KLW reprimanded by SGX over breaches

Details of the breaches by KLW were uncovered after PwC was hired as a special auditor in June last year to review the firm's financials.
Details of the breaches by KLW were uncovered after PwC was hired as a special auditor in June last year to review the firm's financials.PHOTO: KLW HOLDINGS

Door maker chalks up more than 10 breaches of Catalist rules

KLW Holdings has more than 10 counts of breaches of Catalist rules since 2013, the Singapore Exchange (SGX) said yesterday in a stern reprimand of the door manufacturer.

Two senior figures - former managing director Lee Boon Teck and former group financial controller Jaslin Gaw Kuan Ching - were also named by the bourse for their role in the breaches.

One of the string of breaches involved a sum of about $16.2 million, which KLW paid out in 2014 as commitment fees for property projects in Bali and Zhangye.

However, the fees were not recovered after the due date for the project agreement passed, and no timely announcement was made.

This was a breach of Catalist Rule 703(1)(a), on the timely announcement of material information to avoid establishing a false market.

"Mr Lee wilfully caused that breach, being the only member of KLW's board of directors who was aware, at the material time, of the full facts surrounding the property development projects and payments made, and having failed to inform the board of those facts," SGX said in the reprimand.

Another breach resulted from a $1.95 million advance from KLW to Mr Lee in June 2014. The amount was over 5 per cent of KLW's net tangible assets and the advance should have been announced as an interested person transaction and subjected to shareholder approval.

The two transactions were wrongly classified as "cash and bank balances" by the company's finance team. SGX held Ms Gaw responsible for the erroneous accounting entries.

These details were uncovered after PwC was hired as a special auditor in June last year to review the financials of KLW.

Mr Lee also failed to inform the board of KLW's US$1.58 million (S$2.2 million) acquisition of Key Bay Furniture through subsidiary KLW Resources, causing the company to breach Catalist Rule 704(16)(c), which requires a company to announce any acquisition that results in another company becoming a subsidiary.

There were also delayed and inaccurate disclosures on the use of fund-raising proceeds, SGX noted.

As a result of the range of lapses, "SGX is of the view that KLW has breached Catalist Rule 719(1) to have a robust and effective system of internal controls, addressing financial, operational and compliance risks", the bourse said.

KLW closed flat at one cent, before SGX issued the reprimand.

A version of this article appeared in the print edition of The Straits Times on October 04, 2016, with the headline 'KLW reprimanded by SGX over breaches'. Print Edition | Subscribe