Serba Dinamik’s directors cum shareholders should not vote at EGM

by PRIYA VASU / pic by TMR FILE 

SERBA Dinamik Holdings Bhd’s action to remove KPMG PLT as its external auditor following dissatisfaction with its audit findings is not only inappropriate but undermines the independence of accounting standards, said Malaysian Institute of Corporate Governance (MICG).

An EGM to be convened for this purpose was mooted by a non-independent director (albeit non-ED) who appears to be in agreement with the MD’s (the executive) position, raising conflict concerns, MICG’s deputy president David W Berry noted in a statement yesterday.

“It is MICG’s view that in this scenario, none of the directors who are shareholders, should vote in the matter, irrespective of whether they are executive or non-executive, independent or non-independent.

“It should be for other shareholders to hear both viewpoints and vote accordingly,” Berry stated.

Serba Dinamik, in an exchange filing yesterday, clarified the proposal to remove KPMG was mooted by its substantial shareholder, Datuk Abdul Kadier Sahib, who is also a non-independent non-ED of the company, and not initiated by the company and the board of directors (BoD) despite what some media reports suggested.

“The BoD is required to act to convene an EGM, upon request by the said shareholder through issuance of Special Notice to the BoD, and it shall then be decided to vote for or vote against the motion at the EGM by the attending shareholders,” the company clarified.

It said the appointment of an independent firm will move ahead as planned for the purpose to commence a special independent review to assess the veracity and accuracy of the matters pertaining to the statutory audit raised by the external auditors.

Berry, meanwhile, said more information should be provided to the company shareholders to facilitate a proper understanding of the dispute before any vote.

“It is appropriate, therefore, for an independent review to be conducted. The professional and ethical standards applicable to that review should be identical to those applicable for a statutory audit,” said Berry.

He added that the episode suggests Serba Dinamik’s independent directors are unqualified to understand the accounting issues raised by its external auditor, KPMG, and appears to attack the competence of the company’s audit committee, which is composed of independent directors.

“Criticising the auditors for addressing their concerns to the company’s independent directors is perverse, therefore, when that is exactly to whom the auditor is expected to direct any concerns.

“Against that background, the silence of the audit committee and the company’s independent directors raises questions. More light is needed on the audit committee’s findings and its recommendation to the board.

“These should be revealed to shareholders at the EGM,” said Berry.

He said KPMG should remain in its role to provide any information and clarification that may be required.

“Any committee set up by the board with oversight on the matter, when referred to as an “independent”committee, should be just that — independent.

“There should be no ED or other management in the committee, or any non-independent director. They can be available to answer questions as required,” said Berry.

Serba Dinamik last Friday said KPMG had raised issues over more than RM3.5 billion of contracts and transactions that it had not been able to verify with 11 customers.

Shares of the firm’s extended losses yesterday, falling 29.5 sen or 26% to 83.5 sen in heavy trade with some 1.65 billion shares exchanging hands.

The counter opened limit down at 79.5 sen in the morning, before staging a rebound to hit the high of 98 sen in intraday trade before sustained selling pressure saw the counter close lower.