China Environment said that managers of a wholly owned subsidiary in China refused to cede control of the unit's funds and rebutted allegations of possible misappropriation of rental income.

China Environment, an industrial waste gas treatment firm, said it had met the management of Anhui Dongyuan Environmental Protection after an earlier unsuccessful attempt to obtain the China unit's company seals.

China Environment said that at the meeting, Anhui Dongyuan's management cited pressure from Chinese creditorLi Qun Bin for not handing over control of the subsidiary's funds. Anhui Dongyuan's management said that it owed 6.47 million yuan (S$1.36 million) to the creditor, China Environment stated.

Anhui Dongyuan's management also said that it did not misappropriate any rental monies, China Environment said.

Last month, China Environment said auditors uncovered possible misappropriation of rental income monies at the unit as part of the audit for fiscal 2016 and 2017. At the time, China Environment requested that Anhui Dongyuan's management hand over company seals entrusted to them pending the resolution of the misappropriation issue. But the unit's management declined to do so. China Environment said then that it was looking to amicably resolve the issue.

In the latest announcement, it said it was seeking advice on subsequent actions, and will update shareholders. Trading in China Environment shares is currently suspended.