Catalist-listed Oriental Group has lodged a report with the Commercial Affairs Department over possible breaches of securities laws or other offences arising from the irregularities in both its Singapore and China operations.
The group is still seeking legal advice on the appropriate course of action in China, it told the Singapore Exchange yesterday. "The full extent of the possible breach of securities laws or other offences, or other potential breaches (if any) has yet to be determined," it added. "The board will continue to take all necessary actions in the best interests of the shareholders and the group."
Oriental's statement came after a few potential legal and regulatory violations were noted in the report of a special audit it earlier commissioned. The possible breaches include missing sums of money, inaccurate disclosures and backdated invoices, said the steel manufacturer and trader on Wednesday.
In a 28-page report, special auditor RSM Corporate Advisory said it found that the company, for example, had announced the completion of stock placements in 2013 and last year and a convertible note offering last year even though it did not receive all of the proceeds.
On the convertible note issuance, the payment of $500,000 from one note holder "remains untraceable" as at Dec 7, while $250,000 was still owed by another note holder.
RSM noted that several former key company directors and officers were involved in the potential breaches. They include former chief executive Lee Wan Sing, former chief financial controller Lee Ong, former chairman Wu Dingrong, former executive director Sun Lu and Mr Wu Dingcheng, the legal representative of a China unit who is also Mr Wu Dingrong's brother.
"We have identified various issues which point towards the lack of effective internal controls, management's effective override of controls and poor discharge of directors' duties, which raise grave concerns on the corporate governance of the company," it said.
An independent review led by independent directors similarly uncovered irregularities in Oriental Group's China operations. It found that the China units had been used to provide guarantees to former chairman Mr Wu's own companies, for instance, while there were multiple unsupported fund transfers between the units and Mr Wu's firms.
"These transactions do not appear to be trade in nature and thus do not fall within the scope of the interested party transaction mandate previously approved by shareholders," said the independent review.
"The independent reviewer is unable to trace the purposes of such fund transfers as there were no supporting documents."
Oriental Group is due to hold an extraordinary general meeting today. This will seek to oust three directors and appoint four new ones named by requisitioning investors Aseanzon and Dingji Investments.
But firm has said the appointments will be invalid as it did not receive notice indicating their willingness to be elected within the period set out under its constitution.
Oriental Group noted in its Wednesday filing that Dingji Investments' shareholders and directors include Mr Sun Lu and Ms Miao Lina, who are the son-in-law and daughter of Mr Wu - "one of the persons responsible for the irregularities within the group's (China) operations".
It also noted that one of the four proposed directors, Ms Liu Ye, is Mr Wu's personal assistant.
The firm said yesterday it has received a letter of demand from Lian Hoe Hardware for $91,468.17, adding to a spate of other claims.