SINGAPORE - China Environment said that managers of a wholly owned subsidiary in China would not cede over control of the unit's funds and also rebutted allegations of possible misappropriation of rental income.

China Environment, an industrial waste gas treatment company, said that it had met with the management of Anhui Dongyuan Environmental Protection Co following 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 a Chinese creditor, one Li 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. In May, China Environment said that 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 hand over the seals and escorted Singapore management off the premises. China Environment said then that it was looking to amicably resolve the issue before taking further action.

In the latest announcement, China Environment said it was seeking advice on subsequent actions, and will update shareholders.

Trading in China Environment shares is currently suspended.