“The company or its controlling shareholder must comply with rule 1309 of the listing manual to provide a reasonable cash exit offer to shareholders,” said KXD in a statement Tuesday, adding that SGX has informed it that the cash exit offer must be completed within one month.
In June last year, SGX reprimanded KXD as well as its former chairman and CEO for breaching a number of listing rules and failures in corporate governance after a special audit flagged several grave lapses.
KXD reportedly failed to inform shareholders that it had ceased business operations, effectively becoming a cash company. It also failed to promptly disclose lawsuits filed against it by Royal Philips, and the default judgments entered against KXD in 2007-2008.
In January this year, the China-based multimedia firm has been ordered by the Commercial Affairs Department (CAD) to produce company documents in a probe by the white-collar crime buster under the Securities & Futures Act.
The Securities and Futures Act (Chapter 289) contains laws related to the issuing and trading of listed company securities.
Trading of KXD shares is still suspended. It made its trading debut on the Singapore market, with its shares surging to twice its offer price of S$0.23 a share on its first day of trading. The stock last traded in May 2010 at S$.01 per share.
S-Chips Under Tight Watch
The Singapore bourse has stepped up its scrutiny of accounting practices of Singapore-listed Chinese companies, more popularly known as S-chips, after a series of accounting problems seen in the past few years.
On Monday, it was reported that the Monetary Authority of Singapore (MAS) is seeking a court order to freeze funds in Singapore belonging to the former chief executive officer of China Sky Chemical Fibre Co as a police probe on China Sky and its directors is underway.
Another S-chip, Sunmart, announced that it had been informed by its auditor, Ernst & Young LLP, of certain issues noted during the course of their audit for the financial statements for financial year ending 31 December 2011.
Specifically, the auditors have not been able to obtain satisfactory explanation and supporting documents from management on the business rationale of certain transactions as well as the veracity of certain account balances.
Sunmart’s audit committee said it intends to commission a special audit to perform a thorough investigation on the matter, and will keep shareholders updated once the appointment of the special auditor has been finalised.
“We believe the two latest developments will continue to weigh on subdued sentiments for S-Chips. Firstly, the China Sky saga exposes a fundamental issue – existing shareholders of overseas companies might have limited protection/recourse under existing Singapore legal framework if ownership structures are weak. The incident is likely to have put various stakeholders in a bind, in which there is no winner,” said Terence Wong of OSK-DMG.
“Secondly, we note that February to April will be a sensitive period especially on auditors’ opinions. Trading suspensions for Sunmart and Sinopipe (on March 30) are reminders that risks in which auditors may uncover more accounting issues remain from now until end-April, before audited financial reports are issued,” he added.
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