KUALA LUMPUR (April 15): Malaysian authorities should clarify the rationale behind the decision they took to compound the charges faced by Serba Dinamik Holdings Bhd and its top executives, instead of proceeding with the criminal prosecution against those involved, as the egregious lapses in corporate governance within the company were clear from the charges raised, according to the Malaysian Institute of Corporate Governance (MICG).
The case has also attracted wide attention from an international audience of investors and observers, said MICG chairman David W Berry.
"Against this background, the decision to agree [to] a compound with the parties concerned and not proceed with criminal indictments may not be easily understood by the audience.
"Our concern is for all the company's stakeholders, and to underpin the regard of investors generally for corporate governance standards in Malaysia. While it may not be the norm, we believe it would be helpful if a way could be found by the authorities involved to give clarity to the rationale behind the decision-making in this instance," Berry told theedgemarkets.com via email.
On Thursday, Berry told theedgemarkets.com that it was good that the issues surrounding Serba Dinamik were beginning to find some resolution.
While Berry said MICG could not comment on the sanctions announced, he said MICG believed it to be the first step to returning normality to governance within Serba Dinamik. "It can only be beneficial to the company and its stakeholders, who have faced a prolonged period of uncertainty. We look forward to seeing how a restructured board and management address the issues," he said.
The Securities Commission Malaysia (SC) on Wednesday compounded Serba Dinamik, its chief executive officer cum group managing director Datuk Dr Mohd Abdul Karim Abdullah and three other top executives for a sum of RM3 million each for submitting a false statement involving a revenue of RM6.01 billion for its financial period ended Dec 31, 2020 (FY20).
The other three individuals were executive director Datuk Syed Nazim Syed Faisal, group chief financial officer Azhan Azmi, and vice president of accounts and finance Muhammad Hafiz Othman.
The compounds settled the criminal charges they faced for submitting the false statement to Bursa Malaysia Securities Bhd in February 2021.
"This follows the decision of the public prosecutor to accept the representation made to the Attorney General's Chambers by Serba Dinamik and the individuals involved regarding the charges pending in court," the SC said in announcing the decision.
The RM3 million compound is the maximum amount permissible under Section 369(a)(B) of the Capital Market Services Act 2007 (CMSA) for submission of false information in the company's financial statement, the SC said.
Muhammad Hafiz was also issued with another compound of RM1 million, also the maximum amount permissible, for falsifying the accounting records of the company's subsidiary Serba Dinamik Sdn Bhd.
The criminal charges that the four faced were framed under Section 369(a)(B) of the CMSA, read together with Section 367(1) of the same Act, which carry a maximum jail term of 10 years and a maximum fine of RM3 million if one is convicted for the offence.
The issue with the FY20 revenue was first raised by KPMG to the Serba Dinamik board in May 2021. At the time, KPMG also flagged Serba Dinamik's sales transactions, trade receivables and payables, material on site balances, as well as how it was unable to verify the counterparties involved. Serba Dinamik then announced that a special independent review would be conducted to look into KPMG's claims.
However, Serba Dinamik then filed a lawsuit against KPMG, who refused to sign off on the company's FY20 accounts, which resulted in KPMG resigning as its external auditor. Serba Dinamik's independent directors also resigned in protest of the suit.
https://www.theedgemarkets.com/article/micg-says-authorities-should-explain-their-decision-serba-dinamik-case
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