make immediate announcement upon the finalisation of appointment of the new auditor.

In May 2021, Serba Dinamik changed its financial year end from Dec 31, 2020 to June 30, 2021. The appointment of the new auditor – in a timely manner – is essential for Serba Dinamik to meet the looming Oct 31, 2021 financial reporting deadline for its 18-month financial period ended June 30, 2021.

That deadline is less than four months away. To-date, two weeks have lapsed since the resignation of KPMG. Hopefully, the SIR Report which should be completed well before the Oct 31 reporting deadline will facilitate the timeliness of concluding the statutory audit.

The statutory audit is an important shareholder protection process under the Companies Act 2016. It is the independent opinion of an independent party – the auditor – directed to the shareholders on the truth and fairness of the financial statements.

Not meeting the timeline for the audited financial statements will be perceived by minority shareholders as a huge red flag. Time is of essence.

3. The appointment of new independent directors (IDs) on the board

On June 25, five IDs resigned. Four IDs resigned, citing differences in opinion over the company’s decision to take legal action against KPMG while another ID resigned citing “personal commitment”.

Within two weeks, on July 7, the company appointed two new IDs. They are former Bursa official Siti Zaleha Sulaiman and ex-police officer Datuk Seri Mohamed Farid Abu Hassan.

With these new appointments, Serba Dinamik’s board now comprises four IDs or 50% of total board composition. With that, it has applied Practice 4.1 of the Malaysian Code on Corporate Governance (MCCG) which states at least half of the board comprises independent directors.

Conclusion

It is good that the SIR has been appointed and the independent directors’ composition at the board level has been replenished.

What minority shareholders are now looking forward to are:

  • The announcement of an indicative date when the SIR Report will be finalised;
  • The announcement of the findings in the SIR Report as soon as they are available;
  • The announcement of the audited financial statements before the Oct 31 deadline.

 

Devanesan Evanson is the CEO of the Minority Shareholders Watch Group.

The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.

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